OnLive, an online video gaming company, will begin streaming games over the internet within a few months after it secured substantial funding.

Analysts said that if OnLive’s tech­nology worked as promised, the service could pose a challenge to console makers Nintendo, Microsoft and Sony.

OnLive, which plans to launch its service in the United States this win­ter, aims to stream online games which are hosted and run on remote servers. This is known in the indus­try as a “cloud-based” service.

Generally, players have games software installed on the hard drive of their personal computer or on a games console.

The company says its technology will provide on-demand, lag-free access to games - even high defini­tion, graphic-rich titles - that can be played on any TV using a micro­console or nearly any personal com­puter.

The service potentially under­mines the business of console mak­ers, high-end graphics chip makers and video game retailers.

Its latest round of funding was backed by AT&T Media Holdings and Lauder Partners.

Time Warner unit Warner Bros., Autodesk and Maverick Capital, which were earlier investors, also participated in the new round of capital raising.

OnLive would not reveal the sum raised but Steve Perlman, its found­er and chief executive, said it was a large investment at a large valua­tion, especially for a company that is still to take a dollar of revenue.

The company, based in Palo Alto, California, has raised $16.5 million in previous funding.

The capital will pay for OnLive to install and run data centres to handle user demand around the US. It expects to use five data centres on launch day.

Analysts said the inclusion of AT&T with its networking and telecommunications expertise gave OnLive a significant partner. It has also signed nine video game publish­ers, including Electronic Arts,Ubisoft,and Take-Two Interactive Software. The company started test­ing the new service last month. Mr. Perlman, a well-known Silicon Val­ley entrepreneur who helped launch WebTV, which Microsoft bought in 1997, said “hundreds of thousands of people had signed up to partici­pate in beta tests of the service.”

He said: “Our projections have changed. Our projections originally for the first year were less than the number of people that have so far signed up for beta So I guess we underestimated.”

Sceptics have said that streaming online games will not work for most people as the broadband connec­tions would be too slow to make the experience comparable to playing games on consoles.

OnLive has said  anyone with a 1.5Mbps connection should be able to run the service at stand­ard definition.

It said 5Mbps would be required for high definition content.

The company has declined to say how much OnLive will charge users, who will pay on a subscription basis.

Other companies are also looking at streaming video games.

Intel recently invested in a new high definition games-on-demand service called GameTree.tv devel­oped by TransGaming, which is due to launch in spring 2010.

— Mike Harvey San Francisco

Courtesy The Times