Home Video Game Industry at Odds Over Online Future
The three rival video game console makers exhibiting at the Electronic Entertainment Expo this week were at odds over how popular online gaming will be and, more importantly, when it will turn profitable.
So far the success of interactive gaming has been limited to a handful of computer-based games, including a few fantasy worlds with a cult following, such as Everquest. The discontinued Dreamcast console attracted a following for its role-playing game Phantasy Star Online, but for the rest of the industry Internet gaming remains largely unexplored.
Sony Corp., the market-share leader with its PlayStation series, envisions its consoles becoming all-in-one consumer entertainment systems, complete with the ability to play movies, music and browse the Web. Sony said it would start selling add-ons in the fall to equip its nearly year-old PlayStation 2 console, with both an accessory to access the Internet and a 40 gigabyte hard drive.
Microsoft Corp.'s Xbox, the new entrant to the console war, is gambling that players will want a Web connection ready from the start. The $299 console, scheduled for launch in the United States on Nov. 8, comes Internet-ready.
"We've designed Xbox to be a great online platform out of the box," said Robbie Bach, the top executive in charge of Microsoft's Xbox and gaming division. "We don't think it makes sense for you to have to go out and buy a lot of components."
Both Sony and Microsoft will have online games ready for the fall.
In contrast, Nintendo Co. Ltd. has prepared its GameCube console to use the Internet through a separate device, yet says it has no immediate plans to take advantage of online gaming. The GameCube's U.S. launch is scheduled for Nov. 5.
"The key is going to be whoever can find that wonderful idea and gets it out there. We're all going to applaud them, and then we'll go out there and do it much better," Nintendo Executive Vice President Peter Main said.
ONLINE VIDEO GAMES
One of the leaders in online gaming and No. 1 independent video game publisher, Electronic Arts Inc. (ERTS), has invested millions in setting up its online division EA.com. EA President and Chief Operating Officer John Riccitiello reiterated the company's commitment to online gaming and its practice of charging players a monthly fee for its more sophisticated games.
"There is a business here," he said in an interview. "The question is getting good enough content to make (gamers) stay and play."
He likened the willingness to pay for quality content in games to the way the hit show "The Sopranos" has spurred viewers to subscribe to HBO. The company's online mystery title "Majestic" has already attracted TV studios interested in basing shows on the game, which pulls players into an intricate web of clues through Internet sites, instant messaging and voice mail.
Also in the works are online games based on the PC games "The Sims," the Harry Potter novels, in addition to a Tiger Woods golf, Nascar racing and basketball games.
EA has taken risks in staking as much as it has on an extensive Internet game strategy: Its EA.com division is not expected to post a profit until the spring or summer of 2002.
The roll-out of the Majestic title has also been delayed until this summer, several months later than scheduled, in order to fix glitches in unraveling the mystery.
Another pioneer in online gaming is Sega Corp., which launched several games playable over narrowband, or a dial-up modem, for its discontinued Dreamcast.
According to Sega spokesman Charles Bellfield, the company has succeeded in selling games that have compelling online play options. He said 15 percent of buyers of Sega Sports NFL 2K1 took the game online, and 65 percent of users of medieval game Phantasy Star played over the Internet.
Moreover, some 130,000 Japanese players have been paying about $10 per three months of gameplay on Phantasy Star Online, Bellfield said. Sega has yet to determine how it might charge players outside of Japan but plans to launch similar games that charge for online use for the three rival consoles.
"It's been very successful in Japan," Bellfield said. "We've proved it doesn't matter if its narrowband of broadband. It's really about evolving game play."
THE SKEPTICS
Some of EA's competitors have opted for smaller exposure to online gaming, saying it has promise, but a limited audience that won't generate substantial revenue for several years.
Although Activision publishes the popular online action Quake series and has adapted its Tony Hawk series for online play, Chief Executive Officer Bobby Kotick said in an interview Web-based gaming is still in its infancy.
"Today the only online opportunities are on the PC. Until consoles have integrated capacity, easy online access and broadband, I don't expect it to be a meaningful part of the business," Kotick said in an interview.
Likewise, French-based game maker Infogrames, Inc. (IFGM) operates the www.games.com Web site and published a Nascar racing game for Xbox that can be played over the Internet. Yet Chairman Bruno Bonnel says Internet gaming won't be profitable for several years.
"We can't guarantee we can deliver the necessary quality with the existing network and hardware," he said in an interview. "Only a half million people in the U.S. have broadband. Leave it to the others to spend a lot of money trying to capture them -- I'm not interested."
By having a Web presence and developing Internet games, Infogrames will be prepared when online gaming makes more economic sense, he said.
"We're there and we're not making money. We need to be ready, but it's not an obsession," Bonnel said.
SOURCE: Reuters Limited.
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