Aliso Viejo start-up Gaikai Inc. has struck another deal with an industry leader as it seeks to shake up the video gaming market.
South Korea-based Samsung Electron-ics Co. Ltd. will use Gaikai’s cloud-based streaming technology to deliver games directly to consumers through its smart televisions via an Internet connection. That means no downloads, consoles, extra hardware or trips to the store—benefits that Gaikai frequently touts when comparing its business model to others in the industry.
“This has never been done before,” Gaikai Chief Executive David Perry said.
Gaikai unveiled the partnership with Samsung this month at the Electronics Entertainment Expo at the Los Angeles Convention Center, the gaming industry’s largest and most influential show.
The company first introduced the technology earlier this year at the International Consumer Electronics Show in Las Vegas.
It joined South Korea-based LG Electronics Co., the world’s second largest TV maker behind Samsung, to demonstrate the popular Street Fighter game on its smart TVs.
Perry and cofounder Rui Pereira started Gaikai in 2008 with a goal of forging links with the top companies in the video development, retail, consumer electronics and social media sectors—all keys to the video gaming market.
Gaikai got its first major deal in 2010 with Redwood City-based Electronic Arts Inc., which makes the popular Madden NFL and Tiger Woods franchises.
Last year it signed an agreement with Bentonville, Ark.-based Wal-Mart Stores Inc. to stream video games on walmart.com’s Gamecenter, where visitors can test games and buy them, get previews and preorder hot titles.
Then came a deal with Bruno-based YouTube LLC to deliver a demo of EA Sports’ Fifi 2012 game through its website. The demo instanly went viral.
Gaikai in April launched a Facebook app that delivers high-quality games directly to consumers through the Menlo Park-based social networking site.
“As a company we chose to try to always start with the biggest companies and work our way down from there,” Perry said.
Pivotal Time
Samsung is the world’s largest consumer electronics company and TV maker with $143.1 billion in sales last year.
It enters the video game world at a pivotal time, with sales of traditional console games falling as adoption of social networking and apps zooms in the gaming market.
The trend has become evident in such hits as Finland-based Rovio Entertainment Ltd.’s Angry Birds franchise and San Francisco-based Zynga Inc.’s CityVille, Mafia Wars and Words with Friends titles. Those games are played without a console by using desktop or laptop computer, tablet or smart phone.
The shift toward games accessed through the cloud is playing out as the industry’s three biggest players—Sony Corp., Nintendo Co. and Microsoft Corp.—are set to introduce new generations of consoles.
The changeover on consoles could clear the field for new entrants such as Samsung or LG to break into the gaming market by streaming games through their TVs, according to Perry.
“Their timing is perfect,” he said.
Gaikai and Samsung will begin beta tests for streaming services in the coming weeks after garnering a few thousands gamers.
The tests are expected to last until the end of the year, according to Perry.
It took months for Gaikai engineers to configure every gaming system’s controllers with smart TVs and then ensure those TVs could communicate with the controllers.
“Samsung and LG both decided to bet their gaming strategy on the cloud using our technology,” Perry said.
The string of recent deals mark a significant shift for Gaikai as it moves beyond research and development.
The 4G push by wireless network operators such as Verizon, AT&T and Sprint Nextel is helping the cause by making high-gigabit games playable on tablets and laptops.
Gaikai aims to make money on every minute a game is played, similar to the model used by wireless network operators or Amazon.com Inc., which sends its customers a monthly bill for data usage.
“We want to be paid for network time,” Perry said.
Servers
Gaikai is aiming to establish servers around the world to provide quick service to users.
The Samsung deal calls for users to ultimately buy storage capacity to play the games via an app and become part of its master network.
Gaikai raised $30 million last year to push the rollout of its interactive cloud network.
It also has a financing deal with Menlo Park-based TriplePoint Capital, which funded server expansion for Facebook and YouTube.
Gaikai counts more than 40 game makers as clients and has started to bring in revenue, but Perry declined to provide any specifics.
Future
Perry said the future of gaming doesn’t include consoles, hard copy games or other equipment.
He’s been in the industry for 30 years, developed games for Hollywood studios, held executive positions at Acclaim Games Inc. in Beverly Hills and founded Shiny Entertainment Inc., a Newport Beach-based game developer that was acquired for $47 million in 2006 by Infogrames Entertainment SA, a French holding company that later changed the name of its U.S. subsidiary to Atari Inc.
Perry points to cloud companies such as Gatos-based Netflix Inc., Spotify Ltd., the London-based digital music service, and the incredibly popular Facebook game Farmville to make his point.
“Who has a copy of Farmville? And there are literally hundreds of millions of people playing the game,” Perry said. “The cloud is that on steroids.”
