CNET

OnLive, one of the most promising video game startups in the industry, is shutting down.

The Mountain View, Calif., company, which offered gamers a groundbreaking new way to play games over the Internet, announced Thursday that it's selling its patents to Sony. OnLive's service will be shut down after April 30.

"Following the termination of the company's services and related products, OnLive will engage in an orderly wind-down of the company and cease operations," OnLive wrote in a statement. Sony confirmed the deal, saying the purchase opens "great opportunities for our gamers, and gives Sony a formidable patent portfolio." Terms of the deal were not disclosed.

The sale brings to an end one of the more ambitious new video game technology startups. Founded more than a decade ago by Apple and Microsoft alum Steve Perlman, OnLive was built to offer customers a way to play visually sophisticated video games without having to own expensive computing hardware. The way it worked was through a technology called "cloud gaming," where gaming programs would run on powerful computers in a server, and the images would be broadcast over the Internet to a gamer playing on a tablet or computer, much in the same way Netflix streams videos to television sets.

But OnLive struggled. Two years after its high-profile launch in 2010, high costs and anemic marketing forced the company to enter a form of bankruptcy, during which OnLive laid off much of its staff and effectively sold itself to investor Lauder Partners. The company relaunched, offering streaming technology for gamers who used Valve Corp.'s Steam online store, but otherwise it appeared to scale back its ambitions.

In 2012, OnLive said it counted 1.75 million active users, some of whom paid $9.99 per month to access its game library of 250 titles on devices ranging from TVs and PCs to smartphones and tablets. OnLive also at one point sold access to newer titles outright at prices similar to retail.

One of the biggest challenges for game-streaming technology has been convincing players to pay for it. Only 2 percent of gamers had spent money on cloud gaming technology by last June, according to a survey from research firm IDC. Only about 13 percent of gamers said they were even interested in spending money on it.

OnLive wasn't the only company offering streaming technology. Nvidia, which is best known for making microprocessing chips for PCs, offers a game-streaming service for PCs and set-top boxes called GRID.

But perhaps the biggest company offering this technology is Sony. The Japanese tech giant built a streaming service for its PlayStation family of gaming devices using technology it bought in 2012 from a company called Gaikai for $380 million. The PlayStation Now streaming service, as it's now known, launched in January.

But Sony faces similar problems to OnLive: cost and lack of interest from gamers. Currently, PlayStation Now allows for the streaming of only about 100 older games. The company has also priced its service higher than OnLive's, at $20 a month or $45 for three months. Sony has declined to say how many gamers have signed up for its service.

Though it does offer the ability to rent games on a title-by-title basis, Sony has been criticized for offering unrealistic prices as high as $5 for four hours or $30 for a 90-day play period. Sony says publishers and developers decide what rental durations are offered.

What's unclear is whether Sony can succeed where OnLive appears to have failed. In its statement, Sony said its continued investment "is yet another proof point that demonstrates our commitment to changing the way gamers experience the world of PlayStation."