OnLive Restructure Detailed, Game-Streaming Company Looking Ahead

By Robert Ottone | August 20 2012 9:57 AM

OnLive, the cloud-streaming online game service, has had its share of difficulties over the past week or so, including potentially having filed for a form of bankruptcy, as well as firing multiple employees. Kotaku reported Monday that the service may have sold off a good deal of its employees' stock options to make itself an attractive buyout candidate. The situation is, on the surface, passively similar to the Zynga saga of the past few weeks.

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OnLive, the cloud-streaming online game service, has had its share of difficulties over the past week or so, including potentially having filed for a form of bankruptcy, as well as firing multiple employees.

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Gamasutra reports that OnLive has detailed the situation regarding the change to its business model. In a statement, OnLive said, "The asset acquisition, although a heartbreaking transition for everyone involved with OnLive, allows the company's core innovation and ongoing offerings to survive and continue to evolve."

The company also apparently plans on hiring back most if its former staff, once the buyout and transition is complete. With cloud gaming being the purported way gaming seems to be going, OnLive was looking to forge a new path, as the company allows for the streaming of multiple multiplatform titles like the "Assassin's Creed" saga, as well as many other popular franchises.

One of the reasons for the company's financial troubles is that OnLive has been renting out server space that comes with lengthy contracts. Renting a server often costs a good deal of money, and having huge contracts with those server providers can weigh on a company's bottom line. "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. If you've got 8,000 servers and 1,600 users, how could we ever get to cash flow positive, right?"

Unlike the Zynga situation, the founder of OnLive, Steve Perlman, did not receive any form of monetary restitution from the buyout of the company, instead investing the money back into the business. As part of the restructuring, Taiwanese smartphone maker HTC will record a loss of $40 million on its investment in OnLive, according to Gamasutra.

In a speech Friday, Perlman said, "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."