OnLive isn’t out of business, but won’t comment on full staff layoff

Cloud-based games on demand company OnLive isn't closed as rumors suggest, but the company is strangely silent about staff layoffs.

The sky is falling! Or maybe it’s the clouds.  Just one cloud actually. Cloud-based streaming video game service OnLive is closing.

At least that’s what Friday rumors purported. Turns out that OnLive isn’t shutting down, but it’s up in the air whether anyone is working there or not.

It all started when InXile Entertainment head honcho Brian Fargo took to Twitter on Friday morning, saying, “Just received an email that OnLive is closed as of today!” A bold, dangerous statement; Consider how many game developers and publishers working with OnLive likely heard about the Tweet within minutes. It’s the stuff of Internet brushfire legend.

Fargo’s exclamation was followed up by a report at Mashable that OnLive had laid of its entire staff. Its source claimed all OnLive employees were summoned in for a meeting at 10am PDT on Friday and all in attendance were promptly laid off. A number of staff were told that they would be immediately rehired as the company transformed into something new.

That same source said that the management of CEO and founder Steve Perlman was the cause of OnLive’s implosion. His refusal to sell the company to interested buyers was apparently a primary cause of OnLive’s failure.

OnLive corporate communications director Brian Jaquet took to the press by Friday afternoon though, saying that its only comment on the news is that the business isn’t shutting down. Jaquet answered Joystiq’s inquiry as to whether or not it was closing, “We don’t respond to rumors, but of course not.”

So OnLive will still offer up streaming video games to its users according to Jaquet. Wonderful. What about the company’s hundreds of employees? Unknown. There’s been little indication from the company’s employees on social networking sites that they’ve been laid off, but LinkedIn and Facebook profiles don’t exactly tell full stories.

These are strange days for the nascent streaming gaming business. Sony acquired Gaikai, OnLive’s primary competitor, at the beginning of July. As f that moment, cloud-based gaming was no longer a promising niche for startups like OnLive. Now it’s the territory of massive, multinational businesses. There has been speculation that Microsoft would in turn make an offer to OnLive, but so far the company’s stayed independent. The only console related announcement made by the company recently is that it will support Ouya, Boxer8’s new Google Android game console.

We’ve reached out to a number of OnLive employees and will update this article with any relevant information they provide.