Update #3: After much back and forth and confusion, OnLive has officially announced a sale to an as-of-yet-unknown third party, as a part of which “a large perecentage” of the current staff will be purportedly staying on. Details on how this affect service were given in this company statement:

We can now confirm that the assets of OnLive, Inc. have been acquired into a newly-formed company and is backed by substantial funding, and which will continue to operate the OnLive Game and Desktop services, as well as support all of OnLive’s apps and devices, as well as game, productivity and enterprise partnerships. The new company is hiring a large percentage of OnLive, Inc.’s staff across all departments and plans to continue to hire substantially more people, including additional OnLive employees. All previously announced products and services, including those in the works, will continue and there is no expected interruption of any OnLive services.

We apologize that we were unable to comment on this transaction until it completed, and were limited to reporting on news related to OnLive’s businesses. Now that the transaction is complete, we are able to make this statement.

Update #2: Sources close to TechCrunch are stating that OnLive has been purchased by an unknown third-party, and has reduced staff by at least 50% in an alleged attempt to reduce employee equity to nearly zero. It’s  also been reported that no former employees were offered any sort of severance pay. Our hearts go out to those affected.

Update: It looks like employees are exiting the OnLive offices, boxes in tow.

Original Story: Reports are cropping up all over that OnLive, one of the biggest names in cloud gaming, is going out of business. The first hints of turmoil came from veteran game developer Brian Fargo, who tweeted out that he’s been on the receiving end of emails from employees about the company’s collapse. Polygon has received similar emails from alleged employees, leading many to think the writing is on the walls.

The emails also mentioned the formation of a new company in place of OnLive, and that certain games would remain available on the service. If you’re wondering what, precisely, that means, you’re far from alone. No additional details were provided, so all we can really do is speculate about what this new company would be. 

OnLive Director of Corporate Communications Brian Jaquet has issued a response to the allegations of the company going out of business:

“We don’t respond to rumors, but of course not. The exciting news is that the first VIZIO Co-Stars (Google TV stream players) with the OnLive app built-in have just arrived in customer homes, and our second of three ‘Indie Giveaway Weekends’ is going on now. OnLive users can get a free copy of the award-winning games Space Pirates and Zombies and SpaceChem.”

It bears repeating that all of this is speculative, and the chance remains that either nothing is wrong or OnLive is going through some massive layoffs. We’ll be sure to update this story as events unfold.