BT announced today that it has entered into a partnership with OnLive Inc. The deal will mean that BT will be the official and exclusive supplier of the game streaming service when it launches in the UK, thus stealing a march on rivals Virgin Media who currently have the biggest cable broadband network in the UK. BT plan to bundle the onLive services with their own broadband packages.

The company also cemented it's commitment to onLive by taking a 2.6 percent stake in the cloud based gaming company. BT will announce further details later in the year, however it is quite likely that the service will end up being integrated into BT's on-demand TV service 'BT Vision' in some form or another.

Gavin Patterson, CEO of BT Retail welcomed the partnership and said: "Entertainment is going to be at the heart of what we offer customers in the future. The partnership with OnLive complements our existing BT Vision service. It's great for our customers - they'll have access to a huge catalogue of games, available instantly on their TV or PC without expensive hardware. And it's great for BT - it will enhance our premium broadband position and we'll be entering into a market that's worth more than £2billion."

As previously discussed, onLive is a potentially market changing gaming platform that will provide gamers with a new way of buying and playing video games. Instead of downloading or installing content to their PCs or Macs, onLive allows players to stream game content in real time over the Internet. It has the potential to change the distribution model of games forever.

All game content is processed in onLive's data centres before being packaged up and streamed out to the user via proprietary video streaming technologies developed by onLive over the past seven years. onLive say that the proprietary compression algorithms used for streaming game content will give the player lag free gaming providing they live within 1000 miles of a data centre and that their broadband connection is a sufficient speed. This concept of playing and distributing game content is hotly contested by many who are sceptical that the service can work.

Despite this onLive has gone through a successful beta period says the company and is all set to launch in the US this summer for $14.99 per month, sans game purchases.

The beauty of onLive is that it will have a catalogue of games from many of the worlds best known publishers and will allow gameplay on virtually any platform be it PC, Mac, Linux or via a TV. Since games aren't processed on any local machine the user doesn't need expensive hardware to run the games they wish to play. The other great thing with this concept is that all the games can be played as the developer intended; with all graphics settings maxed out.

onLive CEO, Steve Perlman had the following to say about the BT, onLive partnership: "The UK market is extremely important to OnLive and our videogame publishing partners as we expand into Europe. We view BT as the ideal UK partner. As gamers are moving increasingly to online game distribution, OnLive delivers video games as a pure form of online media, playable instantly on almost any video-capable device attached to the internet. The implications are nothing short of transformative to video games and in time, all interactive media. OnLive is delighted to be pioneering this revolutionary technology in the UK together with BT".