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Video game console maker Ouya is in negotiations to sell itself, possibly to Razer

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.

The Ouya video game console launched in 2012.Photo by Josh Miller/CNET

Ouya, the startup video game console that became a darling of the independent development world, is in negotiations to sell itself.

The company is in talks with Razer, the computer and accessories maker popular with gamers. The deal is not yet finalized, a person familiar with the matter has said, but the companies are discussing ways to bring Ouya's staff onboard.

The possible sale marks a dramatic turn for Ouya, a once-high flying startup, whose video game console and app store were popular with small developers. While the company and its service will likely continue to run under Razer's ownership, Ouya's efforts to sell itself underscores the challenges of competing in the video game industry, which is fueled primarily by blockbuster games bought by often finicky customers.

In many ways Ouya came to the market too early. In the three years since its debut, Internet-connected TV boxes have become a popular hobby of Silicon Valley, which has introduced devices like Google's Android TV software and Chromecast streaming media stick, Amazon's Fire TV and Roku, which has sold 10 million units since going on sale in 2008. Apple's set-top box, called Apple TV, has sold 25 million units since it went on sale in 2007.

While these devices have begun to take pride of place in people's living rooms, they haven't matched the success of Microsoft's Xbox, Sony's PlayStation or Nintendo's Wii. Part of the reason, analysts say, is a lack of entertainment apps, particularly games.

That's where Ouya came in.

The company announced its namesake video game console on the crowdfunding site Kickstarter in 2012, promising to bring the ease of making games for smartphones and tablets to the big screen. It was supposed to be an even bigger screen replacement for playing mobile games on a tablet, which lack a controller and connection to a television. Ouya hoped its cube-shape console would change that by delivering a product powered by the same high-end components that drive tablets along with a customized version of Google's Android software.

Ouya CEO Julie Uhrman has held leadership roles at gaming site IGN and rental service GameFly. Her enthusiastic pitch of "an inexpensive game console, for gamers" drew 64,000 people to pledge $8.6 million on Kickstarter, making it among the most successful crowdfunding campaigns ever. The Ouya eventually went on sale for $99 apiece.

Ouya raised $15 million in funding in early 2013 from investors including Kleiner Perkins Caufield & Byers, Mayfield Fund, Shasta Ventures, chipmaker Nvidia and Occam Partners. The company also raised a reported $10 million from Chinese e-commerce giant Alibaba.

Several high-profile games launched on Ouya, including TowerFall, a fighting title created by small development studio Matt Makes Games. Ouya also expanded its efforts by offering access to its app store on other devices, such as the competing video game console by Mad Catz Interactive, the gaming tablet Wikipad, and a line of set-top boxes and "smart" televisions by Chinese device maker Xiaomi.

Still, that wasn't enough. In April, Fortune reported Ouya was putting itself up for sale.

A move to Razer could provide a boost in investment for Ouya's platform and its devices. The company hasn't been able to compete with Roku or Apple in terms of advertising, limiting its reach and awareness among customers. Ouya's app store software could also be added to Razer's own set-top box.

Razer, based in Carlsbad, Calif., is best known for manufacturing high-end PCs and accessories designed for gaming. But the company has ambitions beyond that too. The company's Razer Edge gaming tablet, which melded a slim Windows PC with controller buttons and joysticks on its side, won awards at the Consumer Electronics Show in 2013.

Razer has also announced plans to offer a virtual reality headset, called OSVR, which the company has said will be set apart by offering customers the ability to manipulate its software. The company has set agreements with a wide range of game companies for the device, including Valve, whose software is helping to power the high-profile Vive VR headset, which is set to be released later this year.

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