With AMD investment, CiiNow wants to push cloud gaming beyond where OnLive could take it

OnLive may have stumbled as it tried to build expensive infrastructure for its own cloud gaming service. But CiiNow hopes to avoid the high costs that felled its rival by licensing cloud gaming software to game publishers and service firms that could deploy their own cloud gaming services.

To do that, CiiNow is announcing today it has received an investment from microprocessor and graphics chip maker Advanced Micro Devices. In turn, CiiNow will use AMD’s Radeon graphics chips as part of the standard solution for its cloud gaming platform. Mountain View, Calif.-based CiiNow is making the announcement at the Cloud Gaming USA conference today in Burlingame, Calif. If it succeeds, it could help revive hopes that cloud gaming will accelerate the shift from physical, disk-based games to those that are distributed over the Internet.

Much like the rest of cloud computing, cloud gaming has huge potential to disrupt the traditional game business because it allows publishers to cut out the middleman retailer and go straight to consumers, who can play high-end games on almost any device. OnLive tried to do deliver the first major cloud gaming service by creating web-connected data centers that could compute games in centralized servers and then stream video over broadband connections to users, who didn’t need powerful PCs or consoles to enjoy the AAA-quality games. But the infrastructure costs were too high, OnLive couldn’t convince publishers to give it exclusives, and consumers didn’t subscribe to the service in high enough numbers. So OnLive ran out of money in August and had to be sold to an investor.

AMD Ventures is helping CiiNow execute on an alternative strategy, said Ron Haberman, chief executive and co-founder of CiiNow, in an interview with GamesBeat. Rather than raise a huge amount of capital to build worldwide data centers, CiiNow has created software that runs on top of data center servers and enables any kind of server configuration to deliver a cloud gaming service. Game publishers, broadband companies, game retailers, and any other company can license the CiiNow software and use it in combination with cloud computing services to deliver a cloud gaming service.

“We created a service that enables many players to enter the cloud gaming market,” Haberman said.

OnLive’s rival Gaikai built a more open platform that others could adopt, but now it has been acquired by Sony for $380 million.

“We’re even more open,” Haberman said. “If you wanted to use Gaikai to build a cloud gaming service, you had to use their infrastructure. We are different, since our customers can install our software on whatever hardware they choose.”

Haberman believes that such services will be more economical than the custom server infrastructure that OnLive tried to build. CiiNow will thus try once again to convince people that high-quality games, which are among the most technologically difficult programs to stream because they require split second interaction, can really be delivered to consumers at a relatively low cost. Like OnLive, CiiNow says it enables game streaming at 720p, which is HD quality but now quite as good as 1080p resolution. And CiiNow requires a 6-megabit per second connection, which is about the limit of DSL lines but is well within the capabilities of cable modem services.

CiiNow claims it can deliver up to eight high-definition streams per server blade, whereas OnLive was often stuck dedicating a server with a graphics card to just one user. Since the servers could cost hundreds of dollars, the $10 a month revenue (in the best case scenario) from the subscriber couldn’t offset the costs. (We don’t know the exact number of users OnLive could accommodate per server.)

“One of the big issues with cloud gaming is that no one likes to talk about costs,” Haberman said. “We are more economical because we virtualize any hardware that fits underneath our software.”

In a single server rack, CiiNow says it can accommodate 272 HD streams. With this kind of infrastructure, customers such as game publishers will have more flexibility to offer business models such as rentals, subscriptions, a la carte, or free-to-play games. CiiNow says it takes off-the-shelf games and adapts them to its software with very little work. A cloud game has to run on a central processing unit (CPU), it has to be rendered on a graphics chip, and it is delivered via a video stream. CiiNow adapts to whatever technology is installed in a server.

“CiiNOW is on the cutting-edge of online game streaming technology, and it’s clear we share the same vision to drive the cloud gaming industry forward and ultimately provide the best gaming experience,” said Manju Hegde, corporate vice president, Heterogeneous Applications and Developer Solutions at AMD. “AMD’s investment signifies our mutual drive to liberate gamers from today’s constraints and move us to the next era of digital content.”

In addition to announcing the AMD investment, CiiNow is also announcing the general availability of its software for customers, based on AMD Radeon graphics. Haberman said the company has applied for its own patents, and it isn’t worried about prior patents granted to OnLive because remote computing has been around for decades. Haberman said that CiiNow will offer turnkey systems, or a service that is very easy for customers to adopt and deploy. If it succeeds, cloud gaming will get a big shot in the arm and physical distribution of games will suffer a blow.

In an endorsement of CiiNow, former OnLive employee Christopher Donahue has joined CiiNow as vice president of marketing and publisher relations. He was previously director of games and media at OnLive, and he will now help CiiNow establish relations with game publishers. Donahue said that CiiNow represents “the future of gaming.”

Haberman started the company in 2010 with fellow founders from Alcatel Lucent. CiiNow previously raised $13 million in funding from Foundation Capital, Alcatel-Lucent and a third strategic investor. But it doesn’t need tons of money like OnLive, which raised more than $200 million. CiiNow currently has just 24 employees.

Rivals are plentiful. OnLive itself is still alive under new ownership, and Sony has Gaikai. Big Fish Games has used technology from Agawi to power its own casual games cloud service, Big Fish Unlimited. Companies such as Playcast are also offering cloud services, and Nvidia has already set up its own technology, ahead of AMD’s.

Haberman isn’t yet ready to describe customers. But he said CiiNow has completed three large trails in Europe and is in negotiations for commercial deployments. He expects launches to happen by the end of the year. There are possible customers in the U.S., Australia, and Korea. Haberman said it might six weeks to two months to get a cloud gaming service up and running from the day someone orders equipment.

He said CiiNow will enable new types of play, including better spectating and that, in the future, a player could seek help from a professional gamer, who could play together as if they were in the same room, rather than just engaging in multiplayer play via the Internet.

Haberman is optimistic about cloud gaming despite recent events. “Gaikai’s acquisition definitely validated the industry,” he said. “It was unfortunate what happened to OnLive. I was rooting for them to be more successful.”

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