Intel Capital, a subsidiary of the chip giant Intel, and Limelight Networks, the CDN specialist, have invested in on-demand games operator Gaikai. Details of the transaction were not revealed. Intel and Limelight join Rustic Canyon Partners, Benchmark Capital and Triplepoint Capital as investors in the firm. Gaikai raised $10m in May 2010 following an earlier investment of $5m from Benchmark. Gaikai plans to roll out the first commercial deployments of its technology by the end of 2010. Following Onlive's recent commercial launch in the US, a host of competitors are rushing to deploy their services into an expectant marketplace. Fundraising, technology and distribution deals have proliferated as the sector puts the finishing touches on a series of cloud-based, on-demand gaming service infrastructures. Currently the focus is overwhelmingly on the North American market however we expect to see multiple Western European deployments by the end of 2011. Screen Digest is sizing and forecasting this emerging sector and will release findings to Games Intelligence over the next few months.
Already we are seeing some distinct strategies as competitors vie to prove the commercial viability of their respective models. Onlive is focussing on providing a core gaming experience to the consumer while Gaikai is focussing on a B2B product strategy, enabling games publishers and retailers to use games streaming for online sales generation. Transgaming has tied its colours to Intel's mast and is targeting cable TV customers with an on-demand service through Intel's Atom powered STBs.
Gaikai and competitors Onlive and Transgaming's fundraising strategies belie one of the nascent on-demand gaming industry's key dynamics: that operators need a lot of capital to develop and build their technologies and networks before seeing a penny in revenue. The operators have sought to reduce capex levels by partnering with technology providers who can offer hardware or distribution capabilities alongside cash investments which would otherwise represent significant burdens on scarce capital:
- Gaikai has received investments from Triplepoint Capital and now Intel and Limelight: Triplepoint brings short term hardware financing expertise which will enable Gaikai to scale up service capacity quickly by adding additional server hardware for its cloud based streaming service. Intel provides the processors which underpin Gaikai's server technology as well as SSDs which offer data centre performance benefits over HDDs. Limelight provides a truly international fibre network that underpins its CDN along with the potential for managing and optimising traffic on that network. At E3 Gaikai highlighted Limelight's CDN as instrumental to its plans to roll the service out globally: the operator listed EU, US, Kr, Cn and Australia and New Zealand as markets in which Limelight's CDN would enable it to participate.
- Onlive has given BT and Belgacom equity in exchange for distributing Onlive's service across their respective IPTV networks as well as ensuring their networks can offer the speeds and quality of service needed for the games streaming service to operate effectively. Onlive claims that partnering with BT and Belgacom gives the company effective coverage of Western Europe which the operator is prioritising for a 2011 launch. European gamers will also be able to use Onlive via the open Internet meaning the service is not restricted to customers of BT and Belgacom's IPTV services. Onlive has previously raised capital from AT&T Media Holdings (AT&T subsidised Onlive's monthly subscription charge for US gamers, listed at $15 per month, such that the first year is free from monthly charges for early subscribers with the option of a second year for $4.95 a month). Warner Bros is also an investor and provided the new Harry Potter title to Onlive customers at the same time it was released into physical retail.
- Transgaming, which is focussed on providing on-demand gaming to Intel Atom powered STBs, has received an investment from Intel Capital and is reliant on distribution through cable operators deploying Intel Atom powered STBs. Hence Intel has skin in the game through two deals with on-demand operators: Gaikai and Transgaming.
- Otoy is working with high-end server engineers Super Micro and chip manufacturer AMD to build and deploy its cloud-based remote streaming service. It expects to launch its "Fusion Render Cloud" platform in 2010 which will enable it to stream games, video and other graphically intensive applications to PCs.
- t5 Labs is working with IBM which is providing the hardware for its streaming service.
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