Once Valued at $1.8B, OnLive Was Sold For Only $5M

gabebear writes with details of what happened to OnLive back in August: "In a firesale, OnLive, which was once valued at $1.8bn, was sold for practically nothing. Workers are mostly losing their jobs and stock options and investors are having to write off their investment." More details.

Eh

[oGMo]

They may have even discovered that gamers don't tolerate an internet connection level of input delay in their games!

Eh. I tried OnLive to see how well they accomplished what they did. Latency wasn't the main concern, but then I have a reasonable connection (~25Mbps) and may be geographically near one of their data centers. The main problems are more the following:

• The rendering quality was often crap; this may be a function of the encoding, but it doesn't matter. Washed-out colors, blurry video, and heavy artifacting don't make a great experience.
• Price model. This was too good to be true. Pay for the game or like $10/mo for their PlayPack stuff. Let's give them the benefit of the doubt and say that they can provide sufficient rendering at $700 a box on average for any given game. They need one rendering unit for every player. They need to pay for bandwidth and energy to run all these units, plus people to maintain them. They need to stay upgraded, generously, every year or two, to play the latest stuff. That's quite a bit of money to support a single user paying $120/year.
• Casual/hardcore disconnect. Is this for casual gamers who don't want to pay for a gaming PC? Or hardcore gamers who want to play all the latest stuff? A casual gamer can likely find plenty to play on their phone or the web; a hardcore gamer isn't going to be satisfied with the limitations. There may be a niche, but it doesn't seem big enough to support the model.

In the end this always seems to fail at a financial level: if it's cheap enough per-player that a $10/mo fee can cover licensing, hardware, and utility, then it's probably cheap enough the user is going to have his or her own device (e.g., a smartphone). If not, then it's not going to work anyway.

And it's not a matter of volume. Nintendo, Sony, and MS have volume on their consoles, and they still sell for $200+, often at a loss, and the only maintenance cost is warranty support. Making up for this on licensing isn't an option for OnLive, since they don't make any games. There are no exclusives.

The only way this might work (financially, at least) is a subsidized hardware console with a reasonable contracted subscription fee, and first-party game support as well as third-party exclusives. Gamestop might be trying this [joystiq.com], but it's unclear if they're actually funding games or just providing a similar service.

What this actually was about

[Anonymous Coward]

OnLive had a pile of debt and a pile of employees with a pile of stock options.

The "bankruptcy" invalidates all those stock options and means that half the employees can be sacked. Many of those may not be needed because they worked on things like early stage development which is no longer needed.

But guess what? The new company that "buys" the assets of the old company then basically becomes identical to the old company, except that you have suddenly sacked a lot of people, and the remaining employees including the CEO gets 2X the stock options they used to have.

What's interesting is that the creditors and investors of the old company were happy with it being sold at only $5m. It wouldn't surprise me if the investors in the new company are identical to the investors in the old company.

Re:OMG!

[ArhcAngel]

It was on The Verge [theverge.com] and it is pretty obvious Steve Perlman [wikipedia.org] was both the architect and destroyer of OnLive.

No surprise to us: Thats the real story

[CdBee]

A lot of people (particularly I'm discussing western political leaders, but not just them) state as a matter of blind faith that markets are effective allocators of capital

OnLive to me is another DotCom Crash Co, it just happened rather later: We all know the basic story, they said they could deliver high fidelity gaming as a service, thus freeing users from the capital investment of the console and turning a sales market into a services market

Most of us scoffed, pointing out things we understand about residential internet connecticvity, the devastating efffect of lag upon gaming, and the implausibility of the system in general. Institutional investors looked at what the company said, thought ' turning a sales market into a services / rental market is a good thing, it means higher long-run revenues' and poured money into it.

I have limited sympathy - they invested badly. Only real benefit was to the coders who had jobs there for a few years. But I do think the idea that investors will run to invest in markets they patently dont understand doesnt speak well for the efficiency of the capital markets.

So, am I the only one who liked it?

[Kiyyik]

I am primarily a mac user, and this was the way I was able to play certain games that didn't get ported over, like Arkham Asylum and such. And they looked a heck of a lot ebtter than if I'd just run them in a VM or something like that. I had occasional bandwidth issues, but that was generally down to my ISP in any case. Frankly, I thought they were the bee's knees, and I'm sorry to see they seem to be going the way of the dodo. It's still a good idea, to my mind. Maybe just needs a little tweaking to make it a viable proposition.