The Shipley, England-based company said Monday it has integrated Sega's game technology into its digital video recorder to give its customers access to scores of games with 3D graphics, digital sound and video.
The move comes amid reports that Sega plans to stop making its Dreamcast as a standalone game console. A Sega representative told CNET News.com last week that Sega would add its Dreamcast technology to set-top boxes.
Pace's decision is also its latest effort to broaden the appeal of interactive television to consumers.
Interactive TV reached a zenith of marketing hype in the early 1990s, but lost some of its luster as industry focus shifted to interactive game consoles. Sega's Dreamcast has a modem for accessing the Net. Sony's PlayStation 2 and Microsoft's upcoming Xbox plan to offer Internet access.
Pace said its business partners, such as cable and satellite operators, will be able to bring in revenue from the gaming service through pay-per-play or pay-for-time models. A hard drive integrated into the set-top box acts like a jukebox, also allowing people to wirelessly download games to a portable, handheld device.
No further details were immediately available.
The market for interactive-TV services is expected to generate as much as $9 billion in e-commerce and subscription revenues by 2004. Television-based online advertising is anticipated to account for $3.2 billion in the next five years, according to Forrester Research.
Last year, Pace signed a deal with Time Warner Cable, which ordered 750,000 set-top boxes built to its specifications to provide interactive services such as e-mail, online shopping and an electronic channel guide.
News.com's Ian Fried contributed to this report.