Sony paid $380 mil for Gaikai, but OnLive sold for just $4.8 mil

New details about OnLive's spectacular implosion show that the company was sold for a paltry sum after declaring insolvency in August.

OnLive’s disintegration in August was abrupt. One day the cloud-based streaming video game service was plugging along, the next its entire staff was liquidated. As details emerged, it came out that one of the investment firms that had initially backed OnLive back in 2009, Lauder Partners, was now sole owner of the company. How much did it pay?

Lauder Partners has poured a good amount of capital into other streaming entertainment businesses, including local television provider Aereo and Smart TV software producers like TrickPlay. Streaming video game businesses cost a princely sum based on recent transactions. Sony dropped $380 million on OnLive’s competitor Gaikai in July. Lauder spent a comparatively paltry $4.8 million on OnLive.

The San Jose Mercury News acquired a letter written by Joel Weinberg, CEO of Insolvency Services Group, the company charged with handling OnLive’s liquidation of assets prior to the company’s near closure. Weinberg’s letter states that Lauder swept in at precisely the right moment to buy up what remained of OnLive.

“Had the sale to the buyer not taken place, the assignee would have been left with inadequate capital to fund the significant costs to preserve and market OnLive’s patents and other intellectual property, thus greatly reducing expected recoveries essentially to those of a forced piecemeal auction,” reads the letter. In short: Taking just a paltry sum from Laudner was better than incurring the cost of actually trying to sell OnLive’s assets.

The dire state of OnLive when it declared insolvency in August is enhanced by other figures revealed. While the company had raised as much as $40 million prior to opening for business in 2010, it had accrued nearly $19 million in debt by the time it dissolved this summer, not counting future costs for maintaining its facilities.

It was OnLive’s employees who got the rawest deal. Not only did they lose their jobs, but according to a report at The Verge, many of them had spent significant sums on shares in the company that were rendered worthless when it declared insolvency. That same report says that clients including Samsung and LG had offered to buy the company, but CEO Steve Perlman refused to sell, preventing those employees from seeing any return on their investment.

Source : digitaltrends[dot]com

Microsoft recruiting former OnLive staff. Will Xbox 720 stream games?

Microsoft seeks OnLive staff. Streaming video game service will be a key battleground for Sony and Microsoft in the next console generation.

Sony’s got Gaikai, but Microsoft might have OnLive to counter it. In a manner of speaking that is.

OnLive’s dissolution as an independent company was not just abrupt but unexpected. People knew full well that the cloud-based streaming video game business was still a limited niche, but no one understood quite how meager an audience OnLive had for such a massive operation. With a rumored 1800 users playing on millions of dollars worth of servers, OnLive was captaining a battle-ready navy on what was essentially a pond. New owners and past investor Laudner Partners is committed to developing OnLive’s place in the nascent on-demand gaming business though. Founder and CEO Steve Perlman is staying on with the reborn company but it’s unknown how much of the original staff will be re-hired after Laudner laid off everyone.

Many of those employees may find new employment in Redmond, Washington though. Microsoft is actively recruiting OnLive’s former staff. GamesIndustry International spotted a posting from Microsoft seeking OnLive staff.

“We are eager to speak to individuals and teams affected by the OnLive transition. With the stunning success of Xbox/Kinect and accelerated growth of this business, we are looking to add key players who want to make a real impact in creating groundbreaking new products and services.”

There were rumors just after OnLive officially opened for business in 2010 that Microsoft was courting the company for acquisition. Those rumors reappeared after Sony purchased OnLive’s main competitor Gaikai in June. Former employees of OnLive anonymously said that part of the reason the company failed is that Perlman refused to sell the company to interested buyers. Given its interest in OnLive talent, it would seem that Microsoft was one of those interested parties.

The posting is also telling about Microsoft’s plans for the Xbox 720, sometimes called Durango. Based on Sony and Microsoft’s recent activity, streaming game content is going to be a central service of both the PlayStation 4 and Xbox 720. This was an inevitability. It will be interesting to see though how Microsoft integrates that streaming service into its already successful Xbox business. Is cloud-based streaming game content going to be the core of Xbox Live? Microsoft is going to have difficulty going forward convincing new Xbox owners to pay for online multiplayer. It’s already experimenting with free-to-play content, signaling that transition. If streaming replaces current Xbox Live Gold services though, Microsoft will need to best the quality offered by OnLive.

Source : digitaltrends[dot]com

OnLive acquired by Lauder Partners, but who will own the streaming video game company in the future?

OnLive's new owner Lauder Partners has a history of investing in streaming technologies, but will it hold on to the troubled gaming company?

OnLive is dead, long live OnLive. Or at least live a little longer than previously expected. The world’s first full cloud-based streaming video game business isn’t closing shop completely, just as corporate communications director Brain Jaquet said on Friday. Rumors that the entire OnLive staff was laid off on Friday as an anonymous investor with “substantial funding” took ownership of the company and its assets also turned out to be true though.

Who is OnLive’s new master? GamesIndustry International reported on Monday that Lauder Partners, one of the initial investors that backed OnLive during its second round of fund raising in 2009, has taken control of the company.

The news clarifies just who lost their jobs and who made the transition to the new corporate structure of OnLive in the wake of its dissolution as a private entity. Reports from Kotaku and Joystiq are corroborated by an official statement.

“Almost half of OnLive’s staff were offered employment at their current salaries in the new company immediately upon the transfer, and the non-hired staff will be given offers to do consulting in return for options in the new company. Upon closing additional funding, the company plans to hire more staff, both former OnLive employees as well as new employees.”

The stock deal for former employees does not extend to OnLive’s founder and CEO Steve Perlman. “Like all shareholders, neither Steve nor any of his companies received any stock in the new company or compensation in this transaction at all. Steve is receiving no compensation whatsoever and most execs are receiving reduced compensation to allow the company to hire as many employees as possible within the current budget.”

Anonymous sources from within OnLive said that it was Perlman’s mismanagement and refusal to sell his company to interested bidders that caused it to implode this month.

Lauder Partners has invested heavily in streaming technologies over the past three years. Following its investment in OnLive in 2009, the LLC has backed local television streaming service Aereo, as well as Smart TV software makers Flingo and TrickPlay.

Lauder isn’t likely to maintain full ownership of OnLive. The transition period will entail streamlining OnLive’s business beyond mere staff cuts, establishing firm content deals like the service’s agreement with Ouya’s Boxer8, and hunting for a new buyer. OnLive competitor Gaikai was purchased by Sony earlier this year, the first shots fired in the new streaming battlefield for video game console makers. Priority one for Lauder will be polishing OnLive until it shines and selling it to the highest bidder.

Source : digitaltrends[dot]com

OnLive isn’t out of business, but won’t comment on full staff layoff

Cloud-based games on demand company OnLive isn't closed as rumors suggest, but the company is strangely silent about staff layoffs.

The sky is falling! Or maybe it’s the clouds.  Just one cloud actually. Cloud-based streaming video game service OnLive is closing.

At least that’s what Friday rumors purported. Turns out that OnLive isn’t shutting down, but it’s up in the air whether anyone is working there or not.

It all started when InXile Entertainment head honcho Brian Fargo took to Twitter on Friday morning, saying, “Just received an email that OnLive is closed as of today!” A bold, dangerous statement; Consider how many game developers and publishers working with OnLive likely heard about the Tweet within minutes. It’s the stuff of Internet brushfire legend.

Fargo’s exclamation was followed up by a report at Mashable that OnLive had laid of its entire staff. Its source claimed all OnLive employees were summoned in for a meeting at 10am PDT on Friday and all in attendance were promptly laid off. A number of staff were told that they would be immediately rehired as the company transformed into something new.

That same source said that the management of CEO and founder Steve Perlman was the cause of OnLive’s implosion. His refusal to sell the company to interested buyers was apparently a primary cause of OnLive’s failure.

OnLive corporate communications director Brian Jaquet took to the press by Friday afternoon though, saying that its only comment on the news is that the business isn’t shutting down. Jaquet answered Joystiq’s inquiry as to whether or not it was closing, “We don’t respond to rumors, but of course not.”

So OnLive will still offer up streaming video games to its users according to Jaquet. Wonderful. What about the company’s hundreds of employees? Unknown. There’s been little indication from the company’s employees on social networking sites that they’ve been laid off, but LinkedIn and Facebook profiles don’t exactly tell full stories.

These are strange days for the nascent streaming gaming business. Sony acquired Gaikai, OnLive’s primary competitor, at the beginning of July. As f that moment, cloud-based gaming was no longer a promising niche for startups like OnLive. Now it’s the territory of massive, multinational businesses. There has been speculation that Microsoft would in turn make an offer to OnLive, but so far the company’s stayed independent. The only console related announcement made by the company recently is that it will support Ouya, Boxer8’s new Google Android game console.

We’ve reached out to a number of OnLive employees and will update this article with any relevant information they provide.

Source : digitaltrends[dot]com