OnLive Faces Rumors of Bankruptcy, Staff Layoffs and Reboot, But Denies Full Closure

Gaikai’s main competitor, cloud streaming service OnLive, could be in a lot of trouble according to a host of rumors.

First off, Brian Fargo, the Wasteland developer, received the following email from an OnLive employee, before they tried to retract it:

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.

It has been an absolute pleasure working with you and I’m sure our path with cross again.

Zen Studios’ Mel Kirk also saw the email, followed by the recall.

Mashable then joined in, claiming that a source close to the situation told them OnLive laid off its entire staff today, after calling an all hands meeting at 10am PDT. Some employees may be rehired for a new company, according to the source. The apparent failure of the company was blamed “squarely on the CEO”, who allegedly refused to sell the company “many times”, something that likely could have raised hundreds of millions of dollars, considering Gaikai managed to fetch $380 million off of Sony. The new company might end up just being a holding house for their valuable intellectual property, which could be sold.

Afterwards, Kotaku added to the rumors by claiming that “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”. Perman allegedly added “that the company as it stands now would cease to exist and that no one would be employed by OnLive. A subset of employees would be brought on to the company created from the remains of OnLive”, but the source said that the OnLive service would probably continue.

OnLive’s Brian Jaquet refused to comment on the bankruptcy or layoffs, but said that the OnLive service itself would continue.

Stick to PSLS for more news as it develops, but do you think that OnLive going bankrupt could damage consumer belief in cloud gaming – where you need the provider to always exist to play your existing games, unlike consoles? And should Sony buy up OnLive’s patents to tighten their grip on the market?

Share your thoughts in the comments below.