OnLive’s disintegration in August was abrupt. One day the cloud-based streaming video game service was plugging along, the next its entire staff was liquidated. As details emerged, it came out that one of the investment firms that had initially backed OnLive back in 2009, Lauder Partners, was now sole owner of the company. How much did it pay?
Lauder Partners has poured a good amount of capital into other streaming entertainment businesses, including local television provider Aereo and Smart TV software producers like TrickPlay. Streaming video game businesses cost a princely sum based on recent transactions. Sony dropped $380 million on OnLive’s competitor Gaikai in July. Lauder spent a comparatively paltry $4.8 million on OnLive.
The San Jose Mercury News acquired a letter written by Joel Weinberg, CEO of Insolvency Services Group, the company charged with handling OnLive’s liquidation of assets prior to the company’s near closure. Weinberg’s letter states that Lauder swept in at precisely the right moment to buy up what remained of OnLive.
“Had the sale to the buyer not taken place, the assignee would have been left with inadequate capital to fund the significant costs to preserve and market OnLive’s patents and other intellectual property, thus greatly reducing expected recoveries essentially to those of a forced piecemeal auction,” reads the letter. In short: Taking just a paltry sum from Laudner was better than incurring the cost of actually trying to sell OnLive’s assets.
The dire state of OnLive when it declared insolvency in August is enhanced by other figures revealed. While the company had raised as much as $40 million prior to opening for business in 2010, it had accrued nearly $19 million in debt by the time it dissolved this summer, not counting future costs for maintaining its facilities.
It was OnLive’s employees who got the rawest deal. Not only did they lose their jobs, but according to a report at The Verge, many of them had spent significant sums on shares in the company that were rendered worthless when it declared insolvency. That same report says that clients including Samsung and LG had offered to buy the company, but CEO Steve Perlman refused to sell, preventing those employees from seeing any return on their investment.