After a long shop-to-shop fight on the high street, games console manufacturers are looking to cyberspace as the new battleground. In the US, both Sony and Microsoft have recently announced initiatives to attract significant numbers of their existing console users online. Nintendo is expected to make a similar move early next year. Though none of the big three manufacturers has so far announced detailed roll-out strategies for the UK and Europe, the key role broadband access will play is clear. Both companies are talking to continental broadband suppliers. Console manufacturers are using broadband in a bid to gain dominance of a market that research outfit IDC reckons will be worth $21bn (£14bn) by 2003 and broadband suppliers hope online gaming will be one of their long-awaited "killer apps".
Online gaming is not a new phenomenon. "Hardcore" PC gamers have been taking part in online contests over local networks and the internet for years. For many players, online gaming is already big business. Two of the leading PC-based multiple-player online games (MPOGs), Sony's EverQuest and Electronic Arts' Ultima Online, attract around 450,000 and 275,000 users respectively, paying between £6-£8 a month. Such is the allure of online gaming - to hardcore users, at least - that in Japan, games company Square recently launched Final Fantasy 11 and managed to attract 120,000 online subscribers paying £7 a month in just three months. Rather than compete with one friend in your living room, you can now - on some of the PC games - compete against up to 80 people worldwide at the same time.
But the online PC games market is notoriously fickle, doesn't have the returns the bigger manufactures would like and attracts mainly hardcore gamers. Even though IDC suggests that a combination of faster internet connections and improving technology will take online gaming to 40 million households by 2004 - up from the 25 million who played online in 2000 - it warns that the going will not be easy. "To succeed in this competitive space, companies must formulate a profitable revenue model, ensure that gamers remain loyal and extend the reach of online games beyond the PC," says senior IDC analyst Schelley Olhava.
The first manufacturer to extend its reach was Sony. Earlier this month in the US, it launched a £30 online add-on adapter. It expects around 500,000 American PS2 fans - out of a base of 11 million users - to switch to playing online by the end of the year. Microsoft's rival strategy, Xbox Live, on the other hand, won't launch until November 15. It expects to pull in "tens of thousands" of users - out of a worldwide base of around 4 million Xboxers - by the new year. So what are their chances?
"There have been online computer games before, but not online console games, and that's the difference," says Telewest's head of games, Tom Cotter. "Look at the online PC games market and it's chaos out there. It's like the wild west - it's anonymous, unregulated and you get lots of cheating. In the online console world it's going to be a much more controlled environment where it's very safe to be online and with two of the biggest companies in the world throwing their weight behind it I think it's going to be a success."
Telewest claims it is the only broadband supplier to undertake online gaming trials with Sony in the UK. "The feedback from the game-playing experience was phenomenal. It's very difficult to explain to someone who hasn't played multi-player gaming what a step change it is, but the first thing you notice when you do play is that this is truly interactive entertainment," says Cotter.
Other broadband providers are equally confident that online console game-playing will mushroom. BT's head of games, Geraint Bungay, who expects Sony and Microsoft to launch UK services either at the end of this year or early next, predicts that the market will grow quickly. "Initially a lot of early adopters will take it up and then there will be a gradual climb as more and more people go online. If you look at the PC market, there are 4 million people in the UK right now using their PCs to play an online game but only 400,000 are hardcore gamers.
"If you look at the installed base of console users - Sony's talking about having 4m PS2s installed in the UK by Christmas, while Microsoft's looking at between 500,000 and 750,000 Xboxes - even if 10% of those decide to go online, you're looking at a massive explosion."
But given the correlation between early broadband adopters and committed console gamers, it's hardly surprising that UK and European broadband suppliers are keen to extol the virtues of online console gaming. There are others in the games industry who suggest that a broadband-only strategy is risky. 'The roll-out of broadband, particularly in the UK, has been slow and Europe is pretty poor too. Both Sony and Microsoft are making a fairly courageous move in saying that it's going to be broadband only. From a technical point of view, it's exactly the right thing to do as the experience is so much better than dial-up, but I think it's going to be difficult to get people to sign up, at least initially," says Simon Protheroe, games developer Eidos's technical director.
That said, both Microsoft and Sony are understood to have been working hard on their consumer propositions, for instance bundling consoles, subscriptions and broadband access into one easy-to-digest package. "The key for the online console market is to make that whole experience as simple as possible, so you just plug it into the TV, drop in the CD and that's it, you haven't got to cache it up or install drivers," says Protheroe.
Yet the two companies have differing strategies. Microsoft has taken the typical route of trying to own the whole infrastructure, while Sony's plan is to work with telecom companies (telcos) on a more open approach. Microsoft's strategy appeals to games publishers. "Microsoft are saying they own everything but they are also providing full service, so all we need to do is write our code to their specs and it will work," says Protheroe. But the telcos seem more inclined towards the Sony model. "As head of games for BT, I'd say we have much more opportunity to generate additional ARPU [Average Revenue Per User] working with Sony's current plan," says Bungay.
With the battle lines just being drawn up, it is too early to say who will win. "Nobody ever got rich underestimating Microsoft," says David Docherty, Telewest managing director of broadband content, but then console gaming is a numbers game and Sony is currently way out in front with an installed base of 33 million users worldwide, compared to Microsoft's 4 million. Whoever emerges victorious won't do so until after a long fight.
"It will be a war about legitimising this in popular culture," says Telewest's Cotter. "Sony faced this problem with just legitimising video games and did a fantastic job predominantly by word of mouth. This is a whole new step change in terms of gaming. We want to be ready and ensure that we are on the trajectory. It would be bonkers of us to wait for it, then try to play catch-up and I think that's what Sony and Microsoft think as well."
