http://www.bbc.co.uk/news/technology-19896362

Cloud video gaming service OnLive was sold to a venture capital group for just $4.8m (£3m), it has emerged. The sale - which also involved many of the company's workers losing their jobs, and investors writing off their stakes - took place in August. Analysts had previously discussed the business being worth as much as $1.8bn. Its rival, Gaikai, was sold to Sony for $380m in July.

Creditors were told efforts to secure a higher price might have backfired.

Mercury News revealed the details after obtaining a letter from the firm handling OnLive's bankruptcy-like process.

"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," wrote Joel Weinberg, president of Insolvency Services Group (ISG).

Gaming's future?

OnLive allows users to play "premium" games over the internet, without the need for a console. Remote servers run the software and stream video footage to users, who play the game using an OnLive gamespad on a computer, smartphone or television - in the latter's case with the aid of a special adapter.
Many gaming industry insiders have predicted subscribing to a cloud gaming package could ultimately become more popular than buying a dedicated games machine. However, to date it has had limited appeal. OnLive has said it had 1.5 million "active users" at the time of the sale - although reports suggest that only about 1,600 subscribers were using the service at any one time.

Even so, the unexpected sale of the firm to Silicon Valley-based venture capital group Lauder Partners caused controversy when it was announced.

Workers were told that they had lost their rights to stock in the company, while investors who had spent tens of millions of dollars buying a stake in the business were told they would only be compensated if money was left over from the deal once debts had been covered. ISG's letter reveals that the original OnLive company owed about $18.8m, meaning there is unlikely to be any pay-out to shareholders, who include UK broadband provider BT, Taiwanese smartphone maker HTC, US media group Time Warner and the US telecoms group AT&T.

One industry analyst told the BBC he had thought OnLive's assets had been worth more. "Apparently OnLive's patent portfolio is relatively strong around the technologies used to provide a streaming games service, so I'm surprised it couldn't get more for those," said Ed Barton, director of digital media at Strategy Analytics. "But the sum is a reflection of the absolutely dire negotiating position it was in when it made the sale."

OnLive's founder, Steve Perlman, left the firm shortly after the deal. However, Lauder Partners continues to offer the service in the US, UK and Belgium

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That's some cheap tech.. i wonder why Sony or MS didn't fish up the patents and tech... 5 million is nothing

OnLive got destroyed thanks to Steve Perlman. http://www.theverge.com/2012/8/28/3274739/onlive-report

Less than 5 million sure....if you don't count the debt the new owner has to pay. To him, that purchase was a whole lot bigger.

Also 1,600 users at any given time? That's barely more than what LBP Vita is popping out right now.

Yeah, onlive's patents aren't viewed very important according to others in regards to cloud services. I read that the debt was cut down to 25 cents on the dollar. I think the debt was 20-30 million due with additional debt at that reduced rate. Not sure how much the whole thing is totalling. Any idea what this guy plans to do with it? Continue service maybe. If onlive is gone, the OUYA is going to hurt without that up its sleave. Maybe Sony will fill the void? Wouldn't that be something? OUYA suceeding because it becomes a PlayStation, lol.

Haha, I'm glad.

I was tired of the whole consoles are dying predicament.  It was a bold move, but not the right time.  Who knows if the future with solely be like Onlive someday, but damn it help me if I don't hold some prejudice to something that threatens my consoles. 

I for one like this ecosystem of 3 leading console manufacturers.  There's a certain dynamic to their three-way tug of war. 

I give them props for trying something new, but for now, "Get out of my house, son!"

Realistically, they should have focused on making Onlive a service on consoles rather than competition for consoles. Hypothetically speaking, they could have provided a "HD gaming experience" on the Wii, and had they done this in 2008 (or so) they probably would have found millions of people willing to subscribe to their service.