Online Gaming to Spur Standardization?

With online gaming poised to take off, there are indications that game logic may migrate from the edge device to the server in a revolution that would make ISPs essential players in the game market.

by Thor Olavsrud of internetnews.com [December 2, 2002]

A broad shift to online gaming in the $9.4 billion video game industry—widely forecast now that the big three console makers have enabled their machines for online play—is likely to create pressure to standardize technologies, possibly leading to a new layer on the Internet dedicated to gaming, according to experts.

That, in turn, could lead to a wide-ranging alteration in the complexion of major media and entertainment concerns, advertising companies, ISPs, Regional Bell Operating Companies (RBOCs), and telecom equipment makers.

"Long-term, there's a real consensus that massively multiplayer online games (MMOGs) are going to be like TV, and you need a real dedicated infrastructure," said David Levine, chief executive officer of Butterfly.net, a company which is attempting to leverage grid computing technology for gaming.

The overall video game market is already big business. It racked up $9.4 billion in revenues last year, outgunning Hollywood's box office take of $8.1 billion by a cool billion dollars. According to research firm InStat/MDR, console games accounted for nearly $7.4 billion in revenue in 2001. While the online segment is still nascent, London-based audio/visual media research firm Screen Digest predicts online game revenues will be more than $1 billion by 2006.

Currently, the best-known online game in the U.S. is Sony's EverQuest, a subscription-based massively multiplayer online roleplaying game that draws 430,000 players worldwide who not only buy the software but pay $13 a month to play in the online realm. South Korea-based NCsoft produces Lineage, an MMOG that boasts more than 4 million subscribers across South Korea, Taiwan, Hong Kong, Japan, and the U.S.

Meanwhile, IDC has projected that online gaming will grow nearly 50 percent each year for the next few years, with U.S. revenue climbing from $210 million last year to $1.8 billion in 2005. Jupiter Research forecasts similar bounty in this market, projecting that U.S. revenue will climb to $2.55 billion by 2006. In-Stat/MDR said it believes wireless gaming will grow to $2.8 billion worldwide by 2006.

According to the Internet Digital Software Association (IDSA), 31 percent of game players say they play games online. That's up from 24 percent last year and 18 percent in 1999. Also, 37 percent of Americans who own consoles or computers said they also play games on mobile devices like handheld systems, PDAs and cell phones.

As big as television?
Teens already spend more time on video games than watching television, according to Beth Larson, vice president of marketing for game publisher Electronic Arts. Larson noted that 11.1 billion minutes are spent playing online games monthly—more time than is spent on e-mail—and the most popular online games boast nightly audiences that rival those of popular cable television shows.

"These people are choosing interactive media over mainstream media," she said.

That fact, Larson said, has big advertisers, which have traditionally turned to television to reach their customers, worried and looking for new ways to reach out through the interactive entertainment space. The creators of mainstream content are also striving to leverage the medium.

"At a high level, the major media and entertainment conglomerates have realized that they're not leveraging their creative assets online, and that massively multiplayer subscription games are the answer," Levine said. "They've had bad experiences with game development and publishing in the past, but the online industry is getting too big and too important to ignore. They're starting to look at how to shift the attention of 10 million people from a TV show into an online game for the hour after the show ends. They're looking at how to turn a $300 million movie into $300 million of monthly revenue. They're starting to figure out how to have people really interact with TV shows through their game consoles. Everyone is suddenly realizing that MMOGs are the next big thing. Records then radio then movies then TV, now games. TV wasn't taken seriously by Hollywood for a long time. Now it's our central form of entertainment. Games are next. When the money starts flowing into the industry, all hell will break loose. We're at the point where we haven't invented the dolly shot, or the pan, or the slow fade, much less sound."

Levine said Butterfly.net has already been contacted by media titans like AOL Time Warner and Disney, both of which are searching for ways into online subscription gaming on PCs, consoles, set-top boxes, and mobiles as a way to extend their properties. But he said they feel stymied in their efforts by a lack of technology standardization. "They can't decide what a "platform" is anymore." They question whether they should develop their properties for PCs, one or more consoles, or mobiles.

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