UPDATED: Judgement day nears for OnLive, though it denies closure

Streaming games company OnLive has been forced to publicly deny reports that it is on the brink of closure.

It started with a tweet from InXile Entertainment’s Brian Fargo, who bluntly stated that: Just received an email that OnLive is closed as of today!”

This was followed by a report from Mashable based on a source close to the situation” who claimed that The company called an all hands meeting at 10am PDT, at which the entire staff was fired. Some staffers may be rehired as the company transitions to its next unknown iteration.”

The source added that: Many employees blame the failure of the company squarely on the CEO — who refused to sell the company many times. There is speculation that the future company may simply be pure intellectual property play. OnLive reportedly has lots of patents covering cloud-distributed content, especially in 3D graphics.”

The validity of the reports is not clear, although OnLive itself has vocally denied the reports. Director of corporate communications Brian Jaquet told Joystiq: "We don’t respond to rumours, but of course not."

Should the rumours prove to be true few within the industry would be surprised. Whereas the now Sony-owned Gaikai always focused of refining its technologyfor potential business partners, OnLive has stuck vehemently to its goal of becoming an established platform in its own right.

What the company has successfully achieved, at least, is a string of partnerships with high-profile telco firms and content companies, such as Ouya, Vizio and BT.

But with OnLive there’s a persistent elephant that’s always in the room – sales numbers. We’ve never had any (despite MCV repeatedly asking for them, it should be known). Subscriber numbers, software sales, microconsole sales – nothing. Nothing concrete, at least.

The microconsole certainly never appeared at retail, as was once promised. And the repeated game offers that included a free unit – as well as the tens of thousands that were given out to attendees of last year’s Eurogamer Expo and members of the press – certainly suggests that somewhere there’s a huge pile of these things gathering dust.

Following what was undoubtedly an exciting launch that generated plenty of noise, OnLive has gone silent. Journalists who were given all you can eat” free memberships granting free access to all content had them revoked, only for some to have them reinstated weeks later.

The content strategy was not clear, and hadn’t convinced the entire industry. The bigger firms such as Electronic Arts never put games on the servce, although OnLive had courted many businesses of all types, including indie developers.

The most fundamental problem, however, is the user experience. Playing games on OnLive may be technically quite the spectacle, but it has yet to properly recreate the lag-free sharpness of play offered by console and PC. The added functionality of the platform can’t quite make up for that key shortfall.

The truth is that OnLive was always positioned for acquisition. But Gaikai won that war. Mashable’s source mentions the CEO’s failure to sell the firm. If a new company is being lined up to emerge from the ashes this confirms that OnLive is being taken down by growing debt and the failure to appeal to new investors.

‘OnLive 2’ can only hope to succeedif it employs a brand new strategy. And you can bet your cat on the long aspired-for integration with Microsoft’s Xbox Live to be the golden pot that at the end of that rather wobbly rainbow.

UPDATE 1: Moments after going to press Kotaku has gone live with a report claiming that OnLive is filing for bankruptcy.

It states: This morning, an all-hands meeting was called at 10 a.m. this morning where CEO Steve Perlman said that OnLive would be filing for ABC bankruptcy in the state of California—a status that affords them a level of protection from creditors. Perlman also said that the company as it stands now would cease to exist and that no one would be employed by OnLive. A subset of employee would be brought on to the company created from the remains of OnLive.”

UPDATE 2: Now Gamasutra is reporting as fact that all OnLive staff have lost their jobs, with some being re-hired for a new company formed out a pre-packaged closure.

The email reportedly sent to staff has also been published by Fargo:

"I wanted to send a note that by the end of the day today, OnLive as an entity will no longer exist. Unfortunately, my job and everyone else’s was included. A new company will be formed and the management of the company will be in contact with you about the current initiatives in place, including the titles that will remain on the service.”

However, OnLive insists the reports are not true, telling Forbes: No, let me be clear. We are not going out of business.”

UPDATE 3: Senior correspondent at IDG News Service Martyn Williams says via Twitter: "In the last 20mins have seen three people walk out of #OnLive with leaving boxes. Still unclear what’s happening inside [pic]."

UPDATE 4: A further update, this time from Engadget. A source tells it that half of the staff have lost their jobs and that an aquisition of the now closed company is already in place.

"A meeting was held at OnLive’s offices at 10AM this morning, wherein the company’s CEO announced a massive staff layoff – at least 50 percent of the staff, according to our source’s numbers," it claims. "The layoffs come as part of across the board cuts to the company, and all those out of a job will have their key cards deactivated as of 4PM local time today. The source was understandably baffled by the abruptness of the news, along with the added blow that no severance will be offered and stock holdings are essentially worth nothing.

"The move apparently comes as OnLive is being purchased by an unknown party. Those being kept on have reportedly received offer letters from the new company. Why the sudden move? The source believes it may have something to do with the company’s massive operating costs, which we’re told are around $5 million a month."