8 ms·

Assets of Palo Alto gaming company OnLive were sold off for just $4.8 million

79 points by newman314 14y ago

phil 14y ago
Just hate to see this part: OnLive was a frequent customer or Prolific Oven Bakery in Palo Alto, said Regina Chan, daughter of the owner of the local chain. By the time the company went through its insolvency in August, it owed the bakery $2,000, which represented about a month's worth of Onlive's orders, she said.
- dhbanes 14y ago
  Is this not an understood risk of selling muffins on credit?
  - crystalis 14y ago
    Companies need to understand that they should seek revenue before customers and vanity metrics.
    - madaxe 14y ago
      Cupcakes are business critical though. Oh wait, no, the other thing.
  - kamaal 14y ago
    Although they might have lost $2K on cupcakes, but the amount of money they would have made by attracting customers on credit is huge. So generally offering things on credit is like bait to catch customers, there is risk I agree. But profits from such schemes vastly exceed losses, to make them almost negligible. Lets say you own a bakery, you sell cupcakes on credit. Say you sell $40K worth cupcakes an year to a company. There are chances that you may go under a loss of $2K if the company folds. Will you go for it, or do not offer any credit and lose $40K worth cupcake businesses to somebody else?
    - ojbyrne 14y ago
      Doesn't this depend on your profit margin, which I suspect is larger for cupcakes than muffins... If you sell $40k of cupcakes that cost $39.5k to make, credit risk is much more of an issue than if they cost $20k to make.
      - kamaal 14y ago
        Agreed, but generally there is an opportunity cost associated with any risk. You just have to decide if you are ready to lose the opportunity if you don't want to take the risk. I know it sounds unfair, but unfortunately that is how things work in the real world. If there was no risk associated with opportunities, then the number of people who be would competing for an opportunity will go up by a large number. Nature puts filters to keep the size of the game limited.
- ChuckMcM 14y ago
  I would have disliked it more if it was the original owners, once Ms. Chan bought it the quality of the cakes suffered, especially in the Saratoga store. It went from being my 'go to' place for a delicious chocolate on chocolate cake to 'I've not been there for like 3 years now.'
  - msie 14y ago
    Translation: they don't deserve as much empathy from me because they make crappy cakes.
    - TeMPOraL 14y ago
      Which is a corollary of people making awesome things deserving more empathy than usual. ;).
  - phil 14y ago
    Come on - your local bakery (even if it's a chain, even if you don't like it as much as you used to) is a low-margin enterprise. Getting screwed out of thousands of dollars is tough on places like that. Plus that was just the example. If they were net-30 on the break room food, it's a safe bet a bunch of freelancers and other local businesses also had losses.
    - ChuckMcM 14y ago
      This particular bakery was pretty legendary for a long time in the bay area.
  - kabdib 14y ago
    We got our wedding cake from the Prolific Oven ten years ago. It was /amazing/. Sad to hear they've taken a dive.
- danielha 14y ago
  $2k in monthly cupcakes... I gotta step up my cupcake game.
- photorized 14y ago
  Hopefully the PR the bakery gets from this makes up for those losses.
YokoZar 14y ago
"In a statement, the new OnLive said its predecessor's basic problem was not its business model but that it simply hadn't raised enough cash for its business to take off." How do you tell when a startup is just desperate for cash and when they actually mean something like this?
- ChuckMcM 14y ago
  The concept is called 'capitalization' and the statement is that Onlive was under capitalized to execute on their primary strategy. The basics are pretty simple, you start with some money (capital) and you spend it to build the product, somewhere along the way you start selling product and getting revenue, the revenue grows and eventually it provides enough money to pay all your bills (operationally cash flow positive). You capitalize the company such that you have enough money to do what you need to do until you get that cash flow positive point. If you don't have enough money your bank account goes to zero before revenues cover cost. If you have too much money you still have a lot of money in the bank when it starts growing again.
- asanwal 14y ago
  This is a cop out when it comes to explaining failure. It wasn't a management, technology, vision, etc problem which are all attributable to decisions made but instead we ran out of cash (something mgmt has less control over by implication). When companies succeed, it was management prowess. When they fail, it's exogenous "headwinds". It's commonly seen in big and small cos. What's more interesting is that based on this statement, the company's biz model actually seems to be raising financing. Very 1999-2000 of them. Btw, this is not to imply that capitalization is unimportant but if you are running out of money and need more, you either convince someone to give it to you or you make some hard resource allocation decisions and reduce your short-term plans so you can live to fight another day. Failure to do so is simply a management failure (no matter the nice spin).
- sounds 14y ago
  Came to comment on this specifically. OnLive was doing "cloud gaming" as in pre-render frames in the cloud and stream them to the device. It has the initial wow, but the devil is in the details, and OnLive had to solve them all at once: 1. Data caps are now the norm. A service that streams video 100% of the time is swimming upstream. OnLive would also need to recoup the significant costs of an uplink capable of serving all its customers full-HD streams. Typically a video service heavily uses a CDN (think Akamai) to only upload a few streams and then have the CDN push those out to edge servers. OnLive needed enough bandwidth to be its own CDN. And cellular data is an even thornier problem in terms of reliable throughput AND latency, which both have a direct effect on OnLive's service. 2. Game Studios are famously protective of their high-value assets. OnLive needed to convince some AAA studios to do a new release of their titles on its service. Engineering the games to work well with OnLive isn't the only problem here: it would be easier to be wholly acquired by a big studio than to convince anyone in the industry to do a deal that fit OnLive's marketing. Game studios want to see big up-front profits on opening day. OnLive's marketing was more along the lines of a trickle of profits over a longer term. (Yes, they had some titles, but they needed bigger ones.) 3. The OnLive marketing about enabling some amazing capability (like cinema-quality graphics or breakthroughs in AI) swims upstream against what the "cloud" is supposed to offer. An OnLive session for one customer takes several machines, while the "cloud" basically makes money by stacking idle VMs so it's many customers to a machine. The only way OnLive would make money is if everybody rented the AAA title and nobody played it. There is some really interesting tech in that space, but those are some basic problems with what OnLive was trying to do.
sshirokov 14y ago
I kind-of hope they make it as a service. As a pure consumer of their product, I quite enjoyed it.
- michaelbuckbee 14y ago
  I'm wondering if you could expand on that some? I had tried the product several times and just consistently found it lacking (sluggish controls, etc.).
  - SquareWheel 14y ago
    Personally, having loud audio blaring at me when simply starting the program was enough of a turn off. Nevermind the fact that my connection speed was consistently too slow to actually play a game. Certainly not their fault, but I know I'm not alone in having crappy internet.
  - flyt 14y ago
    Forget that, the service has about 10 games. Total. No way am I going to make a long term investment of $50 per game into a service that can't grow its library with the new stuff coming out, and that could implode at any second.
    - klausa 14y ago
      https://www.onlive.com/games/featuredgames#&tab=all_games https://www.onlive.com/games/featuredgames#&tab=all_game... There are 12 games on one page, and there are 26 pages - 12*26 = 312. I'm really baffled as to where did your number came from.
      - flyt 14y ago
        How many of these games are exclusive to OnLive? How many of them have better experiences (multiplayer, controls, DLC) on other platforms like PS3 or XBOX 360? Pretty much all of them.
  - sshirokov 14y ago
huggah 14y ago
To say nothing of the people! We've hired three just in my group alone. At least some of their assets haven't lost value...
gcb 14y ago
Isn't the whole issue about they not selling the assets to pay staff/credors? But for using the bulk of the assets to spin a clone of the failed company? This is just the peanuts that were left
chadnickbok 14y ago
I am so, so glad that I decided to apply at Gaikai and not OnLive... :'D
gauravkumar552 14y ago
I think this was the time when OnLive could have gone for "debt restructure" and save the company for a few years. Either it would have been successful in business or could get more payout.
codeonfire 14y ago
That's not bad. What really does a software company have other than IP and a few computers? Even considering this, IP is a risky asset which probably won't create much cash flow on its own the way a piece of real estate would. The real assets are in knowledge, but those can only be rented.
- kamaal 14y ago
  I was talking to a person who had started a company and went toast. He bluntly put it, what remains after a software shop shuts down are 'just files' on the hard drive. This is especially true when the company doesn't own any real estate at all. After the shops shuts down, nearly everything gets sold for half price. My chair at home costs 25K INR if I buy it in the showroom, I bought it from a scrap shop for 2K INR, the guy in the scrap shop told me the chair came a software shop which closed recently. That is how low things like infrastructure get sold.
ivanb 14y ago
In modern gaming responsiveness is the prerequisite to everything. You can't fight the laws of physics. Server-side only latency hiding just does not work: there is always a noticeable delay between a key press and visual response. In addition a decent gaming PC doesn't cost much these days and games on mobile devices are as enjoyable as desktop and console ones. They will get even cheaper and cooler with time. There is no reason for existence of such a service.
- weego 14y ago
  Unless the game you are playing doesn't require lots of micro/twitch, like the new XCOM game, all the total war series, sim city, anno series etc.
  - ivanb 14y ago
    A dedicated hi-tech service to play strategy and puzzle games then?
    - freehunter 14y ago
      I never much cared for UT3 on the service (maybe it was the game, maybe it was the connection, but it felt sloppy) but Red Faction 3 was fantastic. That's a physics-based third person shooter/action title. I beat the whole game on OnLive.
- andybak 14y ago
  Did you actually play OnLive? I've played FPS shooters on it for hours quite happily.
  - ivanb 14y ago
    It is not available in my country, so no. Actually after your comment I've read and watched several modern reviews of the service. Players don't seem to be complaining about the latency so maybe it is really not that noticeable as I thought it would be. Thus my initial point about the latency does not hold much water.
6ren 14y ago
> OnLive's assignment came less than two months after Sony bought rival streaming game company Gaikai for some $380 million. I heard about OnLive all the time, but never Gaikai. Was it big in Japan perhaps? According to jeffool, it seems Gaikai got EA demo rights, and OnLive then self-imploded http://news.ycombinator.com/item?id=4635405 http://news.ycombinator.com/item?id=4635405
belthasar 14y ago
I always wondered why they never made a service for the Wii. To me, it seemed like the perfect device to test out whether console streaming has merit.
- madaxe 14y ago
  They blew their budget on cupcakes.

79 points by newman314 14y ago

phil 14y ago

Just hate to see this part: OnLive was a frequent customer or Prolific Oven Bakery in Palo Alto, said Regina Chan, daughter of the owner of the local chain. By the time the company went through its insolvency in August, it owed the bakery $2,000, which represented about a month's worth of Onlive's orders, she said.

dhbanes 14y ago
Is this not an understood risk of selling muffins on credit?
- crystalis 14y ago
  Companies need to understand that they should seek revenue before customers and vanity metrics.
  - madaxe 14y ago
    Cupcakes are business critical though. Oh wait, no, the other thing.
- kamaal 14y ago
  Although they might have lost $2K on cupcakes, but the amount of money they would have made by attracting customers on credit is huge. So generally offering things on credit is like bait to catch customers, there is risk I agree. But profits from such schemes vastly exceed losses, to make them almost negligible. Lets say you own a bakery, you sell cupcakes on credit. Say you sell $40K worth cupcakes an year to a company. There are chances that you may go under a loss of $2K if the company folds. Will you go for it, or do not offer any credit and lose $40K worth cupcake businesses to somebody else?
  - ojbyrne 14y ago
    Doesn't this depend on your profit margin, which I suspect is larger for cupcakes than muffins... If you sell $40k of cupcakes that cost $39.5k to make, credit risk is much more of an issue than if they cost $20k to make.
    - kamaal 14y ago
      Agreed, but generally there is an opportunity cost associated with any risk. You just have to decide if you are ready to lose the opportunity if you don't want to take the risk. I know it sounds unfair, but unfortunately that is how things work in the real world. If there was no risk associated with opportunities, then the number of people who be would competing for an opportunity will go up by a large number. Nature puts filters to keep the size of the game limited.
ChuckMcM 14y ago
I would have disliked it more if it was the original owners, once Ms. Chan bought it the quality of the cakes suffered, especially in the Saratoga store. It went from being my 'go to' place for a delicious chocolate on chocolate cake to 'I've not been there for like 3 years now.'
- msie 14y ago
  Translation: they don't deserve as much empathy from me because they make crappy cakes.
  - TeMPOraL 14y ago
    Which is a corollary of people making awesome things deserving more empathy than usual. ;).
- phil 14y ago
  Come on - your local bakery (even if it's a chain, even if you don't like it as much as you used to) is a low-margin enterprise. Getting screwed out of thousands of dollars is tough on places like that. Plus that was just the example. If they were net-30 on the break room food, it's a safe bet a bunch of freelancers and other local businesses also had losses.
  - ChuckMcM 14y ago
    This particular bakery was pretty legendary for a long time in the bay area.
- kabdib 14y ago
  We got our wedding cake from the Prolific Oven ten years ago. It was /amazing/. Sad to hear they've taken a dive.
danielha 14y ago
$2k in monthly cupcakes... I gotta step up my cupcake game.
photorized 14y ago
Hopefully the PR the bakery gets from this makes up for those losses.

YokoZar 14y ago

"In a statement, the new OnLive said its predecessor's basic problem was not its business model but that it simply hadn't raised enough cash for its business to take off." How do you tell when a startup is just desperate for cash and when they actually mean something like this?

ChuckMcM 14y ago
The concept is called 'capitalization' and the statement is that Onlive was under capitalized to execute on their primary strategy. The basics are pretty simple, you start with some money (capital) and you spend it to build the product, somewhere along the way you start selling product and getting revenue, the revenue grows and eventually it provides enough money to pay all your bills (operationally cash flow positive). You capitalize the company such that you have enough money to do what you need to do until you get that cash flow positive point. If you don't have enough money your bank account goes to zero before revenues cover cost. If you have too much money you still have a lot of money in the bank when it starts growing again.
asanwal 14y ago
This is a cop out when it comes to explaining failure. It wasn't a management, technology, vision, etc problem which are all attributable to decisions made but instead we ran out of cash (something mgmt has less control over by implication). When companies succeed, it was management prowess. When they fail, it's exogenous "headwinds". It's commonly seen in big and small cos. What's more interesting is that based on this statement, the company's biz model actually seems to be raising financing. Very 1999-2000 of them. Btw, this is not to imply that capitalization is unimportant but if you are running out of money and need more, you either convince someone to give it to you or you make some hard resource allocation decisions and reduce your short-term plans so you can live to fight another day. Failure to do so is simply a management failure (no matter the nice spin).
sounds 14y ago
Came to comment on this specifically. OnLive was doing "cloud gaming" as in pre-render frames in the cloud and stream them to the device. It has the initial wow, but the devil is in the details, and OnLive had to solve them all at once: 1. Data caps are now the norm. A service that streams video 100% of the time is swimming upstream. OnLive would also need to recoup the significant costs of an uplink capable of serving all its customers full-HD streams. Typically a video service heavily uses a CDN (think Akamai) to only upload a few streams and then have the CDN push those out to edge servers. OnLive needed enough bandwidth to be its own CDN. And cellular data is an even thornier problem in terms of reliable throughput AND latency, which both have a direct effect on OnLive's service. 2. Game Studios are famously protective of their high-value assets. OnLive needed to convince some AAA studios to do a new release of their titles on its service. Engineering the games to work well with OnLive isn't the only problem here: it would be easier to be wholly acquired by a big studio than to convince anyone in the industry to do a deal that fit OnLive's marketing. Game studios want to see big up-front profits on opening day. OnLive's marketing was more along the lines of a trickle of profits over a longer term. (Yes, they had some titles, but they needed bigger ones.) 3. The OnLive marketing about enabling some amazing capability (like cinema-quality graphics or breakthroughs in AI) swims upstream against what the "cloud" is supposed to offer. An OnLive session for one customer takes several machines, while the "cloud" basically makes money by stacking idle VMs so it's many customers to a machine. The only way OnLive would make money is if everybody rented the AAA title and nobody played it. There is some really interesting tech in that space, but those are some basic problems with what OnLive was trying to do.

sshirokov 14y ago

I kind-of hope they make it as a service. As a pure consumer of their product, I quite enjoyed it.

michaelbuckbee 14y ago
I'm wondering if you could expand on that some? I had tried the product several times and just consistently found it lacking (sluggish controls, etc.).
- SquareWheel 14y ago
  Personally, having loud audio blaring at me when simply starting the program was enough of a turn off. Nevermind the fact that my connection speed was consistently too slow to actually play a game. Certainly not their fault, but I know I'm not alone in having crappy internet.
- flyt 14y ago
  Forget that, the service has about 10 games. Total. No way am I going to make a long term investment of $50 per game into a service that can't grow its library with the new stuff coming out, and that could implode at any second.
  - klausa 14y ago
    https://www.onlive.com/games/featuredgames#&tab=all_games https://www.onlive.com/games/featuredgames#&tab=all_game... There are 12 games on one page, and there are 26 pages - 12*26 = 312. I'm really baffled as to where did your number came from.
    - flyt 14y ago
      How many of these games are exclusive to OnLive? How many of them have better experiences (multiplayer, controls, DLC) on other platforms like PS3 or XBOX 360? Pretty much all of them.
- sshirokov 14y ago

huggah 14y ago

To say nothing of the people! We've hired three just in my group alone. At least some of their assets haven't lost value...

gcb 14y ago

Isn't the whole issue about they not selling the assets to pay staff/credors? But for using the bulk of the assets to spin a clone of the failed company? This is just the peanuts that were left

chadnickbok 14y ago

I am so, so glad that I decided to apply at Gaikai and not OnLive... :'D

gauravkumar552 14y ago

I think this was the time when OnLive could have gone for "debt restructure" and save the company for a few years. Either it would have been successful in business or could get more payout.

codeonfire 14y ago

That's not bad. What really does a software company have other than IP and a few computers? Even considering this, IP is a risky asset which probably won't create much cash flow on its own the way a piece of real estate would. The real assets are in knowledge, but those can only be rented.

kamaal 14y ago
I was talking to a person who had started a company and went toast. He bluntly put it, what remains after a software shop shuts down are 'just files' on the hard drive. This is especially true when the company doesn't own any real estate at all. After the shops shuts down, nearly everything gets sold for half price. My chair at home costs 25K INR if I buy it in the showroom, I bought it from a scrap shop for 2K INR, the guy in the scrap shop told me the chair came a software shop which closed recently. That is how low things like infrastructure get sold.

ivanb 14y ago

In modern gaming responsiveness is the prerequisite to everything. You can't fight the laws of physics. Server-side only latency hiding just does not work: there is always a noticeable delay between a key press and visual response. In addition a decent gaming PC doesn't cost much these days and games on mobile devices are as enjoyable as desktop and console ones. They will get even cheaper and cooler with time. There is no reason for existence of such a service.

weego 14y ago
Unless the game you are playing doesn't require lots of micro/twitch, like the new XCOM game, all the total war series, sim city, anno series etc.
- ivanb 14y ago
  A dedicated hi-tech service to play strategy and puzzle games then?
  - freehunter 14y ago
    I never much cared for UT3 on the service (maybe it was the game, maybe it was the connection, but it felt sloppy) but Red Faction 3 was fantastic. That's a physics-based third person shooter/action title. I beat the whole game on OnLive.
andybak 14y ago
Did you actually play OnLive? I've played FPS shooters on it for hours quite happily.
- ivanb 14y ago
  It is not available in my country, so no. Actually after your comment I've read and watched several modern reviews of the service. Players don't seem to be complaining about the latency so maybe it is really not that noticeable as I thought it would be. Thus my initial point about the latency does not hold much water.

6ren 14y ago

> OnLive's assignment came less than two months after Sony bought rival streaming game company Gaikai for some $380 million. I heard about OnLive all the time, but never Gaikai. Was it big in Japan perhaps? According to jeffool, it seems Gaikai got EA demo rights, and OnLive then self-imploded http://news.ycombinator.com/item?id=4635405 http://news.ycombinator.com/item?id=4635405

belthasar 14y ago

I always wondered why they never made a service for the Wii. To me, it seemed like the perfect device to test out whether console streaming has merit.

madaxe 14y ago
They blew their budget on cupcakes.