Cloud gaming service OnLive will offer some rentals on a game-by-game basis for those who don’t want to pay the monthly subscription fee, but at least one analyst says that high prices and a small user base could be a big obstacle to success.

OnLive announced earlier this week that it would go live on June 17 at a cost of $14.95 per month plus games, which would be available to buy or rent. The service will initially be limited to PC and Mac owners, while more information about the planned MicroConsole was promised for later this year. But CEO Steve Perlman revealed today that OnLive would also offer a portal through which gamers could access free demos and some rental titles without having to pay the monthly fee.

“The OnLive Game Portal is for gamers looking for direct access to OnLive games without being required to subscribe to the features of the full OnLive Game Service,” Perlman said. “Through the OnLive Game Portal, gamers will be able to play select games directly on a rental basis as well as game demos for free, subject to available OnLive service capacity and whatever usage limits are associated with each given demo. Rentals will be priced on a per-game basis.”

But with the official launch of the service only three months away, Signal Hill analyst Todd Greenwald said OnLive could be hamstrung by high prices and a relatively small user base which will have little appeal to major publishers. “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,” he wrote in an investors note.

“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,” he continued. “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.”

The actual cost of games available through OnLive is still unknown, with Perlman noting only that “we expect them to be offered at competitive prices.”

And while publishers like Electronic Arts, Take-Two, THQ and Ubisoft have signed up to support the service, Greenwald suggested its comparatively small user base may keep them from committing to it completely. “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 one million units, compared with 67 million Wii, 39 million Xbox 360, and 33 million PlayStation 3 units,” he said.

Source: GamesIndustry

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