Is OnLive on life support?

By Alex Pham

Aug. 17, 2012 12 AM PT

Is OnLive still alive?

The online-game streaming company may have laid off a significant number of workers, triggering wide speculation about whether it is on life support.

The stories of layoffs, reported by Mashable, Kotaku, Engadget and Gamasutra, were dismissed in an email as “rumors” by OnLive spokeswoman Jane Anderson, who declined comment further. Mashable reported that “the entire staff” of OnLive was laid off Friday morning, while Engadget put the figure at 50% of employees.

The San Francisco company, founded by veteran technology entrepreneur Steve Perlman, has been struggling to find its footing in the emerging market for cloud-based gaming, which does not require payers to use discs or download programs to their computers’ hard drives because the games are streamed in real time over the Internet.

Although increasingly accepted by intrepid “early adopter” gamers, cloud-based console games have not caught on with the vast majority of players.

OnLive also has had to contend with skepticism from a key segment of gamers devoted to first-person shooter games such as “Battlefield” and “Call of Duty.” Those players worried that any lag in the OnLive network would be unacceptable, as player performance often depends on split-second timing.

Anderson deflected questions about the company’s future and said in a statement: “The exciting news is the first Vizio Co-Stars [Internet-connected television sets] with the OnLive app built-in have just arrived in customer homes, and our second of three ‘Indie Giveaway Weekends’ is going on now.”

Aside from its agreement with Vizio, OnLive has a number of ongoing obligations that would make it difficult to shut down completely. Last month it signed a deal with the start-up Ouya to provide the streaming technology for Ouya’s proposed console games service. In addition, it has an undisclosed number of customers who have paid for games on its service and would be left high and dry if the company pulls the plug.

OnLive, therefore, would be left with a limited number of options, including a sale to an outside investor or a bankruptcy filing that would allow it to continue operations while renegotiating with its creditors. The company has a number of assets, the most valuable of which is a portfolio of patented streaming technologies that Perlman developed.

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