Israeli tech poised to bring streaming games to US homes

GameFly, the biggest video game rental service in the US, is moving into the streaming business – and it’s using Israeli video streaming experts Playcast to accomplish that. On Tuesday, GameFly announced it was acquiring Playcast. According to industry sources, the deal is worth about $30 million.

And GameFly is putting its Israeli acquisition to work right away. The US company announced Tuesday that it was starting a new streaming game service, called GameFly Streaming. The service will be available exclusively for now on Amazon Fire TV, the streaming broadcast media service run by the Internet retail giant.

Amazon TV is just the beginning, according to industry sources. With GameFly Streaming, Playcast will bring its technology to a large group of active game players who regularly rent games and devices to play them on.

Located in many malls in the US, GameFly has been said to be planning its move from retail consumer-facing rentals of games and equipment into streaming for a long time – but was stymied by the technological challenges. Unlike streamed TV shows and movies (such as those on Amazon TV or Netflix), games cannot be streamed with compression; game players who want an experience similar to the one they can get on their high resolution PlayStations, Xboxes, and other devices, wouldn’t stand for it.

Both Sony and Microsoft offer streaming game services as well, but their devices have to be hooked up to TVs for the games to work – and they both have a larger selection than the 35 games GameFly is offering on Amazon TV to start. According to industry sources, GameFly has something else in mind entirely – and intends to expand its services to other devices that do not require high-end consoles, meaning that they will be able to build a much larger audience for their offerings.

Caesarea-based Playcast, in business since 2007, takes commercial console games – like Sega’s Sonic Generations, the latest offspring of Sonic the Hedgehog – that are usually played on a console, and streams them to other devices, like televisions. Using Playcast’s software and servers, players are able to interact with games using a mouse or gamepad connected to the TV’s USB port.

In a recent deal with Samsung, for example, Playcast provided about 70 games to buyers of Samsung Smart TVs.

“With Playcast, we can provide our customers with the convenience and instant gratification of playing popular video games directly from their Samsung Smart TV,” said Young Chan Kim, vice president, Samsung Electronics. “Playcast’s technology enables Samsung to get the best out of its screen, utilizing Playcast’s powerful cloud presence worldwide.”

Israel has become a world center of gaming technology, according to Oded Sharon, a top Israeli game developer, CEO of Corbomite Games and the Adventure Mob game development firms. “Some of the biggest games are made by companies that got their start in Israel, and over the past few years the industry here has grown significantly.”

Sharon is the former head of the Israel chapter of the International Game Developers Association (IGDA).

There are hundreds of gaming development firms in Israel, many of them at the top of their niches – such as TabTale, which has had its titles downloaded over half a billion times in the past five years, KidOz, which provides content for kids’ tablets and was preloaded on 1.5 million devices last year, and Funtactix, publisher of top games with movie tie-ins, like those for The Hunger Games and Mission: Impossible.

In addition, Israeli start-ups invented the concept of “social gaming” – the casino-style games played by hundreds of millions of people a day on social networking sites like Facebook. Over the past several years, Las Vegas-based gambling giants Caesar’s Interactive Entertainment (CIE), the online gambling division of Caesar’s Entertainment, and Bally Technologies, the R&D arm of the world’s biggest casino equipment maker, have been snapping up the Israeli firms that created the top titles in on-line social gaming, in which users get the rush of gambling without putting up real money. Also acquired this year, by Imperus Technologies of Canada, was Israeli social game maker Diwip.

Between them, Playtika, DragonPlay, and Diwip consistently hold on a regular basis at least half of the top slots on Facebook’s list of most popular online games. Although players don’t put any bets down, social gaming is a multi-billion dollar business worldwide – in the US alone in 2012, it generated $1.9 billion in revenues – and Israeli firms are the engine keeping the industry going.

According to GameFly, nearly 80 percent of Americans now have access to high speed broadband, a majority of households have internet enabled TVs, and by 2017 there will be more than 200 million total streaming equipped devices in households – meaning that, for the first time, the infrastructure is in place to support streaming video games, the company said.

And Playcast’s technology will be a major factor in streaming’s growth, said Michael Moritz, chairman of Sequoia Capital and GameFly Director. “The $25 billion video game industry is undergoing major disruption and consumers have expressed strong interest in streaming games, much as they do with TV and movies. GameFly’s introduction of its new streaming video game service should help accelerate the growth of this market considerably.”

“We’re excited to offer the GameFly streaming service worldwide with Playcast’s market ready and scalable technology,” said David Hodess, CEO of GameFly. “This represents the perfect evolution of GameFly by extending its mission of providing the highest quality video games available to gamers however they want to play. We are also very pleased to launch on Amazon Fire TV and make the service available to US consumers.”

Playcast’s Israeli shareholders include Jerusalem Venture Partners, Mer Group and Xenia. Gadi Tirosh from JVP and Bret Maxwell from MK Capital will join the GameFly Board of Directors.

“GameFly is the perfect company to join forces with and bring our game streaming technology to gamers around the world,” said Gadi Tirosh, managing partner at JVP and a Playcast director. “They are the leaders in video game subscription services and bring an established brand, strong publisher relationships and financial resources.”