In digital game distribution, big companies are starting to dominate the market. But Jared Kim, chief executive of WeGame, believes there is room in the market for his startup.

Today, WeGame is launching its business for distributing games via online broadband connections. These aren’t casual games for non-serious gamers. We’re talking about games that have such good graphics they take a while to download. Kim says the new business is a natural outgrowth of what WeGame already does: sharing game videos and screen shots. Hardcore gamers eat that up.

If WeGame succeeds, it will test the idea as to whether a small fish can succeed in a digital distribution market, where amassing a lot of firepower is usually the way to succeed. WeGame hopes to survive by serving gamers better than the other guys do.

WeGame is a small player in the space with just four employees, and it’s late to the party. But Kim says the company has built a reputation for paying close attention to gamers’ needs. Gamers love to record video of their exploits in multiplayer online games and take screenshots of their best moments. It ordinarily takes a lot of tech savvy and expense to set up a computer so it can do that.

But WeGame has been working on that problem since 2007. By solving that particular problem well, it has amassed an audience of 1.7 million registered users. Now it’s a simple matter of a click to begin recording a game video or screenshot. Then the assets can be automatically uploaded to sites such as YouTube or Facebook, for all of your friends to see. To date, WeGame’s client has been installed more than 1 million times on desktops. More than 2.2 million user-generated videos have been uploaded to its site, and users have posted screenshots from thousands of games.

Now WeGame will add the ability to download games. It will start with partners such as Shanda/Mochi Media and Bigpoint. Mochi Media will provide 250 browser-based games, while Bigpoint will offer four titles: Dark Orbit, Sea Fight, Deepolis, and War of Titans. Eventually, Bigpoint will add the rest of its titles. Perfect World will provide its free-to-play massively multiplayer online game, Perfect World International. Suba Games will provide two MMOs: ACE Online and Mission Against Terror. Cmune will provide UberStrike, and Trion Worlds will give out beta keys for its upcoming MMO, Rift.

By 2011, Kim says WeGame will start distributing games from more companies, including the big ones. To date, the company has raised $3.5 million from True Ventures and a group of angels: Jeff Clavier, Aydin Senkut, Ariel Poler, Naval Ravikant, and Ryan Scott. Advisors include Jameson Hsu of Mochi Media, Dennis Fong of Raptr, and Matt Mullenweg of WordPress.

Those are good friends to have. But WeGame is a tiny company among giants. Valve’s Steam has 70 percent of the hardcore digital game distribution market. Direct2Drive also has a sizable chunk and there are other rivals too. OnLive is trying to leapfrog everyone, doing away with the need to download games by streaming games from servers to users in real-time, as the games are being played.

But Kim says that the game publishers need another digital distribution source besides Steam, if only to counterbalance Valve’s growing power. While Valve takes a 20 to 30 percent fee of every game download, WeGame will take a smaller fee. WeGame will also have a social element, where users can discover the games their friends are downloading and try them out. Steam, by contrast, has very little by way of social networking. As for OnLive, Kim doesn’t think server-based games will be mainstream for a while.

If anything, Kim is feisty. He started two companies in high school and college. Raised in China, he attended the University of California at Berkeley for three months before dropping out to focus on starting a company.

“My Asian parents were furious,” Kim said. “But I told them I was saving them tuition money.”

In 2007, he started WeGame and moved into the business of providing videos and screen shots. One of the keys to doing video captures was to do it without slowing a game to a crawl. Now, WeGame hopes to serve gamers by building them a good download service, coupled with a good social network.

If you’d like to sign up for the beta, click on this link. The link is good until Dec. 31.