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RealTime IT News

Tech Firms Find Home in Online Gaming

If the announcements pouring forth this week from major video game industry players at the Electronic Entertainment Expo (E3) are any indication, online gaming is making an aggressive push to become a mainstay of popular entertainment.

The video game market is big business. It racked up $9.3 billion in revenues last year, outgunning Hollywood's box office take of $8.1 billion by a cool billion dollars. And game makers are already aiming to overtake the $14.3 billion music industry and nearly $19 billion home video industry.

Currently, online gaming is a niche of the gaming market, driven primarily by subscription-based massively multi-player online roleplaying games (MMORPGs) for PCs like Sony's EverQuest and Microsoft's Asheron's Call. EverQuest, the largest of the MMORPGs in the U.S., draws 430,000 players worldwide who not only buy the software but pay $13 a month to play in the online realm. And Korea's Lineage MMORPG has become a phenomenon, boasting 2.5 million subscribers.

Other players in the online game space simply offer an online version of a game together with the offline software in order to extend game play and make their offerings more competitive. These game makers typically absorb development costs, and the costs of maintaining servers and other network infrastructure as part of their efforts to remain competitive in the marketplace.

But game makers appear to be increasingly interested in opening up the online arena on both the wired and wireless fronts, especially as the console makers equip their boxes for online play and mobile carriers roll out 3G networks. The reason is no secret. 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.

Meanwhile, IDC projects 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 Media Metrix's numbers are nearly in-line. It calls for U.S. revenue to climb to $2.55 billion by 2006. And In-Stat/MDR said it believes wireless gaming will grow to $2.8 billion worldwide by 2006.

Butterfly and IBM
All this suggests a market opportunity for infrastructure and service providers. An example of a company that is already moving to fill such a niche is Shepherdstown, W.V.-based Butterfly.net Inc., which has teamed with IBM Corp. to create an online gaming platform built on grid computing.

Grid computing is a form of networking that harnesses unused processing cycles of all computers in a network for solving problems too intensive for any stand-alone machine. Essentially, a grid is a distributed supercomputer. Until now, it has been almost exclusively used for biomedical research (like the Human Genome Project) or other scientific computing (like weather forecasting).

Butterfly, which demonstrated its technology at E3, envisions its grid as an extensible, object oriented, distributed world system that can be hooked together and shared. Game developers would simply need to include Butterfly.net software libraries (available for free at the company's Web site) in their game software in order to allow their customers to play their games on the grid. The grid could be used for both console and PC games.

"A big [risk] for a publisher is that $3 million dollars will be put into developing a game and building out the infrastructure to support 100,000 players and only 10,000 show up," David Levine, chief executive officer of Butterfly.net, told InternetNews.com sister site ConsoleWire.com this week. "With Butterfly.net, the infrastructure is always available and accessible on-demand. When game developers can focus on crafting the design and the art, rather than engineering the server and protocol stack, the publisher's up-front execution risk has dropped dramatically. Developers can pitch publishers right off the platform that the game will be developed on. "

He added, "Game developers are typically very strong on programming graphics, but don't know a lot about moving packets around a network and coding servers."

Butterfly is currently hosting its rack-mounted Linux-based IBM eServer xSeries systems at IBM's Sterling, Va. collocation facility, but plans to partner with ISPs and game publishers to increase the breadth of its grid.

AT&T and Sony
IBM is not the only "traditional" tech company to involve itself in the space. At E3 Wednesday, AT&T , which has been hosting Sony's EverQuest in the U.S. since EverQuest's initial release in 1999, signed on to be the hosting provider for the European portion of the global expansion of Sony's game. AT&T will now host the game in its Internet Data Centers in the Netherlands and the U.K.

"Expanding our global online gaming community has been a top priority since day one," said John Smedley, chief operating officer of Sony Online Entertainment. "With more and more EverQuest gamers coming online, we needed a hosting provider that could guarantee superior performance. AT&T's rock-solid hosting infrastructure enables us to now deliver the best possible gaming experience for hundreds of thousands of players around the world."

To read about what other online gaming players are up to, please see page 2...