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.
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.'
"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?
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.
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.
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).
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.).
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.
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.
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.
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.
[+] [-] phil|13 years ago|reply
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|13 years ago|reply
[+] [-] ChuckMcM|13 years ago|reply
[+] [-] danielha|13 years ago|reply
[+] [-] photorized|13 years ago|reply
[+] [-] YokoZar|13 years ago|reply
How do you tell when a startup is just desperate for cash and when they actually mean something like this?
[+] [-] sounds|13 years ago|reply
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.
[+] [-] ChuckMcM|13 years ago|reply
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|13 years ago|reply
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).
[+] [-] huggah|13 years ago|reply
[+] [-] sshirokov|13 years ago|reply
[+] [-] michaelbuckbee|13 years ago|reply
[+] [-] ivanb|13 years ago|reply
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.
[+] [-] andybak|13 years ago|reply
[+] [-] weego|13 years ago|reply
[+] [-] 6ren|13 years ago|reply
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
[+] [-] codeonfire|13 years ago|reply
[+] [-] kamaal|13 years ago|reply
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.
[+] [-] gauravkumar552|13 years ago|reply
[+] [-] belthasar|13 years ago|reply
[+] [-] madaxe|13 years ago|reply
[+] [-] chadnickbok|13 years ago|reply
[+] [-] gcb|13 years ago|reply
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