Author Topic: OnLive Meets Its End (and New Beginning)  (Read 1263 times)

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Offline zerosum

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OnLive Meets Its End (and New Beginning)
« on: August 18, 2012, 10:16:21 PM »


Via [Kotaku]:

OnLive Meets A "Destructive End To The Company"

All of OnLive's 200 employees worked daily with the cloud gaming service's traffic numbers, and knew that something big had to happen for the company around this time of the year. That's not to say everyone expected to lose their jobs together on the same day, no severance, no benefits, no nothing.
 
That's according to a former OnLive employee present for yesterday's meeting, at which the effective end of the company was announced. OnLive's assets have been acquired by an unnamed investor, and a statement yesterday said all of its services will continue for subscribers. The problem is, there didn't appear to be enough of them to sustain the ambitious venture.
 
Published reports, in particular one from Joystiq, have said that OnLive CEO Steve Perlman told workers the company was averaging 1,600 concurrent users on a service with 8,000 servers requiring maintenance.
 
While Kotaku's source didn't recall Perlman using figures that specific in the meeting, the source also didn't refute the claim.
 
"[Perlman] had broken the news that the company had ceased to exist," said the former employee. "As soon as you hear that phrase, you kind of stop listening. You're more thinking, 'what's the state of my resumé.'"
 
As employees whipped out cell phones to text friends or loved ones, they were told they would be receiving no severance and any stock options, if they held them, now had no value as the company was no more. Their only assistance as they find new jobs will come from public unemployment benefits. Some may be asked if they want to contribute to the transition effort the new venture will undertake with OnLive's assets, but it didn't sound like an attractive offer. They'll be paid only in stock options offered by the new company, which will have value only if it is acquired or taken public.
 
Reaction to Perlman's decision to pursue what is called an ABC—an Assignment for the Benefit of Creditors—was mixed, said the former employee. An ABC is not bankruptcy; it's a form of protection akin to bankruptcy, albeit taken at the state level. A troubled company's assets are assigned to a third party, which allows the old company some kind of breathing room to settle its affairs without a bankruptcy trustee running things.
 
It's not Chapter 11 reorganization (a common form of bankruptcy that doesn't dissolve the company) nor is it outright liquidation under Chapter 7 of the bankruptcy code, but it is a "destructive" end to the company, said Kotaku's source. Many had been hoping that OnLive would by now either have been acquired, or have been given a bridge loan to stay operating. Those around the watercooler knew the math: the company's annual operating costs were reasonably estimable, the revenue was likewise not a secret. "We knew something had to happen between August and September," the source said.
 
Weak numbers and a rival's enviable acquisition sent a message OnLive wouldn't have a chair when the music stopped.
 
Sony's acquisition of cloud gaming service Gaikai in July was spun by management as a potentially good thing, but also seemed to be a warning signal that OnLive was going to be left without a chair when the music stopped. Perlman told employees that it showed an endorsement of cloud gaming technology by a console manufacturer, and it set an acquisition price where none existed before. But it was also a blow to morale that Gaikai ended up with Sony and not OnLive, which had been hoping for one for some time.
 
As the year wore on and OnLive's marketing and licensing teams, ones typically asking for money to sign up new releases or visit trade shows, were finding requests for travel denied, a sure sign things were going south. OnLive did send a representative to Gamescom, said the source, but other lesser, yet still important industry functions and roadshows were not attended.
 
Kotaku's source declined to provide specific figures on what OnLive's paid subscriber base or average concurrent traffic was, beyond the fact employees were aware something needed to happen soon. In interviews, Perlman never enumerated the company's number of subscribers, but has been quoted saying it was in the millions. Industry analysts pegged it at two million. How many of those were free or inactive account holders versus paying customers is unknown.
 
When the meeting broke up, there was the ritual exchanging of hugs and gallows humor among the laid off. "One of the things we were successful at with OnLive, there was a real community, not just in its engineering or some other team," the former employee said. "You could either get really angry or you could laugh. There was more laughter than anger, in my opinion.
 
"People were hugging, saying, 'I guess I need a box for my things,' figuring out what bar we were meeting at, so we can go get some tequila."

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Re: OnLive Meets Its End (and New Beginning)
« Reply #1 on: August 19, 2012, 10:31:14 AM »
That's a damn shame. I love the philosophy of OnLive and had high hopes for the company.  I'm still holding out hope for Microsoft to absorb the company as they should have done years ago.

In the meantime, I hope the employees are taken care of.

Offline zerosum

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Re: OnLive Meets Its End (and New Beginning)
« Reply #2 on: August 19, 2012, 06:09:58 PM »
UPDATE: OnLive Offers Their Statement [8.19.12]
Quote
OnLive, the pioneer of instant-action cloud computing, announced today that on August 17th all of its assets were acquired by a newly formed company that will continue to operate under the OnLive name. The OnLive® Game and Desktop Services, all OnLive Devices and Apps, as well as all OnLive partnerships, are expected to continue without interruption and all customer purchases will remain intact; users are not expected to notice any change whatsoever. OnLive's current initiatives will continue as well, with major announcements of new products and services planned in the coming weeks and months. An affiliate of Lauder Partners was the first investor in the newly-structured company, holding the view that OnLive is the future of computing and entertainment, and a passion to see OnLive's breakthrough technology continue to grow and evolve. The new company structure enables OnLive to do so.
 
OnLive, Inc.'s board of directors, faced with difficult financial decisions for OnLive, Inc., determined that the best course of action was a restructuring under an "Assignment for the Benefit of Creditors." The assignee of the company's assets then sold all of OnLive, Inc.'s assets (including its technology, intellectual property, etc.) to the new company. Unfortunately neither OnLive, Inc. shares nor OnLive staff could transfer under this type of transaction, but almost half of OnLive's staff were given employment offers by the new company at their current salaries 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 OnLive Service has been in operation 24/7 without interruption since its launch over two years ago, and is expected to continue to operate smoothly under the new company. All games, products and services remain available, and the company has new product and partnership announcements on the way.
 
OnLive's breakthrough instant-action cloud computing technology has been in development for over a decade and, despite immense skepticism, OnLive successfully deployed this highly disruptive technology as a polished consumer offering with commercial-grade reliability across a vast range of devices, including TVs, tablets, phones, PCs and Macs, connected over almost any Internet connection, including wireless and cellular. Only a few major corporations have ever developed and deployed products and services across such a broad spectrum. OnLive is rare among startups in both the depth and scope of its offerings.
 
The asset acquisition, although a heartbreaking transition for everyone involved with OnLive, allows the company's core innovation and ongoing offerings–the product of over a decade of hard work transforming the OnLive vision into reality–to survive-and continue to evolve.

 

FAQ's Offered By OnLive:

Q. Will users see any change in the OnLive Game or Desktop Services? What about their purchases?
 
A. Users should see no change in the OnLive Game or Desktop Services. All of their purchases remain intact and available. OnLive has been up 24/7 since launch over two years ago and expects to remain so. OnLive has over 2.5 million subscribers, with an active base of over 1.5 million subscribers, connecting from a vast range of devices and networks, with many sessions running for hours. The user base is growing rapidly with OnLive's addition into recently announced devices and TVs from major manufacturers. We expect this growth to continue under the new company.

Q. Is there any cash or stock in the new company provided for any OnLive, Inc. shares?
 
A. Unfortunately not. The nature of the transaction is such that only assets, not shares, were purchased. This is true for all shares of OnLive, Inc., whether held by investors, employees or executives.
 
Q. Did Steve Perlman receive stock or compensation in this transaction?
 
A. 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.
 
Q. Did all OnLive, Inc. assets transfer into the new company? Are any assets held by any other party?
 
A. All of OnLive, Inc.'s assets (e.g. technology, patents, trademarks, etc.) were transferred to an assignee, which then sold the assets to the new company. There was no transfer to any other party.
 
Q. Have OnLive, Inc. employees been offered positions in the new company?
 
A. 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.

Note: Lauder Partners is a venture capital firm headed up by Gary Lauder, grandson of cosmetics legend Estée Lauder and a Silicon Valley potentate who's been behind several cable, IPTV and web ventures.

Source: [Kotaku]

8.18.12

OnLive Found A Buyer, Cleaned House To Reduce Liability Prior To Acquisition (UPDATED)
------------------------
Source: [TechCrunch]

We’re hearing from a reliable source that OnLive’s founder and CEO Steve Perlman finally decided to make an exit — and in the process, is screwing the employees who helped build the company and brand. The cloud gaming company reportedly had several suitors over the last few years (perhaps including Microsoft) but Perlman reportedly held tight control over the company, apparently not wanting to sell or share any of OnLive’s secret sauce.
 
Our source tells us that the buyer wants all of OnLive’s assets — the intellectual property, branding, and likely patents — but the plan is to keep the gaming company up and running. However, OnLive management cleaned house today, reportedly firing nearly the entire staff, and we hear it was done just to reduce the company’s liability, thus reducing employee equity to practically zero. Yeah, it’s a massive dick move.
 
OnLive hit the gaming world hard when it launched in 2009. Promising playable games there were lag free, OnLive moved gaming to the cloud. The service took some time to gain traction but finally hit its stride last year with the addition of several top-tier titles. It was rumored in June that even Microsoft considered buying the company. Some even thought OnLive would be a good fit within Sony — until Sony bought OnLive competitor Gaikai last month instead.
 
“Sony Computer Entertainment will deliver a world-class cloud-streaming service” Andrew House, president and group CEO of SCE said last month. Sony paid $380M for Gaikai, a cloud gaming company with nearly zero brand recognition. OnLive could have gone for a lot more.
 
For an upstart cloud gaming service, OnLive has done relatively well for itself. The company initially outed only one cloud gaming console, but quickly embraced others. The software works with most Android tablets, ships preinstalled on Vizio TVs (and its new Co Star Google TV), and is available for the iPad and computer desktops.
 
We reached out to OnLive for comment but the company will neither confirm nor deny the claim. All the PR rep was willing to say was that the aforementioned Vizio Co Star launches today. The company also would not comment on the layoffs but Martyn Williams tweeted seeing OnLive staffers leaving their office carry boxes. These people likely just lost their jobs and equity prior to OnLive’s exit.
 
Update: OnLive provided TechCrunch the statement below. Like earlier reports suggested, it sounds like OnLive Inc. was dissolved and a new company, OnLive Inc 2 or something of the sort, will continue in its place and is likely backed by new investors. The statement indicates that “a large percentage of OnLive Inc.’s staff” will be hired by this new company, which will then hire more people. But there’s no word on if the original employees completely lost their equity. No matter how OnLive spins this move, it’s still looks shady to me.
 

Quote
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.



« Last Edit: August 20, 2012, 01:13:10 AM by zerosum »

Offline nCogNeato

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Re: OnLive Meets Its End (and New Beginning)
« Reply #3 on: August 20, 2012, 01:42:13 PM »
Wow.  That's a lot of update.

OnLive service will continue as is.  Customers (including me) stay happy.   :)

Nearly 1/2 employees will keep their jobs, while others can work as consultants with the possibility of being hired full time.  That's good to hear.

All-in-all I think this went pretty well.  I wonder who this newly formed mystery company is that aquired OnLive.  Hmmm...?  ???

Offline zerosum

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Re: OnLive Meets Its End (and New Beginning)
« Reply #4 on: August 20, 2012, 03:20:23 PM »
A few more details - via [Joystiq] - Notes from Onlive's final meeting.



"I've been a non-stop fundraising machine," OnLive CEO Steve Perlman told his entire staff yesterday morning. "And I finally got to the point where I just could not bring in enough funding to carry this thing forward." The hundreds of employees that make up OnLive were – en masse – relieved of their positions in yesterday's meeting, including Perlman himself. "All of us, technically, as of today, our jobs have ended – our current jobs with this company," another administrator informed the crowd after Perlman finished speaking.

OnLive is entering what is known in California as an "Assignment for the Benefit of Creditors," or an "ABC," (a form of bankruptcy) wherein an "assignee" (a person, persons, or entity) takes over the assets of the current company – in OnLive's case, this means "the software, hardware, network architecture, our logo, all that stuff," according to Perlman – in an effort to lighten the previous company's debts and get its creditors paid off. Thus the "Benefit of Creditors" part of that acronym.

Perlman didn't say who that assignee was during the company's meeting, only referring to him as "an extraordinary guy" (not an entity), and a "very accomplished and well known venture capitalist" who is "very wealthy." The unknown assignee apparently believes that OnLive "is the entire future of everything," Perlman told employees. Unfortunately, he isn't wealthy enough to bring on the 150-200 people that OnLive employed.

"Here's the tough part, and this is the thing I'm very sorry to say: it's just not possible for one individual in a startup – whether it's that old startup or this new startup – to bring in this many people into a company," Perlman said. Without giving numbers, Perlman said that, in the new company, "the people that come on board are the essential people, as needed, to go and accomplish that goal of getting this thing to cash-flow positive."

He prefaced that news with a stinging reality: "The people that are gonna be coming on board here, that will come out of the group ... I'm gonna tell you, most of the people will not be coming on board."

So, what caused the sudden implosion of the gaming industry's most successful consumer-facing Cloud Streaming service? In so many words: scale. "There's no way to exactly estimate how many servers we'd need. So we literally bought thousands of them, and all the equipment and networks to go with it," Perlman told employees. Those servers, he said, came with lengthy contracts – contracts that tied OnLive's capital up in maintaining servers that few (if any) users were actually using. "If you've got 8,000 servers and 1,600 users, how could we ever get to cash flow positive, right?" Perlman rhetorically asked employees during the meeting.

Beyond the servers, Perlman said the company "dramatically expanded the number of employees" during its past few years. And during those years, it never downscaled to account for its lacking user base. "We made it through the whole recession without any disconnects, any layoffs, or any down rounds," Perlman boasted toward the end of the meeting.

Going forward, the employees who won't be joining the new venture are being offered "a very simple consulting arrangement." Former employees who help smooth the transition to the new startup will be offered stock options in the new venture. If at some point that new venture becomes profitable (read: gets sold or goes public), those options gain value. If not, the stock remains worthless. Additionally, any stock that former employees own in the original company ("OnLive, Inc.") are now valueless. This includes the preferred stock options offered to executives.

Perlman expressed regret several times during the speech. He even directly accepted blame for the whole mess. "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," he said.

OnLive reps are adamant that the service will continue, uninterrupted, during the transition process, and "future products and services" are also unaffected.

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Re: OnLive Meets Its End (and New Beginning)
« Reply #5 on: August 20, 2012, 03:28:40 PM »
OnLive reps are adamant that the service will continue, uninterrupted, during the transition process, and "future products and services" are also unaffected.

Good, considering I just scored 3 free games, and 4 more next weekend.   8)

 

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