MASSIVE ACTIVITY IN MASSIVE MULTIPLAYER GAMES

If there's one game publisher that more often than not seems to know which way the wind is blowing it's Electronic Arts. The industry's biggest game creator snapped up Jamdat, the largest mobile game developer, when it became clear that cell phone games are the place to be. And, just recently, EA announced it will buy Fairfax, VA-based Mythic Entertainment, a developer of massively multiplayer online games (MMOGs), just when interest in them seems to be growing, well, massive.

In fact, so many game makers and entertainment companies have caught MMOG fever that one wonders what's causing the epidemic.

MMOG veteran Jeff Anderson, CEO of developer Turbine Inc., shrugs and calls it much ado about nothing. His Westwood, MA-based company has been creating such popular MMORPGs (massive multiplayer online role-playing games) as Microsoft's "Asheron's Call" for a dozen years now.

"If you look at the growth curve of interest in MMOGs, it's been progressing over the last 10 years," he observes. "This isn't something that's just started."

But the fact is that Turbine's forthcoming "Lord Of The Rings Online: Shadows Of Angmar" -- which is based on the writings of J.R.R. Tolkien and not the current movie franchise -- excited Chicago-based Midway Games to such a degree that it signed on to co-publish the MMOG, it's very first.

"This is a one-of-a-kind franchise that we think has the potential to pierce through all the noise being created by the dozens of other MMOGs that are coming out," says Midway CEO David Zucker. "We believe it will be a very profitable opportunity for us."

Similarly, when Activision co-founder Howard Marks decided to launch a new video game company this year, Beverly Hills, CA-based Acclaim Games, he chose to position it not as a developer of first-person shooters or of other popular game genres but as an MMOG publisher.

"I studied the Asian game market, especially in Korea , where there is this incredible excitement about online gaming," he says. "The country has 50 million people of which 12 million are known online gamers. It's my belief that, with the 30% increase each year in broadband connectivity in this country, the U.S. gaming market will follow the same path."

Indeed, MMOGs -- which are played online via broadband connections, often in giant, persistent, virtual worlds -- have generated 7.7 million subscribers in the U.S., according to PricewaterhouseCoopers. That number is expected to grow to 9.6 million by next year and 15.5 million by 2010.

"What really validated it for me is the success of 'World Of Warcraft,' an MMOG that's bringing in more money than most video game companies make with their entire portfolios."

Blizzard Entertainment's 'Warcraft' has become the world's most popular MMOG in less than two years, capturing 52.9% of the global MMOG market with 6.6 million subscribers worldwide, according to analysis by MMOGchart.com.

"Blizzard was successful in building a product that is more accessible to the mass-market than any MMOG previously," Marks explains. "It has tutorials, casual gamers can get in and find their way around easily, and that is expanding the MMOG market. As a result, people are paying $15 a month to play [after purchasing the game for approximately $35]. Think about that. That's more expensive than HBO. But you know what they get for their money? Unlimited game play ... with some people are playing 80 hours a month. The amount of entertainment per dollar is unprecedented. And you want to know why I want to get into this marketplace?"

Disney's kid-friendly "Toontown" has only captured approximately 0.9% of the MMOG market since its launch in June, 2003, but that was enough to convince rival Cartoon Network to cook up an MMOG of its own that is scheduled for release in the spring of 2008. Meanwhile Disney plans to capitalize on the success of its two "Pirates Of The Caribbean" films with still another MMOG based on the franchise.

"I wish I could go into detail about the game we're building," says Paul Condolora, senior VP and general manager for Cartoon Network New Media, "but we're still in the process of finalizing our game design document. What I can say is that our MMOG will allow our core kids audience -- the 6- to 11-year-olds -- to interact with our characters like they've never had the chance (to) before."

Condolora describes his as-yet unnamed game as a "casual MMOG" that will incorporate many of the elements that seem to have made "World Of Warcraft" so successful.

"It will be easy to get into, very accessible, and won't require the time commitment that some of the more hardcore MMOGs demand," he says.

Where once MMOs were strictly the playground of hardcore gamers -- who seemed to have all the time and money in the world to expand their online kingdoms -- today's publishers have their eye on the same growing mass market that has taken a liking to the casual games that populate cell phones and attract a wider audiences. And that means considering revenue models that may differ from the traditional subscription fees that fund games like "Warcraft."

"I fundamentally believe that in order to make MMOGs a mass-market business, the games have to be free," says Acclaim's Marks. "Google has proven that point. So you'll be able to play all of my games for free, no money down, no barriers, just download, double-click, and you're playing."

But Marks isn't running a not-for-profit organization. He has linked up with Massive Inc., which will dynamically serve advertisements into Acclaim's games.

"In addition to the ad revenue, we'll be funded by an online store where gamers can buy items through micro-transactions that they can use in the games to enhance their enjoyment," Marks adds. "I'm not talking about selling the ultimate weapon that you can whack everybody with; these are vanity-related items, like clothing that can give your characters a unique look, for example. And that's how we're going to make money, just as the Korean MMOG 'Cart Rider' has generated over $200 million of item sales in just over a year."

Marks expects that his first game, "Bots," will recover its production cost of approximately $10 million in just six months and will then start turning a profit. Just recently released, the game has signed up more than 50,000 players and Marks predicts he will have 500,000 by year-end.

"We believe the advertising-supported model is going to work," he adds. "I'm certain that consumers will understand that, if they can get a game for free, there's got to be a trade-off. Which is why, I think, they'll accept the ads in the game."

But Marks' certainty isn't shared by many of the MMOG publishers who are still wrestling with which business model will work best for them.

"While the subscription model of $15 per month works very well for many MMOG customers, that becomes a barrier for some players who can't afford a subscription or who only play a few hours each week," observes Turbine's Anderson. "Our view is that we need to reach out to more customers, not fewer, and we believe there are several possibilities that will enable companies to do this." His "Lord Of The Rings" is scheduled for release in the first quarter of 2007 which, he says, gives him plenty of time to come up with an "appropriate business model."

Meanwhile, the Cartoon Network's Condolora says he doesn't believe in a "one-model-fits-all" strategy.

"Because the Cartoon Network is in 160 countries, we are designing our game with an international audience in mind," he says. "And so, while, in this country, our business model may mirror what we're seeing in the U.S. today -- which is a subscription-based product -- outside of the U.S. we intend to tailor our business model to the dominant models in other countries. Which means our revenue may come from subscriptions here, but from micro-transactions in Asia, and some to-be-decided models in Europe and South America ."

The fact that his game is scheduled to launch in the spring of 2008 creates quite a challenge for him, notes Condolora. "We have a good sense of where the MMOG space is today, but we won't be releasing our game for another two years. What will the landscape be then?"

He suspects that over-saturation of the MMOG market could be a problem, especially if the number of MMOG releases continues at the current rate.

Michael Lafferty, senior editor at GameZone.com, who focuses on the MMOG sector, agrees.

"EA's purchase of 'Mythic' signals something big going on in the MMOG industry," he says, "and is a reflection of lots of MMOG publishing activity."

He ticks off a list of forthcoming releases, including "Archlord" from UK-based publisher Codemasters, Sony Online Entertainment's "Vanguard" and "Gods & Heroes," Flying Labs Software's "Pirates Of The Burning Seas," Atari's "Test Drive Unlimited," Funcom's "The Age Of Conan: Hyborean Adventures," Spellborn International's "The Chronicles Of Spellborn," eGames' "Legend Of Ares" and "Hero Online," and other Asian MMOs such as "Silkroad Online," "Cabal Online," "Deicide," and "Eudemons."

And then, of course, there's Electronic Arts which isn't new to the MMOG space but seems to have a renewed interest in it. The company shuttered two MMOGs due to low subscription numbers -- "Earth & Beyond" in 2004 and "Motor City Online" in 2003 -- but is still active with "Ultima Online" and "The Sims Online." Its purchase of Mythic Entertainment -- to be known as EA Mythic -- is expected to yield "Warhammer Online" next year.

EA chose not to provide a spokesperson for this report.

But Turbine's Anderson doesn't perceive the market as becoming too crowded; to the contrary, he says he welcomes the competition.

"Although there are a lot of titles on your list, some of them have barely begun development, which means we're not going to see some of them for another three years or so," he says. "In my opinion, given the size of the MMOG audience, we're actually seeing a paucity of titles in development, which is a reflection of how time-consuming and costly MMOGs are to develop. Besides, many of these titles are targeting different demographics, which reduces the pressure even more."

Regardless, Anderson believes that "the market will take care of itself. MMOGs are at a tipping point right now. Too many of them are still using outdated designs and approaches. We need fresh thinking that will move the industry away from the current crop of titles into the next generation of online gaming. That's something I truly welcome."