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Shocking news to come out over the weekend is around the collapse of OnLive, the cloud-based game streaming service. OnLive made headlines just a few short years ago for bringing an innovative concept to market as analysts predict that the future of gaming is in the clouds.
According to Joystiq, OnLive CEO Steve Perlman gathered his 200 some staff to announce that OnLive is folding as the revenue earned is not nearly enough to sustain the massive costs associated with running the server farms.
Perlman stated, “I’ve been a non-stop fundraising machine… and I finally got to the point where I just could not bring in enough funding to carry this thing forward.” After Perlman’s speech another staff member stated, "All of us, technically, as of today, our jobs have ended – our current jobs with this company."
It appears that OnLive will be entering ABC, or Assignment for the Benefit of Creditors, another form of bankruptcy where an assignee takes responsibility of the assets and debts of the company.
According to Perlman, the assignee taking on OnLive’s assets and debts is a “very accomplished and well known venture capitalist.” Apparently, the venture capitalist is “Very wealthy” as is described to be “an extraordinary guy” by Perlman, confirming rumors that OnLive is being bought out by an individual and not a company.
It is speculated that over 50 percent of the staff will be laid off in the process as the individual, while wealthy will not be able to afford to keep the 200 staff members.
…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…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.
Perlman explained that the reason the company is collapsing is due to poor estimation of the server scale. OnLive apparently initially acquired thousands of cloud servers which can’t be maintained with the current low user base.
Perlman told employees, "If you’ve got 8,000 servers and 1,600 users, how could we ever get to cash flow positive, right?" According to reports, OnLive user subscription tops out at 1,600 concurrent users. The company reported nearly two million signups in the past, but this does not account for purely active users.
Incidentally, the collapse of OnLive happened just weeks after Bruce Grove, GM for OnLive stated that companies like Sony buying up Gaikai defeats the purpose of cloud gaming.
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