OnLive, a US-based online entertainment technology service that raised about $100m from three corporate venturing units in the past two years at a $1bn valuation, has restructured so its assets are sold to a new company in a move expected to wipe out its existing shareholders and making its staff redundant.
OnLive said investors had included phone operators AT&T, BT and Belgacom Group, filmmaker Warner Brothers, software provider Autodesk, phone maker HTC, network equipment provider Juniper Networks and venture capital firm Maverick Capital and family office Lauder Partners.
An affiliate of Lauder Partners was the first investor in the newly-structured company that bought all of OnLive’s assets, including its technology and intellectual property. The new OnLive, which has retained the name, has hired about half of the former business’ staff and said the non-hired staff would be given offers to do consulting in return for options in the new company.
“Upon closing additional funding, the company plans to hire more staff, both former OnLive employees as well as new employees.”
The company said “OnLive Game and Desktop Services, all OnLive Devices and Apps, as well as all OnLive partnerships, are expected to continue without interruption and all customer purchases will remain intact; users are not expected to notice any change whatsoever”.
OnLive said it had more than 2.5 million subscribers, with an active base of over 1.5 million subscribers, and the user base was growing with its addition into devices and televisions from manufacturers.
Belgacom, which gained the rights for OnLive in Belgium and Luxembourg when it bought a stake in OnLive in 2010, said it “invested about €23m [$30m] for a share of 2.6% in the gaming company OnLive. Currently there are no problems with the service towards the Belgacom users.
“Belgacom closely monitors the further developments concerning OnLive. It is possible this amount could be written off partially or in total.”
BT, which had exclusive rights to bundle the OnLive Game Service with broadband in the UK when it bought its stake alongside Belgacom, added: “”We cannot comment on speculation about the future of OnLive, but we are keeping a close eye on developments. Questions should be directed to the company in question.
“BT customers who are customers of OnLive will continue to be able to access the service. In any event, the 2.6% shareholding in OnLive does not represent a significant investment for BT as a whole. We consider it highly likely that we will have to write off our investment.”
Autodesk said: “We were an investor in OnLive. We are not an investor in the new entity. No further comments at this time.”
AT&T declined to comment; Juniper, Maverick and Warner Brothers were unavailable to respond to requests for comment; and Lauder Partners referred questions to OnLive’s spokeswoman.
HTC said: “Due to lack of operating cash and an inability to raise new capital, OnLive had completed asset restructuring over the weekend [of 19 August]. HTC estimates that it will need to recognize a $40m provision for this investment loss.”
In a filing with the Taiwan Stock Exchange in February last year, HTC said it would buy 5.33 million shares in US-based OnLive at $7.50 per share as part of a partnership.
Peter Chou, chief executive of HTC, then said: “In a world of mobile internet ubiquity, content is king but it’s not all created equal. OnLive provides a connected cloud-based gaming experience unlike any other.
“HTC and OnLive share a similar goal for expanding connected cloud-based gaming by making it wireless and location-independent.”
Autodesk said: “We were an investor in OnLive. We are not an investor in the new entity. No further comments at this time.”
AT&T, Lauder Partners, Warner Brothers, Autodesk and Maverick Capital closed OnLive’s series C round at an undisclosed size in September 2009, two years after its $16.5m series B round that included Warner Bros Home Entertainment president, Kevin Tsujihara, as a director, according to the regulatory filing.