OnLive, an online video gaming company, will begin streaming games over the internet within a few months after it secured substantial funding from AT&T Media Holdings and Lauder Partners,Time Warner unit Warner Bros, Autodesk and Maverick Capital.

Analysts said that if OnLive’s technology worked as promised, the service could pose a challenge to console makers Nintendo, Microsoft and Sony.

OnLive, which plans to launch its service in the United States this winter, aims to stream online games which are hosted and run on remote servers and is known in the industry as a “cloud-based” service. The company says its technology will provide on-demand, lag-free access to games — even high definition, graphic-rich titles — that can be played on any TV using a microconsole or nearly any PC.

OnLive would not reveal the sum raised but Steve Perlman, its founder and chief executive, said it was a “large investment at a large valuation,” especially for a company that is still to take a dollar of revenue.

Analysts said the inclusion of AT&T with its networking and telecommunications expertise gave OnLive a significant partner. It has also signed nine video game publishers, including Electronic Arts, Ubisoft, and Take-Two Interactive Software.

The company started testing the new service last month. Mr Perlman, a well-known Silicon Valley entrepreneur who helped launch WebTV, which Microsoft bought in 1997, said “hundreds of thousands” of people had signed up to participate in “beta” tests of the service. He said: “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.”

Sceptics have said that streaming online games will not work for most people as the broadband connections would be too slow to make the experience comparable to playing games on consoles.

OnLive has said would anyone with a 1.5Mbps connection should be able to run the service at standard definition and that 5Mbps would be required for high definition content.

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

Other companies are also looking at streaming video games: Intel recently invested in a new high definition games-on-demand service called GameTree.tv developed by TransGaming, which is due to launch in spring 2010.

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