September 30, 2009 / 4:46 AM / in 8 years

OnLive secures more funding, sees strong interest

SAN FRANCISCO (Reuters) - OnLive, the “cloud-based” service that is aiming to change the way consumers play video games, announced on Tuesday a new round of financing and said interest from potential users has exceeded expectations.

<p>A visitor plays the video game Red Steel 2 during the Electronic Entertainment Expo or E3 in Los Angeles June 3, 2009. The convention runs June 2-4. REUTERS/Mario Anzuoni</p>

OnLive’s Series C funding round included AT&T Media Holdings Inc and Lauder Partners.

Time Warner unit Warner Bros, Autodesk and Maverick Capital, who were earlier investors, also participated in the new round.

Although OnLive declined to say how large the funding round was, founder and Chief Executive Steve Perlman said it was a “large investment at a large valuation,” especially for a company that is still to take a dollar of revenue.

OnLive, which was under stealth development for seven years, was formally unveiled last spring and shook up the gaming industry. Analysts said that if the technology works as promised, the service could pose a challenge to console makers Nintendo, Microsoft and Sony.

OnLive, which is still aiming to launch this winter, plans to deliver games run on servers in the cloud, rather than locally on a PC or a console. It has signed on nine video game publishers, including Electronic Arts, Ubisoft, and Take-Two Interactive Software.

The company says its technology will provide on-demand, lag-free access to games -- even graphically rich titles such as “Crysis” -- that can be played on any TV and nearly any personal computer.

OnLive is installing servers daily and is now utilizing three data centers to handle user demand. It expects to use five data centers around the country on launch day.

Earlier this month the company opened the service to outside testing and “hundreds of thousands” of people signed up to participate, said Perlman, a well-known Silicon Valley entrepreneur who helped launch WebTV, which Microsoft bought in 1997.

He said the huge response by beta testers has caused the company to rethink its expectations.

“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.”

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

Reporting by Gabriel Madway; Editing by Tim Dobbyn

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