So yesterday we told you how at first it looked like cloud gaming service OnLive was closing down and then they later came out and said the company’s assets had been acquired by another company and all its products and services would be absorbed by this new entity. Today, we have even more details and now know that the company will be entering a form of bankruptcy known as Assignment for the Benefit of Creditors, or ABC, this will change the structure of the company significantly.
In layman’s terms, the company and all its assets will be given to an assignee, this could be a single person, persons, or an entity, as a new company so that they or it can relieve the company’s debt and make sure creditors are paid off. This is apparently the reason behind the massive layoffs the company saw yesterday. It looks like at least some of the employees who lost their jobs will be offered jobs in the new company but not everyone. In my opinion, if I were any of those employees I would tell the new company and the old one to shove it but I understand people have families and responsibilities and they have to do what’s best for them.
In terms of how OnLive got to this point, OnLive’s CEO Steve Perlman attributed many of the issue to the company’s rapid expansion, a factor that has overwhelmed more than its share of young companies . The technology and services behind OnLive were relatively new in the way they combined them and it seems they made some bad decisions. The company didn’t know how much infrastructure it would take to run their service so they bought thousands of servers, which were ultimately underutilized but still had to be maintained. Perlman seemed to sum up the disposition of OnLive very succinctly saying, “If you’ve got 8,000 servers and 1,600 users, how could we ever get to cash flow positive, right?” The user-base simply hasn’t caught up with the number OnLive was prepared to support.
I know that there are quite a few people that really loved OnLive, but listening to the CEO describe things its hard not to say it was a failure. As I’ve always said, until the average broadband speed increases dramatically across the globe services like this will NOT be able to thrive. To move the amount of data required at the speeds required for a AAA game to be played seamlessly over the net is going to be difficult to scale for almost anyone until the infrastructure catches up. For what its worth, Perlman did apologize to OnLive employees saying :
“I’m the one that brought you here. I’m the one that ultimately made decisions. And I’m the one that ultimately takes responsibility. So I am sorry, and it didn’t end up exactly as we’d hoped.”
For now, the are claiming that OnLive will continue to run pretty much uninterrupted but as I’ve said before I’m not buying that. As Perlman said, the company has a fundamental cash flow problem because it just doesn’t have enough customers. There is no way around that and recent events aren’t going to make folks flock to the service. The new company will still have all the problems the old company had, perhaps they reduce their offerings and play in an even more niche market, but I would say that this is it for OnLive in terms of people thinking they could some day compete with the likes of Nintendo, Sony, and Microsoft.
So there you have it folks, OnLive as it was originally envisioned is no more. My personal advice to anyone that uses the service would be to cancel your subscription for a while and if the company is still full supporting all the services like they had been then jump back on. We want to hear from OnLive players, how do you feel about all this? To former OnLive employees we want to hear from you too. If you were offered a position with the new company, would you take it? Hit up the comments or take the discussion straight over to our Facebook page.