Given all the infrastructure costs involved in setting up OnLive, you might wonder whether the system is financially feasible—after all, it needs processing power to do the work of thousands and thousands of expensive gaming consoles. Even if cloud gaming is technically possible, is it going to be able to profitably scale up to meet mainstream demand? Perlman says there are several ways in which Internet-based gaming is more computationally efficient than console gaming. Even the most dedicated gamers will only play for a few hours a day; the rest of the time, the console is dormant. What's more, sometimes you play games that don't require the full power of your Xbox—the system could be doing much more, but you're only asking it to render World Series of Poker 2008.
OnLive can use these inefficiencies to its advantage. Depending on how many gamers are using the system and the kinds of games people are playing, the company can spread the power in one gaming processor across two, three, or more gamers, Perlman says. This allows the company to operate far more cheaply than game console manufacturers, which often have to subsidize the cost of the console in order to get mass adoption. (For the first few years of production, Microsoft and Sony sold the Xbox 360 and Playstation 3 for hundreds of dollars less than it cost them to make the devices.) "Our cost of operations [is] about a 10th of Microsoft's capital costs involved in getting a user on the Xbox 360," Perlman claims.
But cloud-gaming doesn't just make good business sense; it also makes for a better experience for gamers. For one thing, it's portable. You can play the same games across different kinds of computers and in completely different parts of the country. As the mobile Internet gets faster, you could also imagine playing console-type games on minimal hardware. OnLive has demonstrated the system on netbooks and iPads; because the games are running on the same server regardless of where you're playing, they'll look the same on any hardware you choose.
But Perlman pointed to an even more interesting possibility. "We don't have any upper limit in performance," Perlman says. "Today the serious gamer can build an overclocked 4GHz, 6-core double-NVidia-board beast of a machine, but because there's so few of those out there, game developers don't create many games to take advantage of that." In the same way that OnLive can share processing power across different users, it can also combine processors to make for games that surpass what's possible on your console—creating a big new market for the most advanced games. Before I signed up for OnLive, I'd been wondering whether Internet-based games could ever match the quality of something like an XBox or PS3. Now I wonder if consoles stand a chance.