Why did OnLive implode over a week ago? It simply wasn't making any money. Although the service had attracted millions of users, very few actually bothered to buy content on the service. At most, there were 1600 concurrent users at any given time, making OnLive's thousands of servers a money-burning waste.
As a service, OnLive had many hurdles to overcome. In addition to steep bandwidth requirements, it simply didn't offer a very attractive library. And some former employees blame former CEO Steve Perlman for scaring off potential partners.
While the service managed to land a few high-profile games, it was missing support from heavy-hitters like Electronic Arts, Activision, Bethesda, and Valve. It's true that two of these companies have rival services (Origin and Steam), but partnerships with these publishers were possible, according to comments made to The Verge.
For example, EA was ready to be a day-one partner. Both Mass Effect 2 and Dragon Age: Origins were ready to launch on the service. However, when Perlman found out that EA had also made an agreement with rival streaming company Gaikai, "he went ballistic." EA's games were pulled from OnLive's library before they could even launch--an odd move, considering Gaikai didn't offer full games via the web.
The Witcher 2 is another example of a game that was being readied for OnLive, until Perlman "shot down" the game for having an agreement for a Gaikai-powered web demo. According to the report, "Perlman also allegedly scared Valve off with a broad pitch when the company merely wanted to test the waters, and a source told us that negotiations with Bethesda failed because OnLive simply wasn't willing or able to pay a fee to offset the onboarding costs of their games."
In light of Perlman's hostile attitude, perhaps it's unsurprising that the newly revived company no longer has Perlman as CEO. In a press release, the company said Perlman is "departing to work on his myriad of other projects." In his stead is Charlie Jablonski, the former head of OnLive operations, whose goal will be to "execute against longer-term projects with our breakthrough technology."