Israeli Playcast Merges With U.S. GameFly to Become 'Netflix of Gaming'

Together, the streaming firm and game-delivery service will be a significant player in the gaming industry; Amazon Fire TV will launch the combined service.

The Israeli startup Playcast announced Tuesday that it will merge with American firm GameFly Inc. to become a significant player in the gaming industry.

Playcast specializes in supplying games via Internet streaming, and currently operates in 55 different countries, while GameFly specializes in renting out physical games via home deliveries to customers. Together, they hope to turn GameFly into the "Netflix of gaming."

According to details of the deal, which were announced Tuesday, barely any cash will exchange hands between the parties in this stock deal. Playcast will be sold to GameFly, and, in return, the company's shareholders will receive a 33-percent stake in GameFly.

From the Israeli firm's perspective, the deal marks a positive accomplishment: its operations will expand and its product will gain more widespread distribution. In addition, not only will its research and development center, which has 35 employees, remain in Israel, it will also be expanded.

But for Playcast's shareholders, the deal is a somewhat sad exit – at least for the time being. While mainly shares will be transferred, the deal does include cash payment of a few hundred thousand dollars to purchase the stocks of the company's minority shareholders. As such, Playcast key shareholders will not yet see a return on their investment.

Some $25 million have been invested in the company since it was founded in 2007. Its Israeli investors include Jerusalem Venture Partners (JVP), Xenia Venture Capital Ltd, MK Capital and Mer Group. Playcast recently secured a deal with Samsung to have its technology installed in the firm's smart televisions. This deal is supposed to take the service to some 20-million screens around the world.

Playcast's deal with GameFly includes another benefit: the merged service will be launched by the Amazon Fire TV platform, Amazon's television streamer that competes with Apple TV.

Indeed the merger marks another significant deal for an Israeli startup.