[Updated] The rumor of OnLive closing and staff lay-offs isn’t true, or is it?

Moments ago a wild rumor spread across the Twitter space about OnLive apparently closing their doors today out of nowhere and that they were laying off their entire staff. The rumor also suggested that a new company would be formed but all OnLive staff would be laid off.

While this rumor spread, the OnLive Twitter account was still in full swing doing their usual posting showing no sign of troubles over at OnLive. This all started with an alleged email from an anonymous OnLive employee that apparently went to veteran video game developer Brian Fargo stating that this was happening, at which point Brian Fargo tweeted about it. Mashable also received similar information a source close to the situation. Here is the exact email that Brian Fargo received:

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 else’s 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, including the titles that will remain on the service.

It has been an absolute pleasure working with you and I’m sure our path with cross again.

Obviously this type of sudden action make zero sense, especially when OnLive is still adding new games like Darksiders II, arriving on more tablets and TVs, onto OUYA, and clearing doing pretty good for itself. When asked directly about the rumor by Joystiq, OnLive’s Director of Corporate Communications Brian Jaquet stated “We don’t respond to rumors, but of course not”.

So is OnLive closing its doors suddenly today and laying off their entire staff before forming a new company? Highly doubtful although it does make one wonder why the employee would send that email out. This certainly makes for a bit of a humorous moment this Friday. One thing to point out though, when questioned by Forbes, the same director answered saying OnLive is “not going out of business“. This, however, doesn’t mean they are not re-branding, being acquired or laying staff off either.

We will obviously keep an eye on this as it develops. For right now, take the whole thing with a grain of salt, a big one, and just continue to enjoy OnLive because the whole thing doesn’t make any real sense.

Update 12:52pm August 17th, 2012: According to a source at OnLive who talked to Kotaku about the situation, here is what is happening. According to the source a meeting was called around 10am where the CEO Steve Perlman told staff that OnLive would be filing for ABC Bankruptcy in California. This provides them protection from creditors to a certain extend. The source went on to say that Perlman stated that, as it stands now, the company would cease to exist and that a subset of employees would be brought on to the company that is created out of the remains of OnLive.

At the same time, VG24/7 is mentioning on Twitter that lay-offs are happening except for upper management staff.

Interestingly enough, Mashable posted an update from the same director stating once again that ‘the service is not shutting down’. This type of answer again is starting to point toward the fact that something is happening at least.

Website Referenced: TheVerge

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