The next battleground for video games: cyberspace.
The three dominant game console makers -- Sony Corp., Nintendo Co and newcomer Microsoft Corp -- all plan to launch online services this year, allowing players around the planet to wage virtual war or slay digital dragons together through their television sets.
Connecting to the Internet is about more than just fun and games, though. With a high-speed connection to consumers' homes, console makers could someday use their machines to sell all sorts of products and services.
Along the way, game consoles are poised to grow up from high-tech toys into entertainment centers that augment or replace DVD players, stereos -- and even home computers to some extent.
"All of these companies, especially Sony and Microsoft ... are thinking about game consoles as someday being an entry point for a broader array of services," said Joe Laszlo, an analyst with technology researcher Jupiter Media Metrix. "But I don't think that any company has quite figured out exactly what those broader services can be."
For starters, it will be games. This week at the annual Electronic Entertainment Expo, the yearly coming-out party for new video games and gadgets, the Big Three are taking the wraps off their online gaming strategies.
-- Microsoft, with its Internet-ready Xbox, is the most ambitious, planning to spent US$2 billion to launch a new Internet game service called Xbox Live this fall. For an annual fee of about US$50, Xbox Live subscribers will be able to download games and play others online.
-- Sony, which dominates the console games market, plans to begin selling a US$40 Internet adapter for its PlayStation 2 in August. Users will be able to connect to the Internet through any online service, high-speed or dial-up, to challenge competitors or download games -- some for free.
-- Nintendo is the least enthusiastic of the three about the Internet, instead focusing on its best-selling games and its hot GameCube and GameBoy Advance machines. But it plans to start selling a US$35 Internet adapter for GameCube this fall, and has announced one multi-player Internet game for it.
On the surface, the push into online gaming would seem to be a no-brainer for the console crowd.
Among PC users, online games are already extremely popular. Some involve thousands of players around the world, who shell out millions of dollars in subscription fees to be virtual wizards or commanders of roving armies. Others simply go online to play bingo.
Last year, consumers spent more on video games -- about US$9.4 billion -- than they did going to the movies. Console games led the way, accounting for about 70 percent of all game sales. And while personal computer sales are flat, sales of consoles are growing at double-digit rates.
As high-speed broadband Internet access expands, online gaming is expected to flourish as well. Research firm Gartner G2 predicted in November that by the year 2005, console game users will spent an average of US$157 a year on services, a total of US$2.3 billion.
Though Gartner G2 is backing off its forecasts some in light of slower than expected console sales and broadband growth in recent months, "online gaming has quite a bit of appeal," said Gartner analyst P.J. McNealy.
Some note that the Internet's appeal has been over-hyped before, and selling online services to console gamers won't be easy.
Just ask executives at Sega of America Inc. Two years ago, Sega spent more than US$100 million to launch an online gaming service for its Dreamcast console, It flopped miserably. Recently, Sega announced it is getting out of the console business altogether and will refocus solely on developing and selling games for other companies' machines.
"People have been talking about this for over 10 years now," said David Cole, president of DFC Intelligence, a gaming industry research firm. While the announcements at the gaming conference in Los Angeles are significant, he said, they're only a small step into what for now at least is a pretty small market.
"There's going to be a fairly slow build, a lot of experimentation before this really reaches a lot of people," Cole said.
According to a recent survey of console game players by Jupiter Media Metrix, online services rank low on players' priorities.
Only about 10 percent said online capabilities were an important factor in choosing a game system. About 30 percent said the ability to play DVDs was important, while 46 percent said the lowest price was most important.
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