Indrema, which hoped to carve a niche in the lucrative video game industry with a console based on the Linux operating system, announced Wednesday that it is going out of business. John Gildred, founder and chief executive of the startup, said the company ran out of money and was unable to secure additional financing in a capital market that has grown hostile to Linux-related business. "It's just a terrible capital market to work in now, and it happens to come at the worst possible time for us," Gildred said. Indrema originally expected to have its L600 console on the market in the second quarter of this year. Gildred said Indrema -- which employed just under 50 people at its peak -- laid off most of its staff last week. Indrema had staked out an Olympian challenge, hoping to skirt established video game giants Sony and Nintendo and the looming threat of Microsoft's Xbox with a strategy that borrowed heavily from the open source software movement. The Indrema console was to use commonly available software, including the Linux operating system, and would have imposed no royalty fees on game creators, encouraging hundreds of small developers to write titles for the console. Heavy royalty fees and expensive development kits ensure that only large, well-funded companies can create titles for established consoles such as Sony's PlayStation2. "We really intended to avoid direct competition with Microsoft by taking a grassroots position, by empowering game players to become game developers," Gildred said. "But we couldn't get that across to investors. The assumption was that no matter what we did, we were going to be positioned against Sony and Microsoft." Cahners In-Stat Group analyst Gerry Kaufhold said Indrema had a worthy plan, especially as Microsoft's entry into console gaming is likely to hurt the market for PC games. With some luck, he said, Indrema's console -- rather than the PC -- could have become the format of choice for small companies that develop games. But there's no way to get around the tremendous investment required to get into the console hardware business. "You need really deep pockets. You really need enough money to be able to stay in business for three years," Kaufhold said. "You need to have a couple million consoles out there just to get game developers really motivated." Gildred said there were close to 200 Indrema games in development, including 30 or 40 far enough along that the company hoped to have them available when the console launched. The fate of those games and the Indrema format will likely hinge on current negotiations to sell Indrema's intellectual property. If the Indrema standards and other technology are released as open-source software, the format may live on. If not, there's always the PC. "Fortunately for the developers, it should be pretty easy to translate an Indrema game into a Linux desktop game," Gildred said. "All their work shouldn't be for naught." For complete gaming news, see GameSpot UK. Take me to the Linux Lounge Have your say instantly, and see what others have said. Click on the TalkBack button and go to the Linux lounge Let the editors know what you think in the Mailroom. And read what others have said.