Despite its low price and free-to-try system, the Ouya fails to reach its potential as a disruptive alternative platform.
The company, whose app store was pitched as the go-to place for small and independent developers, is negotiating for employees to remain with the company after the sale.
Hundreds of Ouya games could soon be available on Xiaomi's streaming boxes and smart TVs.
The deal marks the latest agreement in its "Ouya Everywhere" effort, helping the company expand beyond the TV.
The Kickstarter-born micro console company is vying to get more gamers on its platform with a 12-month pass to its entire library.
Both software and hardware sales in the US retail market plummeted last month.
Nintendo's move to Android seemed like a longshot from the start. Nintendo has long controlled all facets of its products, and there's been no indication it'll change its stance now.
Ouya's shift from game-console hardware freed it up to target a wider range of TV-connected devices. But it may have jumped from the frying pan into the Fire TV.
A new Ouya console has been launched, boasting a matte black finish, twice the flash memory and a few other small tweaks.
The company that brings Blizzard's online games to China is now aiming to bring its own games to the Western market, backed by its billionaire chairman.