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OnLive boss explains failure, discusses buyer

Blames excessive server costs and over staffing for company failure

Notes from the final business meeting at OnLive Friday morning - in which it was employees were informed that the firm was no more - reveal CEO Steve Perlman's reasoning for the failure of the leading cloud gaming company.

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Previous claims of gargantuan operating costs sinking the firm were spot-on, as Perlman blamed huge server running costs for pushing the company into the red.

"There's no way to exactly estimate how many servers we'd need. So we literally bought thousands of them, and all the equipment and networks to go with it," he said (thanks Joystiq).

The firm had ample servers but, in truth, not nearly enough users to pay for them. "If you've got 8000 servers and 1600 users, how could we ever get to cash flow positive, right?" he asked the meeting's attendees.

The 1600 users he mentions is the number of concurrent users at any one time (also reported to be around 1800), which is the dire reality behind the some 2 million users the firm has previously reported (which apparently only accounts for the number of sign-ups - account creation is free - and not consistent, paying users).

Speaking further on costs, Perlman said the firm had "dramatically expanded the number of employees" in it's short life, but did not downscale to compensate for its lack of users. "We made it through the whole recession without any disconnects, any layoffs, or any down rounds," said Perlman.

The identity of OnLive's buyer, which went unmentioned in the public announcement, remains a mystery for the time being, but Perlman said he was "an extraordinary guy" and a "very accomplished and well known venture capitalist", validating reports that the buyer is an individual rather than a large company.

According to Perlman, the buyer is "very wealthy" and is of the opinion that OnLive "is the entire future of everything", but not wealthy enough to bring on the 150-200 people that OnLive employed, hence the mass layoffs.

OnLive issued an official statement to confirm that it has been acquired by a "newly-formed company", and that the OnLive service is planned to continue uninterrupted.

In the shift to becoming a new company, OnLive is entering an 'Assignment for the Benefit of Creditors' (ABC) in California, an alternative to bankruptcy in which a new "assignee" takes over the company and its assets. The move is, according to Perlman, 'an effort to lighten the previous company's debts and get its creditors paid off'.

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