By Maggie Shiels
Technology Reporter, BBC News, Silicon Valley
So far, nine big game publishers have signed up to the service
The founder of a new service that plans to stream on-demand video games over the internet says he feels like he has a big target on his back.
No wonder, given that Stephen Perlman's vision to revolutionise the way games are distributed and played has been talked up as threatening the future of the console and of retail stores.
OnLive, which was launched in the middle of the Game Developers Conference in San Francisco to much excitement, buzz - and scepticism - aims to provide high quality gaming on low-end machines.
OnLive says games will no longer need to be run from PCs or Macs, but can be accessed directly from its servers up to 1500 miles away.
Subscribers will get access to a catalogue of games and, rather than have to wait to download the game, can launch it instantaneously.
The quality of what appears on the TV screen or computer monitor will only be hampered by the user's internet bandwidth.
While many attending GDC were impressed by the possibilities of how OnLive will digitally distribute video games, just as many were sceptical.
Mr Perlman says he understands this: "I am an inventor, and people never believe what inventors say might be possible, so I am used to naysayers."
Industry watchers question what OnLive means for console makers
One claim many have questioned is OnLive's statement that its "micro-console" will also be "the last one you'll buy".
But Mr Perlman told the BBC: "The consequences for the user are going to be huge. Consumers who are fed-up buying expensive hardware or the next console will truly benefit."
Analyst Michael Pachter of Wedbush Morgan Securities agrees: "I think we've seen the last generation of consoles.
"Third-party publishers are not going to support a PS4 or Xbox 720. The content is not going to change in any meaningful way because the publishers can't afford it."
Other analysts are not so sure. Colin Sebastian of Lazard Capital argued at another conference, GamesBeat, that there would be one more generation, hitting stores by 2012.
Joseph Olin of the Academy of Interactive Arts and Sciences told BBC News he viewed the debate as beneficial for gamers.
"If anything, competition from OnLive will improve the breed and I think the instantaneous nature of OnLive, or distributed computing, promises something that will challenge hardware companies to figure out what other benefits they can offer the consumer to maintain their market share."
While the demise of the console seems to depend on who you talk to, there appears to be much more consensus over the future of retail stores.
Respected game developer and founder of InXile Entertainment Brian Fargo said just as music stores around the country had closed because more and more music was sold digitally, so video sales would go.
Mr Perlman described OnLive as the "beginning of an era."
"The writing is on the wall. Just look at Virgin, which closed a major store here in San Francisco. It's not looking good for retail," said Mr Fargo.
That's a view backed by Mr Perlman. "Video games are the last media primarily sold as packaged goods and, yes, OnLive disrupts that retail model."
Billy Pidgeon, an analyst with IDC, agreed that digital downloads were the way forward.
"Companies that make disc-only games will be the dinosaurs of the future."
The company said that last year, players in North America spent $1.9bn downloading games, up from $981m in 2007.
Mass market challenge
OnLive is expected to be introduced by the end of the year, but many within the industry believe it will take three to five years, and perhaps as many as 10, to really take hold.
"Early adopters will take to this service wholeheartedly," said Hal Halpin, the president of the Entertainment Consumers Association, an advocacy group representing the game playing public.
The service will be available later in the year for a monthly fee
"Generation X and Y and the really young kids will get this immediately. They are growing up in a digital age so they are comfortable embracing this new technology. The mass market will remain a challenge."
That is a view backed by research carried out by the Academy of Interactive Arts and Sciences.
"There is an awareness of digital distribution to play games and people are interested in it but they are not sure how to use it, so there are some motivation triggers that need to be crossed before we see wide adoption," said Mr Olin.
Little is known at this stage about pricing models, though the service will be subscription-based. Mr Perlman said he recognised it was vital to get this right from the start, but his firm was under no pressure to milk the product.
"The timing of this release was carefully planned. We are in the middle of a console cycle, so we have a couple of years to build up a subscriber base before the next console comes out.
"Look if it's wildfire, it's wildfire. We will build lots of servers and people can go nuts. But honestly I can wait a couple of years for this to work, I have already waited seven," said Mr Perlman.
Throughout the week, the OnLive stand was certainly one of the most popular, with gamers eager to test out the system.
"I thought there were some lag issues and while it's playing pretty well under this controlled environment, I would have to see how it does in my home with my internet connection," said Brendan Iribe, president of Scaleform Corp, which provides middleware for games.
Kai Huang, ceo of Red Octane said "My big concern is pricing and the number of games available, but certainly my interest is piqued."
Student Marty Wagner is excited by the possibilities for independent games
"Digital downloads and direct download services are the future," said Marty Wagner, a student at Savannah College of Art.
"This could be great for independent gamers, who won't have to compete for space on the shelves of a Best Buy. It's cool they're pushing some hardcore games like Crysis War because that kind of thing is getting forgotten. So it's great for gamers if it all works as promised."
Mr Perlman said after seven years in stealth mode, he was more than confident but lamented that more companies were not doing more to "push the boundaries".
"I agree it sounds too good to be true,but why? People today are just too afraid to think big and bold and it's very frustrating.
"Inventors get treated like second-class citizens and all we are trying to do is improve business, technology, society and the economy.
"A lot of us have made money and don't have to work. We make a lot of sacrifices and I just think there is something about our society that we are scared of the new big inventions. This is going to be a really cool thing."