Why OnLive is skipping E3

Mike McGarvey, the COO of controversial new streaming games service OnLive, has explained that his firm will not be attending next month’s E3 event in LA as it has no reason to talk to retail.

Speaking on his blog of the fact that OnLive will supposedly eradicate the need for retail or distribution, McGarvey stated: More than anything, E3 is a retail-oriented conference, both for retail platforms and retail publishers, and OnLive is neither.

You’ll hear and see plenty from us this year in the run up to our external Beta and launch, delivered directly to your home through your broadband connection.”

In the piece McGarvey goes on to explain a little more of the thinking behind the new business model that has drawn so much attention.

While it may seem counterintuitive to question the business model of a thriving industry – it has been projected that video games sales will meet or exceed $60 billion in 2009 – there are some fundamental flaws in the economics that we are aiming to address with OnLive.

First off, while the costs associated with video game development, distribution and marketing have increased exponentially over the last ten years, prices have remained static. The average multi-platform game now costs upwards of $30 million to produce and bring to market, but the retail price has remained fixed at approximately $60. That makes the return on investment much more challenging for publishers.”