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OnLive Acquires OnLive

Posted by Unknown on from the crisis-of-identity dept.

techfun89 writes with an update on OnLive shutting down. From the article: "The restructured OnLive has issued an press release and FAQ to attempt to clear up any rumors and misinformation on the companies recent changes. OnLive is emphasizing that the streaming game service will go on uninterrupted and the 'Newly formed company' will continue to use the OnLive name. The press release also outlines the Assignment for the Benefit of Creditors (ABC) process OnLive used to settle debts and that an affiliate of Lauder Partners, a technology investment firm, was the new OnLive's first investor. The firm talked about the necessity of laying off its staff, stating that 'neither OnLive, Inc. shares nor OnLive staff could transfer under this type of transaction,' and confirming that nearly half of the previous staff had been offered positions at the new company. The new firm mentions that this acquisition holds hope for the future 'of transforming the OnLive vision into reality.' This effectively means that OnLive was essentially bought out by OnLive, or rather, more specifically, one of their original investors in the company who backed the startup back in 2009."

41 of 154 comments (clear)

  1. heh by Anonymous Coward · · Score: 5, Funny

    Xzibit's head just blew up

  2. we're fucked by MickyTheIdiot · · Score: 4, Insightful

    just like we said. Corporate bastards can do anything the fuck they want.

    1. Re:we're fucked by rhsanborn · · Score: 5, Interesting

      I've put together a plausible scenario based upon the really vaguely written press release. I have no inside knowledge of the situation. If you know more, please correct me.

      It sounds like an original investor held shares in OnLive(1). He lost all of his original shares of OnLive(1) just like everyone else. Rather than pump more of his own money into OnLive(1) and remain saddled with debt and overhead, he chose, along with others, to put the company through the bankruptcy process. Remember, he paid his own money to help start and run the company. He has no obligation to continue to support it personally.

      He then used his own money to found OnLive(2). He used his own money in OnLive(2) to purchase the latent assets left in OnLive(1) and then proceeded to offer jobs to employees from OnLive(1).

      So, it doesn't sound like all the investors in OnLive(1) divested the employees, kept their own shares and started over after screwing over the staff. It sounds like investor(s) bootstrapped a whole other company with a whole bunch more of their own money and bought the assets of the shell of the original company.

    2. Re:we're fucked by whoever57 · · Score: 4, Interesting

      He then used his own money to found OnLive(2). He used his own money in OnLive(2) to purchase the latent assets left in OnLive(1) and then proceeded to offer jobs to employees from OnLive(1).

      Purchase? From whom? Not the shareholders of OnLive(1) -- they get nothing. Perhaps the creditors of OnLive(1)?

      Does anyone know how much OnLive(2) paid for the assets? Did OnLive(2) pay a reasonable price?

      --
      The real "Libtards" are the Libertarians!
    3. Re:we're fucked by nedlohs · · Score: 3, Interesting

      As usual, the shareholders will get whatever is left after the debtors get paid. Which will very likely be nothing since the company was bust. That is how it is supposed to work (unless you are an investment banker in which case you get a government bailout instead).

      I'm sure there'll be law suits filed if they didn't pay a reasonable price (and probably if they did anyway) or if the transaction wasn't sufficiently at arms length.

    4. Re:we're fucked by Sir_Sri · · Score: 2

      Depends how much they actually had in debt too. They might have wound up *before* they had unmanageable debt, but just very low income, or they might be completely screwing nearly all of their creditors out of their investment.

    5. Re:we're fucked by gl4ss · · Score: 2

      it sounds like they had arranged the buyer beforehand, that way it's easy to say that they didn't get as good a deal for the assets as possible.

      but for example htc just wrote down 40 million they put into the firm this year! and the onlive douche said last year that onlive was profitable, on forbes.

      --
      world was created 5 seconds before this post as it is.
  3. Sounds Like a Shell Game by sanman2 · · Score: 4, Interesting

    Sounds like some loophole method of getting out of your debts

    1. Re:Sounds Like a Shell Game by guttentag · · Score: 4, Insightful

      Sounds like some loophole method of getting out of your debts

      Exactly. From TFA:

      Unfortunately, neither OnLive, Inc. shares nor OnLive staff could transfer under this type of transaction, but almost half of OnLive’s staff were given employment offers by the new company at their current salaries immediately upon the transfer, and the non-hired staff will be given offers to do consulting in return for options in the new company.

      So basically, "you're fired. Now, you can come back to work for us with no pay, just stock options that will be worth absolutely nothing when we do this again."

      Like all shareholders, neither Steve [Perlman] nor any of his companies received any stock in the new company or compensation in this transaction at all. Steve is receiving no compensation whatsoever and most execs are receiving reduced compensation to allow the company to hire as many employees as possible within the current budget.

      Right. Any time a CEO works for "no compensation whatsoever," it means they have an agreement in place for a ton of shares or options down the road. So, in effect, he makes it look like he got wiped out like everyone else, when in fact his compensation has just been swept under the rug/shell for safe keeping.

    2. Re:Sounds Like a Shell Game by rhsanborn · · Score: 2

      It sounds like losing your ass, and then doubling down and pumping a bunch more money in to buy up the assets after bankruptcy, which is really risky. It assumes no one else would swoop in and get into a bidding war to try to offer creditors a better deal and you get nothing with the money you spent so much time putting together.

    3. Re:Sounds Like a Shell Game by Luckyo · · Score: 2

      Not in the current financial climate. Banks are really tight with loans right now, and getting sums like this quickly is not easy without financing. If the guy had funds prepared, he essentially had the deal in the pocket.

    4. Re:Sounds Like a Shell Game by Nationless · · Score: 4, Funny

      I can't wait for the lawsuit where they sue the new OnLive for copyright breach and take them(selves) to court.

    5. Re:Sounds Like a Shell Game by c0lo · · Score: 2

      Sounds like some loophole method of getting out of your debts

      Not quite. My understanding: after putting their money down (and loosing them with the bankruptcy), one (Lauder Partners) of the original investors decided to throw more money.
      They want a better control on how these extra money are going to be used, but they have little or no control on how much of their original investment are going to recovered (they have no control over the "Assignment for the Benefit of Creditors" process).

      --
      Questions raise, answers kill. Raise questions to stay alive.
    6. Re:Sounds Like a Shell Game by gl4ss · · Score: 4, Funny

      well, it's options to the _new_ onlive. this time it's legit! /s

      --
      world was created 5 seconds before this post as it is.
    7. Re:Sounds Like a Shell Game by Anonymous Coward · · Score: 2, Informative

      I can't wait for the lawsuit where they sue the new OnLive for copyright breach and take them(selves) to court.

      Actually I think that has happened once. I can't remember what company it was but there were 2 divisions within the same multinational who got pissed at each other and sued.

      It was like Sony Music suing Sony Electronics (this isn't the actual case, just a visualisation of what happened). The judge thought it was a joke and forced them into mediation instead.

  4. Screwed Early Employees by Anonymous Coward · · Score: 4, Interesting

    The ONLY reason to do this is to screw over the other early investors and employees who had options in the company.

    Yet another reason why a minority stake (including options) in a private company is worthless. Dont work for options people, you should always assume that they are totally worthless, because they can be made worthless by things like this.

  5. Ok, let's see you died in the wool capitalists by rsilvergun · · Score: 4, Insightful

    This looks to me like classic example of a fundamental problem with free market capitalism. All perfectly legal too. So come on: defend this. Seriously. Not trolling. I'm dying to know why it is that we should tolerate this sort of thing.

    Stuff like this is why countries have laws against firing people, btw.

    --
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    1. Re:Ok, let's see you died in the wool capitalists by Luckyo · · Score: 3, Insightful

      Uncontrolled free market causes power focus into the hands of few powerful at the expense of many powerless. In this case, the manoeuvre allowed a big investor to essentially throw all small investors out of the company with minimal additional investment. If he had to play it fair and prop the company financially in return for additional relative share in the company, smaller investors would have gotten to keep at least a portion of their investment.

      It's a pretty good example of how uncontrolled free market capitalism works on basic level, and why big publicly traded companies tend to include rules that deny or resist such manipulation to gain trust (and money) from small and medium sized investors (i.e. limit free market capitalism with regulation).

    2. Re:Ok, let's see you died in the wool capitalists by rsilvergun · · Score: 2

      Corporations are an abuse of the government by the wealthy. I think the phrase is along the lines of "Privatize the profits and Socialize the losses". Our last round of bail outs exemplifies this sentiment.

      --
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    3. Re:Ok, let's see you died in the wool capitalists by mstrcat · · Score: 2

      I'm not sure if I can defend it, but it actually happens quite frequently to start-ups that burn through investment monies before they become profitable. Essentially a group of people invest money...we'll say A-D in this case.. At some time after investment, company X is still not profitable and have spent all the invested capital and none of the investors want to put new money in. If no one is interested in the business, it just dies. All the workers get fired, any debts get settled in court, and all the investors loose 100% of their investment. In many cases however, one or more of the investors will say, "I'll buy the company for Y dollars, assume the debts, hire some of the staff, ect.". Sometimes Y is very low, so all the remaining investors get nearly completely wiped out, all the stock is worthless. I think of it like a poker game where everyone else folded. Surprisingly the staff at the new company isn't typically all that upset about loosing their stock options. They've known for a while their company wasn't making any money and the options were worthless anyway.

    4. Re:Ok, let's see you died in the wool capitalists by Surt · · Score: 2

      Could you maybe attack it first? I don't see what's wrong. A company that was out of money restructured, letting go half the staff. That's what happens when the money runs out. One of the original investors decided to double-down, but only put in additional funds for a reduced operation.

      What did you want to have happen?

      --
      "Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
    5. Re:Ok, let's see you died in the wool capitalists by bluefoxlucid · · Score: 2

      Empirical results? The best economies are capitalist. The more capitalist an economy becomes, the stronger it becomes.

      The more capitalist an economy becomes, the weaker it becomes. Unless it's already socialist as hell, then it becomes stronger.

      It would be more capitalist to gut all our government regulations, consumer protection laws, anti-trust laws, etc .. let the free market figure it out. Purified capitalism carries no such thing as business for the common good. There is actually a government regulated business class by which you register your business to provide a public benefit, such as Good Will collecting items that would typically be destroyed and thus reduce the wealth present in the economy and selling them at very low prices such that low-income individuals can buy i.e. clothes--this business operation is a money-making cash cow, yet it is extremely beneficial to the public.

      In a purified capitalist system, the entire market control is capital. Money. Profit. Lying, cheating, conning people, as long as you don't break the framework laws--which start getting close to anarchy, as business operations can only be covered as far as anything else, you shouldn't even need a permit to operate a business (no incorporation). Fraud is a difficult concept in capitalism: in theory, market forces would drive people toward a product that works as advertised, so why do we need to protect consumers against fraud....

      The end result is corporatism, where megacorporations buy up everything and become effective government. CACI supplies the US Military with privately trained troops in Iraq--yes, there are private contracted soldiers, which means there are corporations in America with their own military forces. Imagine the buying frenzy to control all private sector military, police, private security contract, etc. All the guards, cops, and soldiers are controlled by Walt Disney Co.

      Sometimes, the government just has to set down the rules and make sure these people play fair. They need--or at least it's beneficial--to nudge the market a little--not cripplingly so, but a little. In my state, the government charges businesses $400 for 1MWh of produced/consumed power. A business has a $400 obligation; however by generating 1MWh of solar power, they can escape this obligation. I have a solar water heater that generates above 5MWh of energy per year (couple it to a radiative heating system boiler via a plate heat exchanger). For each MWh up to 5MWh, I get 1 Solar Renewable Energy Credit.

      I can sell that credit; currently there's enough in the market to push prices down to $195 per SREC, so businesses will pay me about $1000/year for owning and operating my solar water heater. This arrangement is the government's way of using market forces to push solar energy--every MWh my water heater generates is that much less gas burned, just like using 1MWh of solar power rather than electricity from the gas turbine plant. This situation leaves it up to producers and consumers to decide what's best for them and how to pay for it--it encourages the production of more solar power plants (although if you consume 1MWh Solar Energy it's solar and you don't need to pay $400), it encourages businesses to lower their energy usage, it encourages businesses to install any offsetting technology (PV, solar hot water, etc--a lot of businesses install PV to lower their obligation AND SELL THE SREC THEY GENERATE FROM IT), it even encourages consumers to install solar power options like PV arrays or solar water heaters. The market decides exactly what to do with that, how to fluctuate prices, and which direction to take; the burden is small and can be ignored, but will fill with the way the market decides is best without the government getting its hands dirty and trying to micromanage this shit.

      This situation also gives an edge to companies like Capstone Turbine, who sell roof-mounted gas turbines for winter heating. Capstone Turbine gas

      --
      Support my political activism on Patreon.
  6. Spin by Tubal-Cain · · Score: 4, Funny

    ...confirming that nearly half of the previous staff had been offered positions at the new company.

    I guess that sounds better than "we fired more than half of our employees".

    1. Re:Spin by kat_skan · · Score: 2

      ...confirming that nearly half of the previous staff had been offered positions at the new company.

      I guess that sounds better than "we fired more than half of our employees".

      Which in turn sounds better than "we fucked over all of our employees."

  7. OnLive is dead. by drfreak · · Score: 4, Funny

    Long Live OnLive!

  8. Shrug Off Your Debts by sanman2 · · Score: 2

    It's worth mentioning that Perlman's original company was called "Rearden Steel" (a la "Atlas Shrugged"), which was then re-named to Rearden Labs
    (I know, because I applied to it for a job, once)

    http://www.flesheatingzipper.com/gaming/2012/08/can-you-trust-onlive-now/

    1. Re:Shrug Off Your Debts by guttentag · · Score: 2

      It's worth mentioning that Perlman's original company was called "Rearden Steel" (a la "Atlas Shrugged"), which was then re-named to Rearden Labs ...

      Great, a sanctimonious Ayn Rand fanatic who probably thinks this sort of transaction is OK because his company is holding up society by being, as the press release claims, "the future of computing and entertainment." Really? The future of computing? Someone should tell this guy he misspelled "Steal."

  9. This is why we need more workers rights / unions by Joe_Dragon · · Score: 2

    This is why we need more workers rights / unions.

    Just wait for walmart of others to pull the same crap.

  10. But I like raging... by rsilvergun · · Score: 4, Interesting

    when I see stories like this. Sorry, sorta hard not to do.

    There's lots and lots of problems here, but the fundamental one is that the workers are at a marked disadvantage over the Capitalists. Those employees can't really do anything about any of this. OnLive wins, they lose. Even if they get a lawyer and go all class action they'll probably get nothing except a $5 off coupon for a 12 month subscription of OnLive.

    I was just reading Wikipedia's articles on Voluntary Slavery and Wage Slavery. The point made by the Capitalists was you should have the right to sell yourself, the point made by the Socialists was that if you're in that position you're bargaining from such a weak stance that you don't really have any right's to begin with.

    I guess my point is this: "Free Market" Capitalists argue that freedom will win out in the end. As near as I can tell this is either a hopelessly naive sentiment, willful ignorance, or a carefully calculated lie. I'm still waiting to be proved wrong. After all, it'd be nice to believe in the basic good of people and civilization. But I'm a cynical ole coot.

    --
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    1. Re:But I like raging... by c0lo · · Score: 3, Insightful

      There's lots and lots of problems here, but the fundamental one is that the workers are at a marked disadvantage over the Capitalists. Those employees can't really do anything about any of this. OnLive wins, they lose.

      The original investors have also lost in the process.

      I was just reading Wikipedia's articles on Voluntary Slavery and Wage Slavery.

      It is usually called a mortgage. If your parents were not wealthy enough to give you a home (or tuition fees), you'll need to take a job. You'll need the same if you can't live without that shiny gadget (i...whatever-apple-is-pushing-now) or want to drive an SUV or ...

      I guess my point is this: "Free Market" Capitalists argue that freedom will win out in the end.

      Well, I think they may be actually right. Except that nobody is able to tell the cost of this victory.

      --
      Questions raise, answers kill. Raise questions to stay alive.
  11. Phonenix Company by Freaky+Spook · · Score: 2

    This sounds like the definition of the Phoenix Company http://en.wikipedia.org/wiki/Phoenix_company

    I have gone through something similar with a previous employer. It didn't end well at all.

  12. good money after bad by bloodhawk · · Score: 2

    sounds like one of the original investors in throwing good money after bad. Face it the concept is not a good one with to many downsides and too small a niche market to ever be able to do much more than break even if it's lucky.

  13. Re:WTF is OnLive? by Sir_Sri · · Score: 2

    No, that's about it. They have been running a cloud gaming service where they run the game code on their servers, and stream the data to your computer in real time. They have a 'console' that's basically a cheap video player with a controller to connect to the service if you don't want to use a PC desktop client.

    That's their entire business model. And it's not all that successful. There were only really two big outfits in this business gaikai and onlive, and both exist in an effort to get bought out by a big company, or at least did, until gaikai got bought by sony. There are some smaller other asian outfits as well, but that's about it. Pay a subscription fee, play games anywhere through an onlive client (with their box), without needing to buy gaming hardware.

    I would think the big market for this will shortly be legacy games, I bet 10 000 PS2's would serve the entire PSN, and be 'good enough' for legacy gaming, same sort of thing with the original xbox, and if there is a major architecture change for the PS4/Xbox3 they could need literally millions of boxes as an online service. The other avenue of course is people on laptops who can't get decent parts for whatever reason.

    In the really long term obviously most game services are going this direction, but I think they're too far ahead of the curve to make enough money to cling to life for another decade or so.

  14. That's not what's happening here by rsilvergun · · Score: 4, Insightful

    I've watched videogame companies bailed out by the owners. The president of Sega did it. He put up his fortune to keep the company afloat and lost most of it. That's not what's happening here. What's happening here is that a bunch of people were promised valuable stock options in exchange for a lower salary than they would normally command. They were then systematically cheated out of that using blatant and dishonest legal tactics. They've been defrauded in practice, just not legally. AOL did this too, and we all railed against them.

    RANT MODE ON

    And @$#! am I fed up with conservatards using the threat of job loses to keep us at each others throats. Better let the Job Creators do what they want or they'll take EVERYTHING away. It's there's after all. Mitt $#F#!@ Romney built it all with his own two hands. Him and John Galt. Jesus, what the hell is wrong with us? When did we become such a bunch of fsckin' cowards that we let these yahoo's push us around?

    RANT MODE OFF

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    1. Re:That's not what's happening here by Ambassador+Kosh · · Score: 2

      All systems are eventually replaced with a better system. Capitalism won't last forever. I don't know what the new system will be or when it will get here but geeze I hope it comes soon. I am hoping for something like the venus project but who knows what it will be. It is not like we have had capitalism for very long or that any of these systems last for very long. Our technology ends up at odds with our economic system and destabilizes it and we create a new economic system capable of working under the new technological reality.

      Whatever the new system is I hope it does better by a greater number than our current system. I don't think any of the prior systems are viable paths forward so no I don't believe the next system will be communism etc.

      --
      Computer modeling for biotech drug manufacturing is HARD! :)
    2. Re:That's not what's happening here by Xest · · Score: 2

      Socialism and capitalism aren't mutually exclusive. As for whether socialism works, well, I'd say Germany is a good example that it does, but the EU in general is mostly socialist and economically larger than the US whilst having lower average levels of crime, better measures of personal happiness, higher levels of adult numeracy and literacy, longer life expectancy, lower infant mortality rates, greater political respect globally, and so forth.

      Unless of course you're doing as many right-wing Americans do and confusing socialism with communism as is often the case with the American right in which case you're correct, communism has never really been shown to work.

      I don't think anyone whether from America or not complaining about US style-capitalism is suggesting a massive lurch from the fairly far right to the complete opposite on the far left that is communism, they're probably just saying that America has taken capitalism a little too far to the point that it's detrimental not just to the country, but to it's citizens as well, and that a healthy injection of socialism as countries like those in Europe have would probably improve things.

      Certainly the answer for America is absolutely not to lurch even more to the right, because at that point it's really entering the realm of fascism. I know the left-right scale is fairly imperfect, but it does illustrate the relative position of these ideologies quite well. Effectively from left to right you have Communism, then Socialism, then Capitalism, then Fascism. A healthy balance of the middle two is best, too far into either one is unhealthy and moving into communism or fascism is just catastrophic. This isn't to say European nations always get it right, far from it - Greece went too far with it's socialism for example relative to the amount of money it had available as a nation, much as America has gone too far with it's capitalism to the detriment of many of it's citizens being left unable too meaningfully contribute to and participate enjoyably in society.

      The thing is, when put objectively, the vast majority of Americans even seem to agree that capitalism has pushed inequality in the US much too far, and would actually prefer a more socialist society:

      http://www.bbc.co.uk/news/business-19284017

      But of course, what people say in an objective study, and what they vote for in a more emotion filled ballot box, are two different things.

  15. i worked for another Lauder company by Surt · · Score: 3, Interesting

    Interestingly, we were doing something similar, back in 1990 (ICTV). We had computer gaming over remote hardware using cable return path for the display (cheap custom box for keyboard/mouse). We eventually figured out that this was a fundamentally impossible to win game because of the light speed latency issue. OnLive will figure it out too.

    --
    "Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
    1. Re:i worked for another Lauder company by Surt · · Score: 2

      Nope. Oddly enough, they stopped paying me entirely when I left. I did earn a combination of salary and worthless stock options while I was there, though. My second try with stock options (Guidewire) turned out somewhat better.

      --
      "Who is the Journal of Quantum Physics going to believe?" --Stephen Hawking
  16. Re:WTF is OnLive? by Onymous+Coward · · Score: 2

    It's okay if you don't know.

    Just don't go on about how the service is great or awful if you haven't tried it.

    That bugs me to no end.

    If it's available in your area, just try it out first, for free. Then rant either way.

  17. Not the only reason by Sycraft-fu · · Score: 2

    Screwing over the banks would be another one. If the company had loans of any kind this would get rid of them for less money than they are worth. Loan holders are among the first to get paid with whatever a dissolved company is worth, but that doesn't mean they get everything they are owed. So say Onlive had $5 million in loans, they go bankrupt and this buyout happens for $1 million. The banks then get, at most, $1 million for the loans and that is that.

    Basically it lets them get out of all financial obligations. Creditors (including people with options) get what they get which may be nothing and that is it.

  18. Re:This is why we need more workers rights / union by bloodhawk · · Score: 2

    The company was basically bankrupt, what possible benefit could more workers rights or a union offer? apart from making what little is left to salvage undesirable to anyone?