OnLive vows service will continue as new company owner revealed

What next for cloud gaming?

OnLive has told its customers its service will continue uninterrupted as the company transitions to a new owner.

Over the weekend reports emerged that painted a bleak future for the cloud gaming company. Layoffs and claims of under just 1800 concurrent users revealed trouble inside the California start-up, which on Friday closed as part of an Assignment for the Benefit of Creditors - a form of bankruptcy.

Now, it's issued a new statement responding to the speculation, and confirmed an affiliate of investment firm Lauder Partners has created a new company and bought all of OnLive's assets, which include technology, patents, trademarks and intellectual property.

OnLive will keep its name and continue to offer its service, it said. "The OnLive Game and Desktop Services, all OnLive Devices and Apps, as well as all OnLive partnerships, are expected to continue without interruption and all customer purchases will remain intact; users are not expected to notice any change whatsoever," read the statement.

"OnLive's current initiatives will continue as well, with major announcements of new products and services planned in the coming weeks and months."

So, what happened to OnLive? Reports indicate it suffered from crippling overheads: thousands of costly servers and under 2000 concurrent users at peak bringing in cash.

"OnLive, Inc.'s board of directors, faced with difficult financial decisions for OnLive, Inc., determined that the best course of action was a restructuring under an Assignment for the Benefit of Creditors," said the company.

Under the terms of the ABC, all staff were laid off and shares were made useless. Almost half of staff, OnLive said, were offered jobs by the new company at their current salaries, and those not offered jobs were offered consulting roles in return for options in the new company. OnLive said once it gets additional funding it will hire more staff, including former OnLive employees. OnLive founder Steve Perlman did not receive any stock in the new company or compensation.

"The asset acquisition, although a heart-breaking transition for everyone involved with OnLive, allows the company's core innovation and on-going offerings - the product of over a decade of hard work transforming the OnLive vision into reality - to survive - and continue to evolve," the company said.

Overnight OnLive said it had over 2.5 million subscribers, with an "active" base of over 1.5 million subscribers with "many" sessions running for hours. "The user base is growing rapidly with OnLive's addition into recently announced devices and TVs from major manufacturers," it said. "We expect this growth to continue under the new company." But it failed to reveal concurrent users numbers - the most crucial statistic.

Despite OnLive's effort to assure its customers that all is well, there can be no doubt that the brand has been damaged and consumer confidence in the cloud gaming service has been dented.

And OnLive will also face difficult questions over the nature of its collapse and buyout, with a number of disgruntled former employees unhappy that their shares have been made worthless.

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