The Internet has laid the foundation for a tremendous variety of disruptive innovations, enabling serious threats to everything from newspapers to brick-and-mortar stores to desktop word processors, but one segment has seemed to enjoy built-in protection from online disruption. Video games require relatively powerful hardware (in the form of fast computers or consoles), so games generally must be run on machines sitting next to the players. Sure, casual games can be hosted online, and games can even be purchased online, but the Internet just isn't good enough to stream the kinds of games that the Xbox 360 and PS3 can handle. Right?
Wrong: OnLive, a new company making its debut this week, is planning to offer streaming games that can be played by anyone on virtually any computer. This is a remarkable technical achievement, and it could usher in a powerful new business model that affects different incumbents in different ways.
On the one hand, game publishers like EA and Ubisoft are probably ecstatic. Owning the latest and greatest hardware necessary to play the latest and greatest games can be very expensive, and the high prices of gaming-oriented PCs prevent many people from even considering games with demanding system requirements. Making high-end games available to people with even low-end netbooks (as long as they have reasonably speedy Internet connections, which most people do) could greatly expand the market for their products. Unsurprisingly, quite a few of the big names in game development and publishing have already signed on.
On the other hand, hardware manufacturers are probably sweating bullets. OnLive could be hugely threatening to console manufacturers like Microsoft, Sony, and Nintendo, and high-end PC manufacturers like Dell and HP (which acquired Alienware and Voodoo, respectively, just a few years ago to gain a stronger presence in this lucrative segment). Why buy a $3,000 computer when OnLive promises almost exactly the same experience with a $300 computer and a cable modem? Even that's more than you'll need to spend: OnLive plans to sell a "MicroConsole" for less than $250.
"Good enough" technologies on the Internet have gotten better and better, from those prehistoric "newspapers by computer" to movie rentals and streaming video. As technology continues to improve and broadband becomes available to more and more people, who knows what will be disrupted next?
