With Tens of Millions in Debt, Cloud Gaming Firm OnLive Barely Survived
August 23, 2012 1:52 PM
comment(s) - last by
Investors will only get 5 to 10 percent of what they paid back from the negotiated purchase/debt absolution
Joel Weinberg, CEO of Insolvency Services Group, shed some light on
cloud gaming service provider
OnLive's recent financial plight. He
Silicon Valley Mercury News
, "It was a company that was in dire straits. It only had days to live in terms of cash flow and the like. Something had to be done immediately or there would have been a hard shutdown, which would have been a disaster."
OnLive has received some criticism for moving some of its IT employees at its five data centers -- located in California, Georgia, Illinois, Texas, and Virginia -- to lower-paid contractor positions, and
laying off a handful of other employees
. Still, based on Mr. Weinberg's accounting, it was lucky all of the employees weren't released and the business fully liquidated.
According to him, OnLive owed creditors between $30M USD and $40M USD in debt that was about to mature, and it had no means of paying that bill.
But instead of liquidation, his firm negotiated a purchase by venture capital investors
, who previously had held a small stake in OnLive. Under the "
Assignment for the Benefit of Creditors
" (ABC) -- an alternative to bankruptcy -- the creditors and institutional investors (who included AT&T, Inc. (
), HTC Corp. (
), and Autodesk, Inc. (
)) received a fractional return on their respective stakes in exchange for forgiving the insolvent firm's debt. Mr. Weinberg says the expected payment to the debtors is approximately 5 to 10 cents per dollar earned.
OnLive narrowly avoided liquidation. [Image Source: Engadget]
That's the risk of venture capital, particularly pricey cloud-computing schemes, it seems.
The good news for OnLive subscribers is that the firm retains all its intellectual property so it is at no legal risk, and it expects to have no down-time from the transfer of assets to the new Lauder Partners-owned subsidiary.
In his interview, Mr. Weinberg declined to discuss how much Lauder Partners paid or whether their were alternative bids.
Silicon Valley Mercury News
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It just wasn't quite there...
8/23/2012 3:23:10 PM
On my PC on a 50" TV the picture quality just wasn't good enough.
On my 10" tablet it should have been, but it seemed that they used even less bandwidth for phones and tablets. Might be ok on a small phone screen but on a tablet it looked awful.
Also I couldn't use my PS3 controller on the tablet. The tablet supported it but OnLive didn't. On-screen controls suck. I didn't try the PS3 controller on the PC but I suspect only their own controller was supported.
So for these reasons I never bothered becoming a subscriber.
It's quite a good way to trial a game before buying it if there's no demo version. You don't need to pay in order to do that though, so again they never got any money out of me.
These issues aren't insurmountable, especially if they switched to the new x265 codec.
RE: It just wasn't quite there...
8/23/2012 4:15:24 PM
I tried it out once because they were the only way I could do a trial version of a particular PC game. I liked the game well enough to purchase, but not from OnLive. As you mention, the resolution was pretty crappy, and that was on my 23" screen. If I'm putting my cash on the counter, I would prefer to see the game run at the highest resolution that my PC can handle, not some low-res version that is more convenient for OnLive to stream.
"We basically took a look at this situation and said, this is bullshit." -- Newegg Chief Legal Officer Lee Cheng's take on patent troll Soverain
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