OnLive, a well-known video game streaming service, on Friday unexpectedly fired all of its staff and filed an alternative to bankruptcy, a status that provides companies in financial trouble a level of protection from creditors. The company does not shut down its services, but the current legal entity behind the OnLive brand will cease to exist, while another one will be created.

All Out

Earlier today a report broke through claiming that OnLive popular servicer called an all hands meeting, where they fired the entire crew and, perhaps, revealed some of their next steps. One of them is, potentially, the creation of a new company that would continue with the OnLive services. Some of the employees may regain their positions in the new company, but no additional details have been revealed at this point.

“I wanted to send a note that by the end of the day today, OnLive as an entity will no longer exist. Unfortunately, my job and everyone was included. A new company will be formed and the management of the company will be in contact with you about the current initiatives in place,” an unknown source told Mashable web-site.

Meanwhile, the staff reportedly started to blame chief executive of OnLive for not selling the business, like competing Gaikai video game streaming service, to a big company or a strategic investor. It could provide the funds necessary to continue enhancing the data centers needed to operate the video games streaming services. Apparently, the company had been approached with takeover offers several times, but its chief executive officer rejected the idea.

OnLive on Friday filed an assignment for the benefit of creditors, which according to U.S. law generally implies a contract whereby the insolvent entity (Assignor) transfers legal and equitable title, as well as custody and control of its property, to a third party (Assignee) in trust, to apply the proceeds of sale to the assignor's creditors in accord with priorities established by law.

Patents Work, Services Carry On

It is important to point out that OnLive reportedly holds a number of patents covering cloud-distributed content, especially in 3D graphics, a portfolio that may become tremendously important these days. Without any doubts, the investors will continue to capitalize on them even if the service itself becomes unviable. It looks like this is not the case, though. The services will remain operational as the new company takes everything over.

"Let me be clear. We are not going out of business," said Brian Jaquet, OnLive’s director of corporate communications.

Tags: OnLive