David Perry on Gaikai and LG

In issue 238 of Edge, out now, we look at what cloud gaming company Gaikai's Smart TV deal with technology manufacturer LG means for the future of gaming, and indeed the traditional notion of a console. Here we present an extended interview with Gaikai founder David Perry on what this new era means for core gamers and why platform exclusives will soon be an outdated concept. 

Can you give us a brief overview of the first year of Gaikai?
It’s been a really exiting year. The team has accomplished a lot and we have grown a lot. We’ve just moved into a new office. We have 80 people working for us now. We have raised a lot more money this year. That’s actually quite distracting. Raising money takes up so much of your time…

Is that primarily to finance your servers?
Yeah. This is a VC backed company so I am really having to play with the big boys. I had this objective to not just take strategic money. It would have been easy for me to go to game publishers and have them give me money. The problem is that then I’m not Switzerland any more. Once game publishers use our service, then I am able to use that with real VCs as legitimising leverage.

The ones we went to included Benchmark Capital [funders behind Facebook and Twitter] which is one of the top five VC companies in the world. To get money from them versus, say, British Telecom was important to me. These people are experts in lending money so they grill you. They make you look at your whole idea inside and out before they would ever think of putting any money into you. After getting that money we found the support of Intel and then we went after NEA, another top tier VC. We have very respected VCs behind us which makes raising more money very easy compared to another company that might have to really work for that. 

The point is that the game industry for whatever reason keeps opening so many doors. You know, this is year 30 for me; I have done so many things in Hollywood, dealing with the top tier people, then in the music industry. All doors swing open for the game industry; it’s like an MMOG because you can keep levelling up. You’re levelling up all your skills: licensing, raising money, distribution. It never seems to stop. I don’t know anything about networking and yet you have to learn really quickly to survive.

There’s no game company in the future that won’t have to negotiate some kind of network solution or server strategy so you better learn it. Either you learn it or you don’t. It’s hard to predict where it’s all going to go but as long as you stay in the train… It’s going 1000 mph so all you have to do is stay on it. Because it’s so easy to get off – say someone offers you a gig where you’re going to go and make Barbie Fashion Designer or something and you’ll get paid. You won’t win awards, or learn anything from it; you’re just washing the dishes as far as making a game goes. It’s hard to see that. Because when you stay on the train you are always in the land of risk, but I like that.

The big news from CES was Smart TVs and Gaikai’s deal with LG. How did that come about and what did you have to offer to secure the deal?
We actually demonstrated a lot of stuff running at CES 2011, but it was all very early prototype stuff. Our objective in 2011 was to show it was possible and our goal in 2012 was to land somebody. We have other announcements coming, so it’s not just LG. But LG is very cutting edge and I was very impressed by them. Ultimately at CES they are actually leading now because they were the first company to actually demonstrate on a show floor with people playing cloud games on their digital TVs. And the absence of console or custom hardware is really quite surprising. There’s an empty space underneath the TV and yet you’re playing Street Fighter IV. There are all sorts of tricks we have as well which are going to surprise people.

Gaikai founder David Perry

What is the greatest challenge facing your service heading into 2012?
We have a new server design we are working on to reduce power: It turns out electricity is the most expensive part of the equation. We are trying to not go custom; if I’m building custom chips then everything is our problem. Apple went that way with their own processors and it’s a very expensive and difficult way to go. I love that every morning we get up Intel has sped up their processors, added more cores. Same with NVidia: Every day there’s an enormous team making the experiences better. The challenge is to juggle hardware, but intelligently save power. There’s a lot of engineering trickery to make that happen, which is where a lot of our energy is going in 2012. I’m not going to say we need to become green but you get my point: It’s expensive not to be green.

Are you nervous about the potential of Microsoft and Sony entering the cloud gaming TV market within the next two years?
We are a bit of a problem for everybody. If you make a game today for Sony you have to pay them a royalty to do that and you have to manufacture discs and take all the risk and it’s all your problem. And if your game doesn’t sell, you’re toast. We’re just trying to get more players; you own those people as customers. So if you’re offered the choice to stream with us and you own everything, or someone else trying to charge to royalties or any of that old school thinking, I don’t think it will be so interesting to you. We’re aware of that stuff and are trying to not get ourselves into a situation where we are competing with everyone.

Couldn’t we foreseeably arrive at a situation where different television brands are tied to different services offering different games?
No because the publishers will opt into the devices they want to be on. That paradigm of games being locked to single devices is going to go away, in my opinion. If 50 devices can stream your game, you won’t want to sign exclusively.

But what about with first party titles? Sony isn’t going to want to give you the next Gran Turismo when holding onto it means it has the chance to sell Sony TVs.
Actually, that is totally true. There is nothing we can do to stop that. In reality though, I think the developers that create those first party titles will find it hard to ship to a limited audience. I don’t think the best talent will be attracted to those studios in the same way any more, because of that limited audience.

So will you say now that there will be no point in the future where you demand exclusivity to a certain publisher in order to serve their game?
I don’t think Gaikai will ever be in the position to tell the publishers what to do. I think our position is that we are here to help. I don’t see us ever putting guns to publishers’ heads. Because the publishers are actually in control and we are trying to keep it that way.

Some analysts are predicting that the cost of cloud gaming is set to rise for the consumer through bandwidth caps. Do you agree with that forecast?
No. I believe costs are going to go down. There are lots of reasons for that. If you increase your reach your cost is spread a lot more, without having to milk every single unit. The world is moving towards the dollar [pricing] game, you can see it on mobile already. If you have more reach you can start to survive a drop like that. If you have less reach, that price drop will wipe you out.

As far as bandwidth goes the more that people stream stuff the more everyone needs bandwidth and the more those providers will reduce their costs. If everyone needs more, high-use users won’t be singled out as abusers. They currently target the top 5% ad penalise them financially. Caps seem like a cool idea for a company selling bandwidth, but the money is in the long-term commitment a customer makes. Penalising someone for going over their limit for a month and risking his five years’ worth of business… That’s a difficult business decision to make unless the guy is abusing the hell out of your service. As more streaming comes in, cloud gaming just slips in with al the rest of it.

Many core gamers are still attached to the idea of owning physical products. Where do these consumers fit in your vision of the future?
Physical ownership is something that we old-school people still love. I am one of those people. It makes no sense, but I love having something I can touch. It’s like CDs or records, where they put thought into the materials they used, and it’s almost a part of the artistry of making an album. It tells you more about the artist. I like all of that. But like it or not,, at some point you have to look at people like us as the fringe and not the mass market. The market is making that decision for us. But ultimately, I look forward to someday having everything available all of the time and not having to rifle through my shelves…