Oct. 1--OnLive, a new service that hopes to shake up the video game industry by streaming console-quality games over the Internet, is preparing to launch.

This week, the company closed a new round of funding, bringing AT&T on board as a key investor. Earlier this month, it quietly started inviting gamers to test out its service. And over the summer, the Palo Alto company opened up the service to outside game developers.

OnLive still hasn't said exactly when its subscription-based service will launch or how much it will cost, but CEO Steve Perlman said it will be up and running sometime "this winter." By some measures, OnLive is ahead of expectations, he said, noting that the number of gamers testing the service

is greater than the number of people the company expected to sign up in its first year.

"We now have the means to go and create a bigger offering in the first year than we expected," he said. "It's an exciting time for us."

Many game services -- such as Xbox Live, Steam or the iPhone's application store -- typically require consumers to download whole games to their device. With those services, consumers not only need sufficient space to store the games on their device, but also must have enough processing power to run the game.

Other online services stream relatively simple games, usually built around Adobe's Flash technology.

In contrast, OnLive's service will be built around computer server centers, which

will do most of the heavy processing for the games. OnLive says consumers will be able to play them on modestly powerful PCs and on their living room TVs via an inexpensive set-top box. Also, because the service is built to be online, OnLive plans to offer multiplayer games and the ability to watch games that others are playing.

Such features have a lot of appeal to gamers. "Hundreds of thousands" of them are already testing out the service, according to Perlman. And buzz is building among other gamers who haven't tried it yet.

"That's something I'd definitely check out," said Jesse Nunez, 37, a Lomita resident who describes himself as a lifelong gamer.

If OnLive's service works as described, it could upset the game industry. It would be a blow to retailers such as GameStop, because it cuts them out of the loop.

OnLive also could affect traditional console makers. When Sony and Microsoft released their latest consoles, they initially cost more than $300. The next generation of consoles are likely to be much more expensive, Perlman has predicted.