Analyst Believes OnLive Too Expensive, Not Appealing to Publishers

Yesterday online gaming company OnLive revealed a release date for their service, along with an early glimpse at their pricing model. Today Signal Hill analyst Tom Greenwald has gone on record stating that he believes OnLive will be too expensive for the average consumer.

"While OnLive enables users to forgo spending $300 on a console, the $15 per month fee adds up to $180 per year, or $360 over 2 years," noted Greenwald. "Additionally, we believe the target audience for OnLive (hard core gamers) really values the packaged good disc version of a game, which allows them to quickly re-sell a title in the used market and gain back $20-30 of the $60 purchase price.

"If publishers try to sell digital-only new release games at a $40-50 ASP (average selling price), we don't think gamers will find the price points compelling."

Greenwald also claimed that while publishers may look to utilize OnLive to sell their older titles, it will likely not play any role whatsoever when it comes to sales strategies for new game.

"Finally, we'd note that even if successful, the installed base will be too small to be material for large publishers like EA, Activision, THQ and Take-Two (perhaps 500,000 to 1 million units), compared with 67 million Wii, 39 million Xbox 360, and 33 million PlayStation 3 units."

Consequently, Greenwald called the service "exciting," but also stated that it won't "turn the gaming world upside down any time soon." So is he onto something, or is this just another example of a doom and gloomer trying to spoil everyone else's fun?

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