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OnLive lays off all employees, assets sold to new company
OnLive lays off all employees, assets sold to new company
August 17, 2012 | By Eric Caoili

August 17, 2012 | By Eric Caoili
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    52 comments
More: Social/Online, Business/Marketing



OnLive, one of the most prominent services and proponents for cloud-based video game streaming, has laid off its entire staff, Gamasutra can confirm.

Though official statements from the company indicate that the service will remain operable in some form, an affected employee tells us that the entirety of the staff was laid off this morning.

"We can't comment on rumors, but OnLive is just fine," a company representative told us by email. That same representative has not replied to a request for clarification as to what "just fine" entails.

According to a purported internal note shared by industry veteran Brian Fargo, affected employees may be given opportunities at a new company being formed, assumedly to continue operating the OnLive service.

[Update: VentureBeat reports that, according to an official statement, OnLive's assets have been sold to an unknown, newly-formed company, which will continue to operate its services, support its products, and manage its partnerships. It reportedly plans to re-hire a "large percentage" of former OnLive employees.

Meanwhile, an unnamed source claimed to TechCrunch that OnLive CEO Steve Perlman decided to lay off the staff prior to this purchase, as it would reduce the company's liability and practically eliminate the need for employee stock options.]

These mass layoffs are sudden, as OnLive's managment has given no recent indications that it was facing any financial difficulties. The company even announced a partnership with Android-based home console maker Ouya just three weeks ago.

This news follows just a month after Sony announced that it acquired OnLive's biggest rival in the cloud gaming space, Gaikai, for some $380 million, perhaps the largest validation yet that there is value in cloud gaming.

Gamasutra has reached out to CEO Steve Perlman for clarification, but has not heard back as of press time.


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Comments


Johnathon Swift
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I... I don't know what to say about this. I wonder how big of a blow it will be to the concept of cloud gaming. I suppose that depends highly on the outcome of the service continuing, though of course "Entire Staff Layed Off" and "Uh, we had a slight business malfunction, but uh... everything's perfectly all right now. We're fine. We're all fine here now, thank you. How are you?" are never encouraging.

Rich Tietjens
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...stupid conversation, anyway. LUKE! WE'RE GONNA HAVE COMPANY!

Ian Fisch
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My experience with onlive:

1. Wow this is amazing technology! I can't believe I'm playing Trine on my crappy laptop and it looks gorgeous!

2. The gameplay feels a little off. I swear I hit the block button before the enemy swung his sword.

3. Hmmm, if I turn all the settings to lowest and put the resolution to 320x240 (yes Trine lets you do this), I can actually get 30fps running the game on my crappy laptop. I think I'll just stick with that.

4. Onlive, you really impressed me, but I'm afraid I'll never touch you again.

Jeremy Alessi
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I loved the concept behind OnLive and used it several times but perhaps in this time of 2D mobile/social games there's not much point in cloud rendering. It appears that, while cheating Moore's Law was possible, perhaps it was also pointless.

This is a great case study for:
http://www.yosefk.com/blog/what-worse-is-better-vs-the-right-thin
g-is-really-about.html

If they sold the assets (according to the update) then perhaps it was just too soon for a consumer front end or perhaps that was just a proof of concept run in order to get the technology into other spaces. I really hope it wasn't done to screw anyone out of stock options or some other form of bottom-line thinking. No matter what this will be interesting to watch unfold.

Andrew Grapsas
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Cloud computing (for rendering) never made sense to me. In my pocket I have a quad core processor with 1 gig of ram and a pretty damn good video card. In 5 years, I'll have a significantly more powerful rig... just sitting in my pocket. Which is more likely: I'm going to interface my cellphone with my TV, or I'm going to access a remote server up to hundreds (if not thousands) of miles away that will offline render and then transport that image back to me at a high enough frame rate to be responsive.

Keith Nemitz
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As a developer of mid-core games, I never thought OnLive was good for virtual high-end gaming, but it's great for low-speed interactive entertainment. My python games would run on every OnLive capable platform, without a byte of piracy. That's why Big Fish developed their Unlimited cloud service.

Hope this is merely bizarre but eventually good news, but it sounds awful.

Bob Johnson
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Tech was cool, but ... The lag.

Martin Pichlmair
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Maybe they just sold the tech?

Kyle Redd
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This could be just the disaster consumers need to realize how risky it is to invest in cloud gaming at all. There is a real possibility that however many hundreds of thousands or even millions of dollars spent on OnLive games are about to be lost forever. OnLive customers would be justifiably furious, and all other gamers would have to finally wake up and pay attention to what's at stake for them.

Actually though, I suspect precisely because of the impact it could have with consumers that someone is going to swoop in and save OnLive - possibly Microsoft, Google, or any other company that is heavily invested in cloud computing - to try and avoid the resulting backlash against such models.

wes bogdan
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Perhaps ms bought them to shut them down and merge with xbl which would be like xbl cloud so there might need to be re engineieering done. 720 will tell more.

Remember by 2015 streaming will be a very large part of xbox gaming.

Merc Hoffner
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Perhaps they have a deal with Sony? Remember that before Microsoft rolled out Kinect they bought up just about all the companies that were developing rival consumer depth capture technologies, and as far as I understand, set about dismantling them. It's not 'quite' anticompetative behavior if the market didn't yet exist in the first place.

Michael Joseph
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I don't think they'd lay off the entire staff if they were acquired by a company with deep pockets.

And for all we know, OnLive could be a patent minefield for a prospective buyer.

Rich Tietjens
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If MS re-engineers anything, it becomes bloated, unwieldy, expensive to use, proprietary, cross-platform incompatible, and eventually, dead. So if MS bought OnLive, it's effectively dead.

Paul Shirley
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xbl appears to be trying to hire the laid off staff so I doubt that's the plan.

George Blott
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inb4 acquisition announcement by major player (apple?)

Fernando Fernandes
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Something is rotten in the state of Denmark.

Kristijan Lujanovic
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I wrote unbelievably optimistic article about the company. Mostly because Perlman is awesome. Now I feel stupid. Best of luck to them. in the end;

There are more things in heaven and earth, Fernando, than are dreamt of in your philosophy.

Some of them have ton of money. Esp now when gaikai is bought. Definitely not the death of technology.

Kevin Reilly
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Apparently they filed for an Assignment for Benefit of Creditors (ABC): http://www.gamepolitics.com/2012/08/17/former-onlive-employee-des
cribes-bizarre-all-hands-meeting

This means they assigned all assets to the ABC in order to be liquidated and pay off creditors from proceeds of the sale of those assets. Any purchaser would get the company's assets free and clear while the liabilities remained with the Onlive ABC. This is what happened to Brash a few years back.

Kyle Redd
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That interview is really interesting, although I have to wonder how Perlman is going to successfully stiff the creditors by shuttering OnLive... only to turn around and start up a whole new company with the exact same mission

I'm not sure how California bankruptcy laws work but I can't imagine the creditors are going to just throw up their hands and walk away. Does anyone familiar with an ABC filing know how this new, smaller "OnLive" facsimile will be able to operate?

Joe Wreschnig
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This is what I guessed when I read the description of what happened.

Perpetual Entertainment did this same thing in 2007, to the confusion of most of their employees. I think it "worked" in the sense it got them some legal relief from creditors, but they never did ship a game. And it's super-shady.

Merc Hoffner
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Oh dear. I was really hoping this would work. Genuinely sending out love and commiserations here. :-(

I don't suppose the microconsole I picked up at the Eurogamer Expo will become a collectible?

Kyle Redd
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It will be for doorstop collectors.

Merc Hoffner
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It came with a spare HDMI cable :-s

David Pierre
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Did they run out of tachyons or something?

Merc Hoffner
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Did you ever hear about that plan the bankers had? They wanted to build co-ordinated particle accelerators and neutrino detectors on either side of the planet and encode financial data on neutrino bursts so that they could send signals through the earth's center and circumvent the latency introduced from bouncing signals around the horizon.

Paul Shirley
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Bizarre place to find it (Apple vs Samsung court report twitter feed!): there's a feeding frenzy underway to hire OnLive staff, 3 companies competing already. Good news for at least some of the staff.

If OnLive had any plans on opening a new company and hiring them back, that's not looking like a good plan right now, the talent won't be available by Monday night.

Nate Anonymous
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Nice to hear that this is starting a feeding frenzy for the talent.

Onlive was on the cutting edge of delivering cloud content and their Windows streaming services probably makes more business sense then trying to pump out next-gen gaming graphics, if they can get the pricing go-ahead from Microsoft.

If the company was being sold as an acquisition and used this tactic to strip the employees of equity, without being sure to retain the bulk of the engineering talent, it´s a very stupid move. Microsoft, HP, Apple, etc. don´t carry about Onlive´s patents, they probably have double or more equivalent patents since startups usually are slow to fill out their patent pool and everyone has been focusing on this area for years. The talent, however, has to be invaluable because Onlive was the furthest ahead at matching the rendering performance of a local computer/console.

Rey Samonte
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Hrm...I guess this concludes a very old discussion I had with someone years ago when OnLive was just about to be released. He was adamant that OnLive would replace consoles and create a universal platform.

I just wish everyone all the best who will be looking for new jobs. :(

Gern Blanston
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There is zero reason to think that this is a failure of cloud gaming. Anyone can run a business poorly, and no one here can say with any certainty what has led to this situation. I also see no reason to doubt the 'unknown, newly-formed' that will be taking the reigns.

In my opinion, cloud gaming didn't fail OnLive. The people running OnLive failed cloud gaming.

Nate Anonymous
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A lesson for everyone in the tech industry. If part of your compensation package is stock options, hire a lawyer to explain to you how they work, how long it takes for vesting, and what your options are in you end up working for another Zynga, Skype, or Onlive. A few hundred bucks could save you a boatload of money since more companies are treating options like monopoly money or frequent flier miles nowadays.

Dave Smith
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i dont even consider this stuff a benefit anymore.

Jane Castle
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Just refuse the stock options and ask for the equivalent amount in toilet paper. You'll come out ahead 98% of the time.....

Russ Menapace
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Frankly, I'm relieved. I was beginning to thing I was the only one that didn't "get it."

Derrick Lim
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Cloud gaming has always been a bubble to me that will eventually burst.

Michael Joseph
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I think cloud gaming as a feature of pay tv subscriptions would be awesome. Great for casual games, family games, but for some reason they don't seem to think so. You could do some amazingly cool my neighborhood or street vs your street/neighborhood trivia games with that. Like the stuff they are doing on airliners these days but on a larger scale but still keeping the feel of it local and "social."

Imagine the next "Who Wants To Be A Millionaire" type game that is REALLY interactive and lets average folk feel like they're playing in a sort of national gameshow olympics. Dexter Ave North in Seattle just won 1 million dollars!!! Congratulations to the westlake neighborhood residing on Dexter! Next week they advance to the national tournament and will be competing against the residents along Bourbon Street, New Orleans!

I pity the tv shows that have to air alongside those events...

ok yes this sounds like an invitation for massive cheating... oh well.

Nate Anonymous
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I think cloud gaming has a future in Kansas City and wherever Sonic runs fiber. Otherwise you have technological and business head winds running against you in the near term. The biggest internet providers (who mostly share the same business model and enjoy limited competition) are more concerned with preserving the cable subscription model then anything else, which demands creating artificial scarcity for the unfiltered internet.

Maybe some killer apps in another part of the world will provide the case for a national upgrade in broadband.

David Hoffman
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Sad to hear about the staff. Worst news about this imo.

Maria Jayne
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"OnLive's assets have been sold to an unknown, newly-formed company, which will continue to operate its services, support its products, and manage its partnerships."

Why does that sound like a legal loophole to leave the old company with all the debt and start a new company with none of it?

A S
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Ding ding, we have a winner.

This is a method of clearing liabilities. Specifically as they say in the article they have cleared all employee stock option liabilities, and can also strategically reduce payroll at the same time.

Joe Wreschnig
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"Specifically as they say in the article they have cleared all employee stock option liabilities, and can also strategically reduce payroll at the same time."

In regular language, this means "they screwed both the people who initially believed in them and the people who worked for them."

And they'll probably be rewarded for it, too. :(

(And we're still supposed to believe it's in Vancouver's best interest not to tax game companies, rather than like, lock up the people who pull this shit.)

Nate Anonymous
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Plus they can cancel those stupid server lease contracts they singed. 8000 servers for a 2000 average concurrent user base? Really?

Evan Combs
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Well if I ever change my mind on cloud gaming I know who I will not be using as my services as soon as we figure out who this company is.

Michael Rooney
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I am still very confused by this, but it seems that there were a lot of contracts that overestimated their market, so they are doing this to re-evaluate new contracts that don't have unrealistic expectations?

I can't really say that it's screwing the employees though. Having stock options in a company that goes bankrupt because it's stuck in crappy contracts is just as bad as not having stock options at all.

Did employees get any severance (at least ones that weren't rehired)? I'd imagine the severance would be better than the value of the stock options if the company were just allowed to die slowly.

Nate Anonymous
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When a company enters traditional bankruptcy with the goal not to liquidate, the company's management can cancel or keep their contracts, with monitoring by the court. The cancelled contact holders may become unsecured creditors, which usually means that their claim against the company gets whipped out.

This is how the airline industry keeps operating in bankruptcy, despite the fact that they depend on ongoing business relationships with catering vendors, airplane lessors, fuel suppliers, etc. Ideally for the company, the essential contracts can remain in place or renegotiated down while the undesirable contracts cancelled. Of course there is a lot of give and take and I am oversimplifying the process. That's why for the biggest companies that enter bankruptcy with a plan to not liquidate there are a lot of lawyers involved repping all of the different interests and creditors.

I imagine the ABC is a simplified version of this process but I am not familiar with the process so can't say for sure.

A S
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@Michael: A very key point to answer your questions will be whether they did this with employee buy in or not. WRT renegotiating contracts, IANAL but I believe that if they move the assets to another legal entity so they can get out of poorly thought out contracts, and if they did that in a way thats provable in court, their creditors can go after the assets of the new business.

@Nate: (or rather following on) Exactly as Nate says. There are actually various flavours of bankruptcy depending on the objective of the business. However bankruptcy itself carries some negative cachet, and so avoiding it can be worthwhile.

Danny Bernal
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just another evil corporation move.

reminds me of this film.
http://www.thecorporation.com/

Lincoln Thurber
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I think they bungled this and they will pay for it for years. First, selling off to undisclosed shadowy figures is not transparent so even if nothing bad is happening they put a shadow on the company's prospects. Second, instead of selling with the employees in place they pink slipped them which again 'reads' as instability to users or potential users. Third, the pink slipped everyone so they could cheat 'plank holder' employees out of vesting stock, employees who came in early because they believed in the service.

All of this is legal, all of this has been done by others, but the idea is not to be caught. Pink slipping everyone is what really makes this was a rooky mistake. You don’t pink slip everyone in a front line services company something that sells services directly to consumers…it looks bad…it makes you look unstable.

Nate Anonymous
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Google acquires companies, just to shut down or morph the product and recruit the employees.

Whomever acquired Onlive apparently is retaining a skeleton staff through offer letters and wants to invest because he thinks the tech is cool.

I know I am comparing apples and oranges, but it´s odd to see such different strategies play out. I doubt SageTV engineers and developers are more valuable than Onlive´s equivalent employees.

Ruthaniel van-den-Naar
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Im using Onlive very often, because i havent time to install games and there arent now demos of PC avalaible elsewhere.
I think that they fail in advertising and prices because technology works, even here in Europe.

Jean-Michel Vilain
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Phew.
That was too early. Habits and technology need more time.

[User Banned]
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This user violated Gamasutra’s Comment Guidelines and has been banned.

Randen Dunlap
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I think this is a classic example of a technology or company being a little ahead of its time, or what the market is ready for. For the most part, we can all generally agree the digital wave of gaming is on the horizon, that being said I think the cloud gaming technology isn't quite ready to stand on its own just yet. Hopefully they work it out, I think they have a promising setup, just one that the market isn't ready to support for high end games just yet.


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