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OnLive Lays Off Majority Of Employees, Confirms Buyout

Author:
Jonathan Lester
Category:
News
Tags:
Danger, Layoffs, OnLive, Uh-oh

OnLive Lays Off Majority Of Employees, Confirms Buyout

"Newly-Formed Company" Takes The Reins

Breaking news: all is not well at OnLive. Following confirmed rumours of massive layoffs, the cloud gaming company has been bought out by a "newly formed venture" - with a promise that their service will continue.

Here's what we know so far.

inXile's Brian Fargo started the ball rolling by tweeting an alleged email from an OnLive employee, which stated that "by the end of the day today, OnLive as an entity will no longer exist. Unfortunately, my job and everyone else's was included. A new company will be formed and the management of the company will be in contact with you about the current initiatives in place, including the titles that will remain on the service."

Despite putting on a brave face, OnLive's bleak situation was summarily corroborated by sources from Kotaku, Engadget and GamePolitics, with reports claiming that a company meeting heralded the dismissal of over 50% of the workforce without severance pay. Some reports even suggested that OnLive were desperately searching for an alternative to bankruptcy.

The latest news comes courtesy of The Verge, to whom OnLive issued a statement confirming both the layoffs and a buyout by "a newly-formed company," who will hopefully hire back many of the ex-employees.

"We can now confirm that the assets of OnLive, Inc. have been acquired into a newly-formed company and is backed by substantial funding, and which will continue to operate the OnLive Game and Desktop services, as well as support all of OnLive's apps and devices, as well as game, productivity and enterprise partnerships. The new company is hiring a large percentage of OnLive, Inc.'s staff across all departments and plans to continue to hire substantially more people, including additional OnLive employees. All previously announced products and services, including those in the works, will continue and there is no expected interruption of any OnLive services."

"We apologize that we were unable to comment on this transaction until it completed, and were limited to reporting on news related to OnLive's businesses. Now that the transaction is complete, we are able to make this statement."

We'll doubtlessly learn more over the next few days, and wish those affected a speedy return to the workplace.

Add a comment9 comments
Fluidz2k12  Aug. 18, 2012 at 14:33

Oh well. if they go down, there is still Gaikai..

theslickmeister  Aug. 20, 2012 at 08:25

Could this "newly formed venture" been the Ouya team? They were very keen to get OnLive integrated into their system - it would be great if the OnLive customers that did put money into it could still access/play their purchases through the Ouya if they transfered ownership of the servers(?)

Anarchist  Aug. 20, 2012 at 10:28

I would struggle to see how the Ouya team would have the capital to out up for this on top of their existing development. Seeing as they don't actually have any income yet.

Last edited by Anarchist, Aug. 20, 2012 at 10:28
theslickmeister  Aug. 20, 2012 at 10:33

I would struggle to see how the Ouya team would have the capital to out up for this on top of their existing development. Seeing as they don't actually have any income yet.


well, they only wanted $1m (only!), the other $7.5m I guess they can spend where-ever they like as long as it's to better the product in some way. This could include buying out another company if need be, but you're right, this figure would be alot lower than the expected asking price for OnLive.

Korma  Aug. 20, 2012 at 11:25

OnLive no longer existing and a "newly formed venture" taking over could be a way of saying OnLive died and took it's debts with it. This new company will have way less or even no liability (depending on what it is exactly).

Think Rangers.

DivideByZero  Aug. 20, 2012 at 11:26

"all is not well at OnLive"... d'ya think! It was doomed before it came over. It did very poor in the US.

With everything being so spread out there is such high latency so it just doesn't work.

People get suckered in thinking they have 20MB+ internet and thinking that will be plenty for online gaming, but unlike films, it's the latency that really matters here.

We just are not ready for this yet... one day, no time soon methinks.

Late  Aug. 20, 2012 at 11:33

Write off loads of debt, sack a load of people without severance deals, and create a new company which buys all the assets of the old one and continues it's business - likely with the same directors and shareholders.
The courts/governments of the country of origin (USA?) will likely be taking a close look.


well, they only wanted $1m (only!), the other $7.5m I guess they can spend where-ever they like as long as it's to better the product in some way. This could include buying out another company if need be, but you're right, this figure would be alot lower than the expected asking price for OnLive.


Bear in mind they've "sold"[*1] around sixty thousand consoles with their kickstarter campaign - so whilst some of the capital they've raised might be "spare" a fair amount of it will be needed for production costs of those units as well as production of an increased number of units for retail. [*2]

I have no idea how many units they want for initial retail, nor how much the units will cost to manufacture (and neither will the top people at OUYA, tbh, as there's no set "cost per unit" - but they'll have a much better guess than me!), but if we estimate 60k units presold and 60k units for retail, each costing around $50 then that's most of their money gone[*3]. Throw in a mil for development costs of the basic unit, and you've maybe still got a bit to play around with but not enough to buy out OnLive. Hopefully enough to implement a few more features and generate a bit of media interest though.

_______________________________________________________
[*1] To be more accurate, they'll donate free consoles to the approx. 60k people who each donated more than $95.
[*2] They've seen the people are hungry - and hopefully are planning accordingly with an increase in initial production numbers.
[*3] The retail units will bring a load of money in later, but in terms of cashflow between now and launch most of the money's gone. There is, of course, a big difference between cashflow and profit - especially in a fledgling enterprise.

Last edited by Late, Aug. 20, 2012 at 11:36
JonLester  Aug. 20, 2012 at 11:33

With everything being so spread out there is such high latency so it just doesn't work.

People get suckered in thinking they have 20MB+ internet and thinking that will be plenty for online gaming, but unlike films, it's the latency that really matters here.

We just are not ready for this yet... one day, no time soon methinks.


Agreed. We can't have nice things here yet - OnLive is almost a little too ambitious. You have to wonder whether other companies will learn lessons from them when rolling out their own competing services... or if a major publisher will eventually swoop in to acquire OnLive to counter Sony's Gaikai buyout.

@theslickmeister: It's a nice thought, but I personaly doubt that Ouya will be looking to take on that sort of responsibility at this stage. If anything, their major strength lies in the fact that any company can put their services on the console without Ouya having to do much at all or take any risk themselves (e.g. XBMC etc).

Last edited by JonLester, Aug. 20, 2012 at 11:37
DivideByZero  Aug. 20, 2012 at 13:03

[*3] The retail units will bring a load of money in later, but in terms of cashflow between now and launch most of the money's gone. There is, of course, a big difference between cashflow and profit - especially in a fledgling enterprise.


I wonder what would happen if someone won a kickstarter campaign and failed to deliver a product as they invested a load of the money into a doomed side/sub project?

Jon, I think it would take someone with huge amounts of money to make a streaming games service for proper games any good. You would need a server farm every few miles and the hardware would have to be very good to even vaguely compete with old PCs. Then with all the outlay, would you make any profit?

The only way that would work is if it was so viable and good everyone wanted it and most people who wanted it could actually get it.

Will be interesting to see how this all pans out. But I don't think it will end well.

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