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…
Sprint and Sega
Sprint , too, is getting into the act, though on the wireless front. On Monday, Sprint unveiled a strategic alliance
with Sega Mobile, a division of Sega.com Inc., which will bring many of Sega’s popular console game titles to the Sprint 3G Network
this summer as full-color mobile games.
“The Sprint Third Generation Network enables the transformation of mobile games from the text-based experience of today to a
graphic, full-color experience of console-brand games available through Sprint on its 3G-enabled PCS phones,” said Chip Novick, vice
president of consumer marketing for Sprint’s PCS division.
The alliance will begin with the hit Sega title Monkey Ball, and Sprint said it plans to allow its customers to choose from a host
of additional Sega games, including titles like Pengo, Flicky, Puyo Puyo and Baku Baku Animal. For its part, Sega Mobile said it
plans to continually update its game line-up and round out its repertoire by publishing new titles in a variety of genres, such as
puzzles and sports.
“More than 400,000 mobile phone users in Japan currently enjoy wireless gaming from Sega Mobile of Japan, and gaming is consistently
ranked among the top three services for wireless users,” said Ryoichi Shiratsuchi, chief executive officer of Sega Mobile, CEO of
Sega.com and general manager of Sega of Japan, Network Division. “The customer demand is evident. To take advantage of these
markets, we are aggressively pursuing partnerships with leading wireless access providers such as Sprint.”
Sega refocuses
But that’s not the only area where Sega is making an aggressive push. The company conceded the console market to Sony in late 2001,
discontinuing production of its Dreamcast (the first console to provide for online play). But while it left the hardware side of the
business to Sony, Nintendo and console newcomer Microsoft , it remains a leading game publisher. On Tuesday, its
Sega.com division underscored its intentions to become one of the industry’s premiere infrastructure providers when it unveiled the
Sega Network Application Package (SNAP), a set of products and services for videogame developers looking to move their games into
the multi-platform, online realm.
Sega said SNAP provides game developers with an “end-to-end, affordable solution to the expensive prospect of bringing games to the
Net across multiple platforms with different sets of rules.” The company said SNAP is customizable to a developer’s needs from
middleware and hosting to customer service and quality assurance. It plans to sell SNAP through Value-Added Resellers (VARs), as
well as directly.
“Having built the first online console gaming network including support for dozens of first party and third party games via
infrastructure solutions, toolsets and customer service, we are poised to lead the next wave of console developers online,”
Shiratsuchi said. “By sharing our hard-won experience with developers and console-makers alike, we will help bring higher quality
games to consumers faster, more efficiently and at a lower cost.”
The SNAP features include:
- Custom Transport, a component that allows for quick and flexible communications
- Community Building Tools, for matchmaking, secure online identity, text and voice chat, player directories, ladders,
tournaments, and rankings - Scalable Servers, components which allow for both small and large capacities, with simple transitions between them
- Resource Management, offering a view of network status and usage on the server-side, and configuration management — including
automatic updating and patching — on the client side - Security, with advanced encryption and a global authentication system
- Connection Management, a built-in prioritization and stream management system which allows voice and game data to coexist while
mitigating the effects of latency.
Microsoft goes Live
Microsoft, not to be outdone, announced a $2 billion commitment to bring Xbox Live — an Xbox-dedicated, broadband-only online game
service — to its customers in North America, Japan and Europe by this fall.
The company said it is building four data centers — in Seattle and Tukwila, Wash., as well as Tokyo and London — to run the
service, to which customers will be able to subscribe for a year through the purchase of a $49.95 starter kit. Subscribers will
still have to bring their own broadband connections.
Additionally, the company said it will assist publishers by managing the hosting, networking, security and billing.
“Online technology is the next revolution in video games, and it will fundamentally transform gaming into a new form of social
entertainment,” said J Allard, general manager of Xbox at Microsoft. “Together with our partners, we will combine exceptional gaming
experiences, a world-class service, and a viable business model so all parts of the online ecosystem thrive.”
He added, “We built Xbox Live to allow game creators to focus purely on making the next great games. As the artists create, Xbox
Live will do the heavy lifting where cross-game services, technology, customer service and billing are concerned.
The Xbox Live service will feature:
- Gamertag, a unique online ID for all games across the service
- Friends list, a feature that will allow gamers to find friends online and invite them to a game
- Xbox Communicator, integrated voice communication that allows for voice interaction with teammates and opponents, and also
features voice masking, global muting and parental control - Matchmaking, which allows players to enter games and find opponents based on similar skill levels
- High-speed downloads to the Xbox hard disk.
Sony and Nintendo
Sony and Nintendo have also outline online strategies for their respective Playstation 2 and GameCube boxes, but
neither has taken steps as aggressive as Microsoft. The companies will both offer peripherals for their consoles that will allow for
either broadband or dial-up Internet access. Instead of providing their own gaming networks, the companies will rely on game
publishers to shoulder development costs and maintain servers and other infrastructure. This could also create more of an opening
for game-dedicated infrastructure providers like Butterfly and Sega to carve out markets.
Nintendo only unveiled its plans with regard to online gaming earlier this month, but Sony has been moving in the direction nearly
since the launch of its Playstation 2 console two years ago. At last year’s E3, Sony cut deals with both AOL and RealNetworks, both Microsoft
rivals, to drive the creation of additional features for an online Playstation 2. The deals provided the console with AOL-branded
instant messaging, chat, e-mail and a Netscape browser, as well as an embedded RealPlayer 8 and other RealNetworks client
technologies.
