A whirlwind of rumors have emerged today regarding online gaming company OnLive. It was initially reported by Mashable that the company's entire staff had been laid off, a notion supported by an OnLive staffer-penned email received by inXile's Brian Fargo. This sparked speculation that the company could be shut down. OnLive has since denied that is the case; despite this, subsequent reports suggest layoffs have taken place in what has been a confusing day for fans of the service.
OnLive launched its game streaming service in 2010 that allowed users to play full retail games without downloading anything by streaming them to their computers. The service has since expanded to other platforms including tablets, Internet-connected TVs and media players, and a dedicated OnLive game console, with users being able to sample games for a short period of time or purchase them outright. It's appeared to be a likely acquisition target for quite some time; when Sony was rumored to be purchasing a streaming games service ahead of E3, it was presumed to be either OnLive or Gaikai. Ultimately it turned out that Gaikai had been acquired for $380 million. OnLive has meanwhile continued to establish partnerships to bring its service to new devices; in a tweet that came just after word of layoffs began to circulate, the official OnLive account noted that the first Vizio Co-Stars with OnLive built-in arrived in homes today.
At one point this seemed like a potential non-story. When contacted by 1UP about a potential shut down of the company, OnLive issued a statement noting it doesn't "respond to rumors, but of course not." Since then, the company has reiterated it doesn't comment on rumors of any kind, which makes the fact that it acknowledged this at all come across as rather unusual.
It seems clear, however, that something is going down. IDG News Service reporter Martyn Williams has been tweeting from outside of OnLive's headquarters, where he saw several people come out with moving boxes. After pausing, one employee who was asked if he still had a job at OnLive said, "Kinda, sorta." Additional reports have also been filed confirming that layoffs have taken place. Gamasutra has learned from an insider that the company's entire staff was laid off. Kotaku reports an all-hands meeting took place this morning in which it was revealed OnLive would be seeking an alternative to bankruptcy and that all employees would be let go, save for a group who would be brought back on to help form a new company. Someone in attendance at the all-hands meeting confirmed these details to Game Politics, recounting a strange story about how CEO Steve Perlman's presentation was met with applause among the staff. A source speaking with Engadget, meanwhile, says "at least 50 percent of the staff" have been laid off, and the site claims a third party will be purchasing OnLive.
Confusing as this all may be, the bottom line is that it looks like OnLive as we know it will not exist for much longer. There is no indication that OnLive users will lose access to their games, although talk of mass layoffs has rightfully made some worry. It's an issue which has been raised before but is once again brought back to the forefront: What happens when online servers that people depend on to play their games get shut down? We've seen this happen with online servers that grant access to certain content and multiplayer modes, and the objection of many of those opposed to using a service like Steam is how helpless users would be if the company in question closes up shop for whatever reason. Streaming games are more vulnerable to this than anything else, as users don't even have their games downloaded in any form on their hard drives.
OnLive's business model was always questionable in a way -- whereas Gaikai's focus was on allowing games to be sampled right from your browser, OnLive wanted to sell streaming versions of full games. The criticism of the service has been, who wants to pay full price for a streaming version of a game when there are physical and downloadable alternatives? The primary benefit to doing so is having access to a game on any device at any time, but the downsides are significantly greater in the eyes of many, particularly the idea of a company going out of business and leaving its users with bupkis.
Even if OnLive customers are completely unaffected by this and have continued access to their games through OnLive or the company reportedly being founded from its ashes, it's hard to imagine this entire incident not causing many potential users to second guess their decision. Few saw this development coming, as OnLive was believed to have easy access to additional funding if it became necessary, so the idea that these companies will weather any storm is being proven incorrect.
Despite this, I do think cloud gaming has a bright future, provided it's harnessed in the right way. (Sony obviously agrees after it spent a significant chunk of money on Gaikai at a time when it desperately needs to turn things around.) I think what's happening to OnLive is a reflection of its particular business model rather than the viability of cloud gaming. If it turns out that OnLive's strategy of selling streaming games for full price was ineffective, maybe that's an indication that cloud gaming isn't an ideal primary method for delivering games at this point in time. What I mean by that is people may not be interested in relying on a streaming service as the main way to play their games. Streaming could, however, be extremely useful as a way of delivering demos and providing extra value to games. Similar to way Portal 2 on PlayStation 3 came with a copy of the game on Steam, providing a streaming copy of a game so it can be played on tablets or underpowered laptops when away from a console or PC could be an effective use of OnLive's streaming technology. Failing that, offering subscriptions to streaming versions of games may be a preferable option to buying a game outright that might eventually disappear.
Whatever it is that is happening with OnLive exactly, it will undoubtedly have a significant effect on the way streaming games are handled moving forward. It just might be that that's for the best.