LOS ANGELES (Reuters) - A start-up, Butterfly.net Inc., and computing giant IBM IBM.N , have created a global network for online video games capable of supporting a million players or more that will be rented to major game publishers, the companies said on Thursday.

The "Butterfly Grid" will also be one of the first major commercial applications for IBM's concept of "grid computing," in which far-flung computers are linked using open-source software to create powerful computing networks, IBM said.

The Internet already exists as a platform for interactive games, but the costs of developing for the Web are high and games can be interrupted by glitches in Internet traffic.

Software development kits for console- and PC-games that would plug into the Butterfly Grid are available, after two years of development work on the project designed to reduce the cost for game publishers, David Levine, Butterfly's chief executive, told Reuters.

Butterfly will provide software, while IBM will provide the actual operating hardware for the grid under a three-year capacity-on-demand contract paid by the start-up, Levine said.

Game publishers will pay Butterfly a cut of the fees they collect for online gaming, he said.

"Butterfly.net ... has essentially built a platform for building massively multiplayer games," Levine said.

Grid standards and the software to operate such grids are still emerging, and IBM said the Butterfly deal was a validation of the concept.

"As a game developer, you lower costs of development," Scott Penberthy, the vice president of business development for IBM Global Services, told Reuters.

Currently, most massively-multiplayer online games can support multiple users in the hundreds of thousands, but Penberthy said accommodating millions of simultaneous users was possible if games were built correctly.

He also said those users will experience more reliability in their games and smoother game-play.

"I think what they'll see is a lot of the 'jitter' go away," Penberthy said.