OnLive eliminates monthly fees for games-on-demand service

OnLive, an Internet-based games-on-demand service, said today it is permanently eliminating its base monthly fee.

The Palo Alto, Calif.-based company offers server-based games, which are hosted in data centers, unlike most games, which run off of physical media or downloaded copies on PCs or specialized video-game consoles. OnLive’s service allows players to log into their games from anywhere and play high-end games on any type of computer.

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The service launched in June with a base monthly fee of $4.95 a month. On top of that, gamers had to pay for games that they purchased over the system. Since it carried extra costs, the monthly fee wasn’t  a popular idea.

But OnLive also had a special deal going where it made the first year of the service free for founding members. That meant that it wasn’t charging the monthly fee, and wasn’t going to do so for at leat a year. Now it has eliminated the fee entirely.

OnLive is a closely watched company because it can disrupt game retailers by directly distributing games to users. It is also disruptive to console makers since its compression technology allows games with high-end 3D graphics to be played over the web using any kind of computer hardware. That’s why OnLive’s recent value was pegged at $1.1 billion.

The price cut could make the service more popular. The decision to eliminate the fee also suggests that OnLive’s operating costs aren’t as big as once feared, given that the company has to set up a handful of data centers around the country. Steve Perlman, chief executive of OnLive, said, “There is no precedent for OnLive, so we had to grow to a large number of active users in order to assess usage patterns and operating costs. We’ve arrived at that stage, and as we had hoped, we are able to operate OnLive without charging a fee for access.”

Previously, OnLive had offered free game demos to non-subscribers. But now the wider audience can watch live games being played or play games without paying a fee. In a new free trial program, OnLive will let players sign up for an account without entering a credit card number. OnLive also offers game rentals where users can purchase three-day, five-day, and full play passes on an a la carte basis for its library of games.

Perlman declined to disclose how many players have signed up, but he said it is ahead of the company’s internal plans and the pace of growth continues to accelerate. He said the change in pricing will simplify the pricing so that users understand that all of their money is going toward the direct purchase of games.

OnLive’s investors include AT&T, Warner Bros., Autodesk, Lauder Partners, BT, Belgacom and Maverick Capital.