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Old OnLive Owes Around $18.7M; Sold For Just $4.8M

By - Source: MArcury News | B 9 comments

Gary Lauder purchased OnLive's assets for a mere $4.8 million, according to a letter to creditors.

The San Jose Mercury News reportedly obtained a letter showing that venture capitalist Gary Lauder shelled out a mere $4.8 million for the remnants of game streaming service OnLive. This payment indicates that creditors will only get back around 26 cents for every dollar invested into the company.

According to the paper, this letter was originally sent to OnLive creditors last month, reveling that the company had at least $18.7 million in outstanding debt – a number which didn't include money OnLive owed in the future such as leases and other contractual obligations. It was originally believed that OnLive owed around $30 million to $40 million, but the new company has since reached new agreements with creditors, reducing the outstanding balance.

Back in August, rumors surfaced that OnLive was shutting its doors because it owed more money than it was receiving through subscriptions, game sales and other partnerships with publishers and manufacturers. A representative said that all of OnLive's assets were acquired by a newly formed company on August 17th and it would continue to operate under the OnLive name. Gary Lauder actually created this new company, and then bought the assets of the older version to keep the OnLive service up and running, and to preserve the proprietary technologies.

It was OnLive Inc.'s board of directors, facing difficult financial decisions for the company, who determined that the best course of action was a restructuring under an "Assignment for the Benefit of Creditors" (ABC) filing. The Assignee of the company’s assets, Insolvency Services Group which is handing OnLive's ABC motion, then sold all of OnLive, Inc.'s assets (including its technology, intellectual property, etc.) to Lauder's new company.

Insolvency Services Group CEO Joel Weinberg said in the letter to creditors that OnLive was running out of cash and decided to liquidate its assets through the bankruptcy alternative. Lauder's offer reportedly arrived just days before the company went into liquidation mode, and he told OnLive's board that his was the best offer the company would ever get.

"Had the sale to the buyer not taken place, the assignee would have been left with inadequate capital to fund the significant costs to preserve and market OnLive's patents and other intellectual property, thus greatly reducing expected recoveries essentially to those of a forced piecemeal auction," he wrote.

Weinberg told the press back in August that OnLive "was a company that was in dire straits," and that it "only had days to live in terms of cash flow and the like." Something had to be done immediately, he said, or there would have been "a hard shutdown, which would have been a disaster."

The new OnLive reportedly said in a statement that its predecessor hadn't raised enough initial cash for the business to fully succeed in the long run – its failure had nothing to do with the actual business model.

"When planned financing didn't work out, the company was left with few options. Transitioning through this unexpected event has not been easy, but it has left the company much healthier," the company said.

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  • 3 Hide
    john_4 , October 11, 2012 2:01 PM
    Anytime one of these companies goes down it is good for serious gamers. If the powers have their way all gaming will be like this and you will never "own" your software again, well the disk that you can play as long as you want. It will be like a new cable or phone bill. Want to game pay us a monthly fee.
  • 0 Hide
    waxdart , October 11, 2012 2:11 PM
    john_4Anytime one of these companies goes down it is good for serious gamers. If the powers have their way all gaming will be like this and you will never "own" your software again, well the disk that you can play as long as you want. It will be like a new cable or phone bill. Want to game pay us a monthly fee.

    Depends on the monthly fee. Play all the games you want for £6 a month sounds like a great deal. I'd get netflix for games. Can't be bothered with TV/Films as I play games much more.
  • 1 Hide
    bucknutty , October 11, 2012 3:12 PM
    I have a co-worker that has a few hundered bucks, maybe even a grand tied up in the onlive console, and game licenses that he bought over the last few years. What would have happend if they were forced to hard stop. Would they provide him a cd key for those games, or would he just be out of luck?

    At least services like steam and origin give you your CD key.... Not that it would do much if they go under.
  • 0 Hide
    Camikazi , October 11, 2012 5:50 PM
    BucknuttyI have a co-worker that has a few hundered bucks, maybe even a grand tied up in the onlive console, and game licenses that he bought over the last few years. What would have happend if they were forced to hard stop. Would they provide him a cd key for those games, or would he just be out of luck?At least services like steam and origin give you your CD key.... Not that it would do much if they go under.

    Probably he would be out of luck and have a new paperweight that costs up to a grand.
  • 0 Hide
    gamerk316 , October 11, 2012 6:18 PM
    BucknuttyI have a co-worker that has a few hundered bucks, maybe even a grand tied up in the onlive console, and game licenses that he bought over the last few years. What would have happend if they were forced to hard stop. Would they provide him a cd key for those games, or would he just be out of luck?At least services like steam and origin give you your CD key.... Not that it would do much if they go under.


    In theory, a CD Key is the equivalent to a license to use. I'm sure at least some companies would honor existing CD Keys...
  • 0 Hide
    esrever , October 11, 2012 6:40 PM
    onlive will never be profitable. I don't know why people would waste even $4.8m on it. It doesn't have the scalability that is required for anything successful. Can't render thousands of games without it all looking like crap unless they pay big money on bigger systems which will cost a lot more than just giving each person a console type of hardware.
  • 0 Hide
    razor512 , October 11, 2012 8:39 PM
    They would have been successful if they didn't impose policies that outright tells the customer that they wont get their moneys worth.

    Onlive has lag issues that make most games nearly impossible to play. When a response delay becomes noticeable, it becomes frustrating as you have to slow down your mouse movement to avoid overshooting things you want to click on.

    Their terms of service was horrible. You pay near retail cost for a game and then they claim that they will only keep it on their servers for a year but reserve the option to remove them sooner if enough players are not playing it (a number they don't release)

    They offer cheaper options which are basically rending the games but they are move expensive compared to services like gamefly.

    They don't run the games at high settings or even at a decent resolution (you will generally get 720P interpolated video streaming to your system)

    You lose the ability to get mods and otherwise customize your gaming experience.

    Who would want to pay for a service when the company basically tells you that they can take your money and not give you the product/ service that you paid for?
  • 0 Hide
    rantoc , October 11, 2012 10:18 PM
    Hardly surprising, internet isn't ready for latency demanding video streaming. Its not like you want 5 secs buffering while playing a shooter or car game. Video works well thanks to the buffering but gaming is entirely different where latency is a huge part of the equation in fast games.
  • 0 Hide
    abbadon_34 , October 14, 2012 5:57 AM
    maybe in 10 years it will be ready, but I still won't use it