Struggling video game console maker Ouya received a new injection of capital from Alibaba worth $10 million.

The Wall Street Journal reported that, according to sources familiar with the matter, Alibaba made the investment in Ouya last month. The companies have also started discussions on possibly incorporating the software of Ouya, along with its video game library of over 1,000 titles, into the set-top box of Alibaba.

The investment by Alibaba breathes new life into Ouya and could propel the video game console maker to grow in China, where the video game market is ready for expansion. Since the State Council of China recently ended the ban on video game consoles that was in place since 2000, several companies have entered the country offering cheap set-top boxes that feature inexpensive or free video games.

Ouya started as a Kickstarter campaign in 2012, and was the fastest campaign to reach $1 million raised, achieving the feat in more than eight hours. Ouya drew excitement from video game enthusiasts due to the company's $99 price for its console and its foundations on the Android operating system of Google.

Ouya raised $8.6 million from its Kickstarter campaign, allowing the company to launch its console in 2013 through outlets such as Best Buy, Target and Amazon.

However, Ouya struggled since then, as the console received poor reviews. In addition, Ouya found it difficult to penetrate the video game consoles market in the United States due to the dominance of Sony's PlayStation 4 and Microsoft's Xbox One. Ouya also faced competition from video-streaming devices such as the Fire TV of Amazon, which connect to app stores that allowed users to download games.

The cutthroat competition, along with the expensive costs associated with manufacturing hardware, has made Ouya shift its focus to licensing its video game library for other devices and for overseas manufacturers.

One of these overseas companies is apparently Alibaba, which has now made its investment in Ouya.

Alibaba, an e-commerce giant based in China, has recently gained strong footholds in the United States by making investment in startups in Silicon Valley. Last year, Alibaba made a $215 million investment in Tango, a mobile messaging company, after it also invested in Quixey, the search engine for apps, and ShopRunner, a provider for two-day shipping.

In addition, it seems that Alibaba is looking to make strategic investments in startups in the United States for entertainment and technology that could be imported to China. Last year, the company purchased for $120 million about a 10 percent stake in Kabam, a mobile video game company, for the distribution of video games through Chinese Alibaba mobile apps.

Alibaba's set-top boxes, which include the recently launched Tmall Box 2, already offer video games made by third-party developers. A partnership with Ouya will allow Alibaba to expand its video game library, which could in turn boost sales for the devices.

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