Online Gameplay Will Have Little Short-Term Effect on Rentals5 Dec, 2002 By: David Ward
Online console gaming appears to have gotten off to an impressive start in North America, with all three console makers reporting solid sales and even some occasional sellouts of Internet modems and accessories. But despite their potential, it will likely be years before Web-connected game systems have any significant impact on the software rental market.
Only a few weeks after it began shipping its Xbox Live Starter Kits in North America, Microsoft announced it had nearly sold all of its initial 150,000 supply and was busy resupplying the channel. In declaring that Xbox Live had become the “first subscription-based broadband service to surpass 100,000 subscribers,” the company said that, in the first week alone, users had completed more than 5 million games -- approximately 500 games per minute -- totaling more than 1 million hours of game play.
While refusing to provide exact numbers, Nintendo sources indicated it, too, has sold out of a fairly modest initial shipment of broadband and V.90 narrowband for GameCube at $34.95. Sony has been touting the early success of its PlayStation 2 online initiative, saying the company was on track to sell 500,000 PlayStation 2 Network Adapters in North America by March 31, the end of the parent company's fiscal year.
But while online play revolutionized the PC gaming industry, it is causing barely a ripple in the console business, especially with game rentals.
“I don't think it's going to have a huge impact one way or the other for us,” said Randy Webster, merchandise manager for the Vancouver-based Rogers Video chain. “We've seen really impressive growth in revenue over the last three and a half months, but that has to do with the quality of the titles and not the fact that some of these games can be played online.”
The online component may hasten the growth of the installed base for all three systems, Webster said, since it increases the perceived value of the consoles for consumers who may be on the fence about spending that kind of money, but the only short-term impact for rental retailers will be the need to be more selective about taking in games such as Sega's Phantasy Star Online, that have a huge Internet component.
“There are certain games you can only play online that we're just going to pass on,” Webster said. “It's because the rental potential is almost zero. A game such as Final Fantasy XI, when that one comes out, will be a crazy one to rent. It's such a massive game that you need to create a character profile up front so you'd just be scratching the surface by the time a week's rental was up.”
The other issue is the potential for confused and angry consumers who rent games only to find that the bulk of the game play is online. One publishing executive who requested anonymity said when his company was planning to launch a title with a significant online component, it considered a rental version but couldn't find a way to do it. “Don't forget, you've also got to pay for the account in order to get online, and we couldn't figure out a way to build that into the rental cost,” he said.
Despite the aggressive push from Microsoft, Sony and, to a lesser extent, Nintendo, there is some question within the game industry as to how long it will take before online play grows into a significant portion of the overall console market.
“I think it will be a long time before you have any significant percentage of console owners who care about going online,” said Ken Soohoo, president of Planet-Web. Soohoo was one of the early pioneers in online console gaming, providing the browser for both the Sega Saturn NetLink and Dreamcast and helping companies such as Koei include an online component to their PlayStation 2 games in Japan.
But PlanetWeb has shifted focus away from browser-based solutions and all but exited the game industry.
“The complexity is beyond the desire of most of the people the hardware makers are trying to get online,” Soohoo said of the prospects for online console play.
Independent game analyst Billy Pidgeon was a bit more optimistic, but stressed it will be a long consumer education process.
“I think you're going to have to wait for the next generation of machines,” he said. “This generation is simply preparing the consumer for what's ahead.”
For chains with customers looking to rent games to play online with their friends, Webster suggested focusing more on racing and other “arcade style” games, but said these games tend to be stronger renters anyway. “There are just some games that have so much rental potential, regardless of whether they're played offline or online,” he said.