Game makers plot online strategy

Online gaming is still seen as a risky business, but Japanese software developers are positioning themselves for a battle over the next frontier.

Analysts say online games, which let players compete over the Internet, could hold the key to the long-term success of game makers.

"We are talking about incremental revenues, subscription-based business and very stable revenue streams for a company that is engaged in a hit-or-miss business,'' said Jay Defibaugh, an analyst at Credit Suisse First Boston.

Game publishers are expected to keep ringing up profits, at least for a few years, from brisk sales of traditional software as the three mega console makers--Sony, Nintendo and Microsoft--wage price wars and spur demand for hardware as well as software.

The longer-term prospects for game publishers appear less rosy than they would like, however. The costs of developing software titles are rising, for example, as consoles have become highly advanced, armed with powerful chips that offer faster games and dazzling graphics

Nomura Research Institute has estimated the online game market in Japan alone will grow nearly eight times to more than $2.2 billion in 2006 from $285 million in 2001. With console systems all hooking up to the Web, growth of the online game market is expected to accelerate.

Sony has begun selling network adapters and has started its online gaming experiment. Nintendo, which had been the most wary about online gaming among the three, plans to release a similar device this fall. Microsoft, the most aggressive of the three, will start a trial run this fall for its online game service, Xbox Live.

News source: C|Net