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Companies searching for ways to tap into the growing online gaming business have a radical new approach: Give the product away for free.
Online games are adding millions of new players each year, but business models haven't adapted to accommodate the new playing population. People still have to purchase the game, and then pay a monthly fee -- usually about $10.
However, casual gamers wary of shelling out monthly subscription fees are the driving force behind this growth, according to an economic study completed by the Entertainment Software Association, the video game industry trade group. Casual gamer numbers are expected to reach 55 million by 2004, up from 39 million in 2000.
The changing population is forcing companies to rethink their business strategies.
Nexon's Shattered Galaxy, for instance, is now available as a free download from the company's website, and for the first three months, players won't be required to pay anything to play. While nonpaying players won't have access to certain features, they will have free rein if they just want to hack and slash.
"Right now we're looking to grow," said Nexon marketing manager Paul Philleo. "To do that, we need to attract gamers who wouldn't have tried this before."
Some companies, though, believe the best way to attract players is to build social activities around the games.
San Diego's ESports Arena hoped the rise of professional gaming leagues and the increased cooperation between Hollywood and game developers would jump-start a new techie arcade industry.
The company tested a state-of-the-art LAN center that was built inside a movie theater. It was to be a gaming mecca, with 100 computers, a huge screen and four-person battle stations. Players wouldn't have to purchase the games they played. Instead, they'd pay for time on the computer networks.
Revenue would come from walk-in traffic, professional gaming television broadcasts and gala release parties, said vice president of marketing Sheri Ascencio. But game publishers never got behind the idea, which made it impossible to stock the arena with the most popular online games.
"To generate sales, the industry needs to work together," said Ascencio. "We realized that wasn't going to happen. The publishers haven't figured out exactly how they want to deal with these game centers."
Now, the executives are shopping their idea to potential buyers.
Where ESports Arena failed, CompUSA has flourished. The retailer built 20 game fixx centers in locations around the country. Now, thousands of players flock to the retail outlet each weekend to compete in local tournaments.
The idea began with CEO Scott Valencia and his game fixx team launching a 96-city video game tournament tour.
Vendors picked up the $500,000 prize tab, which helped game fixx break even. The traveling tournaments proved so popular, CompUSA invested in 20 permanent LAN centers.
Excited by the possibility of bringing in young technophiles, Valencia partnered with World Cyber Games and the Cyberathlete Professional League, volunteering his new space for qualifying events. In 2003, game fixx ran tournaments for 23,000 gamers over 15 weeks. Next year, it plans to host 30 weeks of tournaments.
"When you bring in the kids, you bring in the parents," Valencia said. "That's when the corporate office goes, 'Wow, this makes a lot of sense.'"
Still, the cheapest way to grow online gaming may be by catering to the competitive nature of the home audience.
Microsoft, which runs its Xlive online service for Xbox console users, will launch XSN Sports this month. The service lets sports fanatics play against human opponents whenever they want.
While it will work only with games like NFL Fever 2004, Microsoft sports games studio manager Kevin Brown believes players will gravitate to the service because it keeps track of statistics and allows friends to form independent leagues.
"People want to play against other people," said Brown. "We want to break through that barrier of single-player games and structure this so that we can build a brand."
XSN will debut as a free service, but eventually will become fee-based.
Still, it's that try-before-you-buy model -- whether at retail outlets or in the comfort of the home -- that is so enticing for new players, said Philleo.
Shattered Galaxy has a population only in the thousands, Philleo said. That is far less than Star Wars Galaxies and EverQuest, which each have more than 200,000 players. Yet the company believes it can generate real revenues by giving its product away.
"With the new business model, we want players to get involved with the community," he said. "If they like it, they can only go so far unless they start paying. We're not trying to operate like Asheron's Call or Ultima Online. We're going for a new, niche audience."
