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Online Games Making Inroads

13 Jul, 2004 By: John Gaudiosi

Online games are finally starting to reach the mass market, according to a new report from DFC Intelligence, “Online Game Market 2004.”

Tens of millions of users are logging on to services like Yahoo Games, MSN Zone, AOL Games and Pogo, which can have as many as 150,000 to 200,000 simultaneous players each. For many services, more than 50 percent of their users are adult females, a demographic that has historically shunned traditional box video games.

Casual and moderate gamers are expected to grow from 65 percent in 2003 to 73 percent of online game usage by 2009, according to the report. About 62 percent of online game revenue in 2009 is forecasted to come from casual and moderate gamers. By 2009, the report forecasts console online games will account for only 17 percent of usage, but 30 percent of online game revenue.

Traditional video gamers are also slowly starting to gravitate to online gaming. Microsoft's Xbox Live may be used by less than 10 percent of Xbox owners (1 million subscribers worldwide), but David Cole, president, DFC Intelligence, said it is clearly a sign of the future. Xbox Live is the leading example of where console systems are going with online games. Microsoft plans to have 150 Xbox Live-enabled games by the end of this year, and Sony plans to have 100 titles.

“We think that online games will be a significant part of the console experience right out of the box for the new systems [PS3, Xbox Next],” Cole said. “We think that about 50 percent of initial owners will go online, with that figure dropping toward 33 percent as the systems start to penetrate the mass market. This compares with well under 10 percent today.”

Sony, which offers free online gaming, in May announced it is getting 100,000 new online players per month on top of the more than 3 million Network Adaptor-enabled PlayStation 2s in the market space. All new PS2s now come with a Network Adaptor bundle for $149, which should increase the number of online gamers. Cole believes Sony will eventually look at doing a more controlled service environment along the lines of what Microsoft is doing with the Xbox Live. He also believes console makers will place a big emphasis on downloadable and episodic content.

New online-enabled video game consoles are also entering the market space, but Cole doesn't believe the Phantom Game Service and DISCover game systems are designed to appeal beyond a subset of existing users. “I don't think they will attract non-gamers,” Cole said. “Phantom has a compelling business model that definitely has potential. However, it's all in the execution, so we will have to wait and see.”

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