Okay, I wish I could say that I was surprised by all of this, but I’m really not.
After a lot of back and forth from the rumor mill and official OnLive channels, we now have what we believe to be a far clearer view of precisely what is happening right now at OnLive headquarters in Palo Alto. We’ve spoken with a (now former) employee of the gaming service who ran down today’s events for us. According to the account, 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. 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. Certainly those concerns line up with a story dug up by Kotaku highlighting the company’s plans to file for Assignment for the Benefit of Creditors as a result of the company’s troubled financial situation. We’re still gathering information as to the nature of the buyout.
I loved the idea of OnLive as much as the next guy. Still do. Having the hard work of running games be handled by big remote servers is a GREAT idea, especially when it comes to demos.
But, sorry, the Internet just ain’t able to accommodate it! Even if the pipes are able to handle it, the telcos are making it extremely clear that they want to charge for every single byte that travels over their networks. Services like OnLive are going to ratchet up your network usage an awful lot at the best of times, and the telcos are clearly leveraging their regional oligopolies to make as much money per transferred byte as possible. The amount of available usage at a given price point is actually going DOWN, not up, and even though it’s not really aimed at streaming gaming, it’s streaming gaming that’s going to suffer. Users simply can’t afford the usage fees for OnLive.
OnLive might be doable once we’ve solved the problem of telcos exploiting their natural monopolies. That ain’t happening right now, though. Right now, we can just chalk them up as another casualty of “natural” private monopolies. They weren’t the first, and won’t be the last. Let’s just try to learn from the example.
Edit: According to Rock Paper Shotgun, they may have a buyer that’s pumping more money into the enterprise. Here’s hoping the people who got let go get rehired—nobody wants to see people get laid off in THIS economy—but the fact that they got to this point in the first place doesn’t say much about their prospects.
Granted, a buyer might be more into the technology than the business model, but it’s the issues with the technology that ARE the challenge here.
Re-Edit: Or maybe it’s just a cynical way to strip away the equity of former employees and initial investors. That seems to be what TechCrunch is implying.
That’s even worse than the previous story. The previous story was just about what’s broken in telecommunications. This story is about what’s broken in American private enterprise. This is the sort of thing that is causing investors to exit the equity market en masse and either buy up debt, sink it into commodities, or just hoard cash. This kind of behavior is a big reason why the economy is terrible in the first place.
Wonderful. Bad to worse.