OnLive sold to new company, OnLive, amid layoffs: the full story

Sony has pulled out its pocketbook to snap up streaming game businesses before, and is doing so once again. Today it announced that it has acquired streaming game service OnLive for an undisclosed sum. Interestingly enough, OnLive will not become some new tentacle of Sony's gaming empire, but is shutting down at the end of the month.

OnLive was the poster child for cloud gaming, before its disasterous collapse. But today, after nearly a full year of radio silence, the company which proved that you can play games over the internet has emerged with a new business model. Instead of selling digital copies of games which you can only access through the OnLive network, the company has now launched a unique partnership with Steam to let you stream PC games you already own for a $14.99 monthly subscription. Because the service interfaces with Steam to sync savegames and DLC, you can pick up right where you left off on your computer.

It's been seven months since OnLive's famous turmoil, and though the company never stopped streaming in the meanwhile, OnLive's new owner Gary Lauder has maintained a near-perfect radio silence. Today, however, in his very first post on the OnLive Blog, he says the company's back in action, with 90 employees working out of a new Mountain View office and a new SVP of Engineering. Don Gordon, former VP of broadcast solutions at Gracenote and COO at ActiveVideo Networks, is joining the cloud gaming team, and Lauder says OnLive will have a presence at major gaming shows going forward, including the Game Developers Conference next month and E3 in June.

We haven't heard a peep out of OnLive since the company's near-collapse last year, but the cloud gaming service has never stopped. Today, the company's bringing its first new title to the platform since September, and it's a pretty good deal to boot. You can now purchase a streaming copy of The Witcher 2: Enhanced Edition to play via OnLive for $19.99, and get a full downloadable PC copy of the game from Good Old Games, too. Even if you decide not to stream the game, you're still getting your money's worth.

The funny thing about this particular game — The Witcher 2 — is that it was actually slated to appear on OnLive nearly two years ago. OnLive said the game was "coming soon" back in June 2011, at the Electronic Entertainment Expo. According to our sources, however, OnLive CEO Steve Perlman personally shot it down after work was nearly complete, enraged that rival cloud streaming service Gaikai (now owned by Sony) was showing off the same game.

When we chronicled the collapse of streaming game company OnLive, one source told us that the company's assets sold for a song. They claimed that investor Gary Lauder took ownership of the company for just $4 million. As it turns out, that number wasn't far off. Along with the San Jose Mercury News, we've obtained a copy of the formal letter that OnLive's assignee sent to the company's creditors. Here's what we've learned:

On August 14th, just three days before OnLive conducted mass layoffs, Gary Lauder formed a new company named OL2. Then, he spent just $4.8 million to acquire nearly all of OnLive's assets, all intellectual property, and even the name "OnLive" itself, effectively allowing the firm to remain in business with as few repercussions as possible. According to the document, OnLive's management believed they wouldn't be able to find any additional funding for the company or be able to sell the business as of August, and believed an Assignment for the Benefit of Creditors (ABC) would be better than going bankrupt. It certainly seems so.

Steve Perlman, founder and outgoing CEO of the troubled cloud gaming service OnLive, has asked disgruntled fans to "give the OnLive team a chance to regroup." Writing in an open letter sent to OnLiveFans.com, Perlman acknowledges that the company has been through a "difficult transition," but attempts to set the record straight about a controversial legal maneuver that saw scores of employees laid off without severance pay.

"We had critical matters like healthcare in place — with financial support fellow employees arranged themselves — and we even partnered with other companies to set up job mixers and recruiters to help find new jobs," writes Perlman. "By the end of a very tough week, we had actually reached a point of stability."

"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."

Two Fridays ago, Steve Perlman told the 200 employees of cloud gaming company OnLive that it was all his fault. He thanked them for their hard work, and then he had HR show them the door with no severance pay.

As founder, Perlman was the majority shareholder in the original OnLive, but when the company used an insolvency tool known as Assignment for the Benefit of Creditors, all the stock in the company (including his) was reportedly wiped out. After purchasing the assets of OnLive, Gary Lauder originally told reporters that he hoped and expected that Perlman would stay on as CEO, but our sources inside the company told us that employees were asking for Perlman's permanent resignation before they would consider employment with the new firm. OnLive tells us that Etienne Handman, former COO, will continue on as CFO going forward, and the press release suggests that the company is currently looking to hire business development and marketing executives.

Here's OnLive's press release in full:

Microsoft is openly courting developers dumped in mass layoffs by cloud gaming service OnLive, hosting a mixer for potential hires at its Mountain View campus. "We are eager to speak to individuals and teams affected by the OnLive transition," reads a description on events site EventBrite. "With the stunning success of Xbox/Kinect and the accelerated growth of this business, we are looking to add key players who want to make a real impact in creating groundbreaking new products and services."

According to the company, positions are available both in Mountain View and at Microsoft's headquarters in Redmond, Washington. The open call for talent is particularly interesting given Microsoft's history with OnLive — an alleged company document leaked back in June showed that Microsoft had considered OnLive a "potential acquisition target" in August 2010, fearing the consequences for its Xbox business if the company teamed up with a major mobile carrier such as AT&T.

Cloud gaming company OnLive has revealed to OnLive Fans that it will keep Steve Perlman as its CEO following the turmoil the company has seen over the past week. Perlman's position was up in the air when the company shut down last week and laid off many of its staffers. Since then, OnLive has rehired a number of its employees back after starting a new venture — also called OnLive — which is said to be a complete "reboot" of the company. The company apparently was in debt to the tune of $30 to $40 million, but Perlman says that he is confident the new financial backer will let him take the company "to a higher level."

OnLive's statement also included hope that we would see some new products from the company in the near future:

Last weekend, cloud gaming startup OnLive shut down the company, gave away its assets and laid off all its staff, only to immediately build a new firm and hire a number of them back. Now, we're learning why: The San Jose Mercury News reports that OnLive owed between $30 million and $40 million in debt at the time. That's from the lips of Joel Weinberg, CEO of Insolvency Services Group, who has been revealed as the mysterious assignee in the insolvency transaction. "It was a company that was in dire straits. It only had days to live in terms of cash flow and the like," Weinberg told the Mercury News. "Something had to be done immediately or there would have been a hard shutdown, which would have been a disaster," he told the publication.

OnLive used an alternative to bankruptcy called Assignment for the Benefit of Creditors, or ABC for short, which requires the company to give all its assets to a third-party who is responsible for maximizing their value and getting creditors paid. In this case, ISG sold some of them back to the new OnLive, but the publication says that others were retained by ISG. Apparently, the transaction wasn't large: "Weinberg expects to be able to pay creditors only 5 to 10 cents on each dollar OnLive owed," the Mercury News reports.

HTC wrote off its entire $40 million investment in troubled cloud gaming company OnLive after the company spontaneously dissolved and reformed this weekend, and it now looks like fellow investor BT may do the same. The British telecommunications company, which purchased a 2.6 percent stake in the company in early 2010 and early exclusive access to the UK version of the service, told TechRadar that a write-off was "highly likely." Here's the full statement:

According to OnLive, the original company named OnLive is no more, as the company restructured itself using an alternative to bankruptcy called Assignment for the Benefit of Creditors (ABC) which apparently only transfers the company's assets to a new party. Under an ABC, the assignee of a company's assets is responsible for maximizing the value to creditors, but it seems like HTC and BT won't be getting much value for their buck here.

As if HTC didn't have enough financial woes already, it's now been hit by the troubles at OnLive. IDG reports that the Taiwanese manufacturer will lose its $40 million investment in the cloud service, which was made last February in an attempt to boost its smartphone gaming credentials.

While we heard that OnLive has filed an Assignment for the Benefit of Creditors (ABC) in a move that could get investors some sort of return, it appears that HTC isn't so optimistic and has announced a whole $40 million loss to the Taiwan Stock Exchange. The company won't be left without a mobile gaming strategy, though — it was the first hardware partner announced for Sony's PlayStation Mobile program.

OnLive has just issued a statement about its major corporate shake-up, confirming the sale of its assets, and promising that its services will "continue without interruption." The company says that on August 17th, all of its assets "were acquired by a newly formed company that will continue to operate under the OnLive name," and has confirmed that it is restructuring under an "Assignment for the Benefit of Creditors" — an option for struggling companies that allows them to transfer all of their assets to another one to run the business more efficiently, to prepare the company for a quick sale, or other purposes.

OnLive says that Lauder Partners — a venture capital firm that's invested in companies like Aereo and LiveScribe — is the company's "first investor." It's not clear what portion of the company Lauder Partners has obtained, but according to Lauder's website, it's no stranger to the streaming game company: the group previously invested in OnLive in 2009. OnLive says that it plans to hire more staff "upon closing additional funding," including former staff.

"OnLive ... will continue to operate," the statement read. "...there is no expected interruption of any OnLive services."

It was a statement that read as an assurance: everything is fine, we're still here, it's business as usual. But it was clear that everything wasn't fine. Earlier yesterday, it was reported that all of OnLive's 150-200 staff were laid off. Now, multiple sources have confirmed that the streaming game company will be filing an Assignment for the Benefit of Creditors (ABC), an alternative to bankruptcy, and Polygon understands that the company will soon issue a statement to better explain what's going on.

What's really going on at OnLive, the streaming game company that reportedly laid off its entire staff today? The official word is that the entire firm's assets were acquired by a "newly-formed company" with "substantial funding," and thus it's business as usual for all... except, perhaps, for the number of individuals we saw leaving the Palo Alto headquarters with single white sheets of paper and boxes of personal possessions. What will become of the company and its employees? We still don't know for sure, but Joystiq has obtained an audio recording of the fateful 10AM meeting, as well as a conversation with a particularly talkative source with insight into the company's recent situation. The most surprising part: according to the audio recording, the new owner is allegedly a single mystery individual who was "impressed" with the OnLive idea.

During the course of the day's meetings, every single OnLive staffer was let go, told to pack and leave by 4PM, with only a small termination package to their name: a check for the last week of work and the value of any remaining paid time off, benefits until the end of the month, and the option to begin COBRA coverage at the beginning of September.

As the business day comes to a close, it looks like OnLive might end up pretty much where it started. Earlier today, rumors swirled that streaming gaming provider had issued pink slips to much of its staff, mostly sparked by a series of tweets from game developer Brian Fargo. According to Fargo, he'd received an email from an OnLive staffer with news of sweeping job cuts at the company, and hints that a reorganization of the service was afoot. Shortly thereafter, company spokesman Brian Jaquet issued a number of responses to reporters, ranging from "no comment," to "of course the company is not going out of business."

After hours of rumors, the company has finally issued an official statement via email:

Widely spread — but still unconfirmed — reports of mass layoffs at cloud-based gaming company OnLive are reportedly tied to an acquisition of the three-year-old company by an unknown third party.

According to a report from alleged former OnLive employees, at least 50 percent of the company's staff was let go this morning, reports Engadget. Staffers were reportedly told that OnLive's new owner had already sent offer letters to remaining employees. An ex-OnLive staffer estimates that OnLive going forward could exist as a skeleton crew of a little as 20 employees.