Internet Success Is a Matter of Play for Some
Michael Tomb watched his $100,000 stock portfolio surge 55% in one month--not a bad profit for a guy who makes his living writing computer programs for chemical and drug companies.
Unfortunately for Tomb, the money isn’t real. It’s part of a new investment game called Final Bell from Sandbox Entertainment Corp. that he plays over the Internet.
What is real is the prize. The investor who makes the most money on a phantom stock portfolio by Jan. 10 will win $10,000.
“All the Internet games that caught my attention are ones that you would actually get something back by winning,” Tomb said.
That’s what companies like Phoenix-based Sandbox want to hear. Their idea is to entice players with the chance to win big prizes, then persuade advertisers to sponsor the games because of the big audience--much like the early days of TV game shows.
Still, game makers looking to match Tomb’s profit will have a long wait.
Sales in the online gaming industry are about $87 million this year, a cyberspeck in the $12.5-billion market for entertainment software and video consoles and games. The projected increase to $1.38 billion in 2000 is barely a tenth of today’s overall gaming market.
Even as a niche market, online game makers face obstacles. The biggest dilemma is hitting on a business model for making money.
Some online gaming companies are banking on sponsors. USA Today is backing Sandbox’s Final Bell. Charles Schwab & Co. Inc.’s online investment arm, e.schwab, and software maker Intuit Inc. are sponsoring similar games.
Yoyodyne Entertainment bases its games on sweepstakes.
Others rely on fees from subscribers. The hope is that as more people plug into the Internet they will discover games. Online gamers are expected to increase to 5.6 million in 2000 from 1 million today, according to Paul Kagan Associates of Carmel, Calif. The number of people going online is expected to jump to 33.7 million from 18.9 million over the same time.
“There is no easy answer here,” said Dean DeBiase, chief executive of ImagiNation Network Inc., a computer game network that America Online Inc. bought from AT&T; Corp. last summer.
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America Online, for its part, just mounted the latest obstacle to online game companies. Effective Sunday, it switched to flat-rate prices instead of charging by the hour. Many of the more than 30 games offered through AOL are set up to profit by getting a percentage of the service’s hourly fees.
“Based on the America Online pricing change, the previous business models are now irrelevant,” said Eric Goldberg, chief executive of Crossover Technologies, whose campaign simulation “President ‘96” is available through AOL until the end of the year.
Online companies meeting at a seminar in New York recently were up in arms. Some may bypass America Online and take their business straight to an Internet-access provider, Goldberg said.
Crossover Technologies plans to compensate by asking players to become local “gods and goddesses.” The players get fill-in-the-blank type software tools for creating and managing parts of the game. And the firm doesn’t have to pay an employee to do the work.
Even so, that won’t make up for the revenue companies stand to lose by the switch to less-expensive flat fees, said some game makers.
Electronic Arts plans early next year to introduce Ultima Online, a 24-hour fantasy role-playing game, produced by its Origin Systems unit. The game can be accessed directly from the Internet. The software company plans to make its money on the CD-ROM it will require players to buy.
Online games have been around since the late ‘80s, yet only recently are gaining a wider following as more people plug into the Internet.
The most popular are role-playing scenarios where a cyberworld runs around the clock and players come and go as they please. The games have chat rooms where veteran players can welcome neophytes and guide them through the games. Game makers call it social computing, and they hope it will appeal to a broader audience than that of hard-core gamers.
Authors are even putting their novels on the Internet. Tom Clancy, who wrote best sellers “Red Storm Rising” and “The Hunt for Red October,” teamed with software developer Virtus Corp. in an online game company called Red Storm Entertainment. The Cary, N.C.-based company will unveil a science fiction game and a geopolitical game next fall.
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AOL’s ImagiNation Network plans to unveil its Cyberworld amusement park next year. The 24-hour world will have about a dozen games. It will have advertising billboards, which players can bypass or click on to find out more.
“Advertising in the normal sense is the worst thing you can do,” DeBiase said. “We build sponsors in so they aren’t as threatening. They don’t flash in your face.”
The ideal model for online gaming companies is to charge by the hour, said Michael Yocco, an analyst at Paul Kagan Associates. He cited Dwango, based in Houston, as a company that has survived by charging in 10-hour increments.
“That’s the perfect model for companies to stay in business, so revenue can grow as cost grows” Yocco said. “It’s a very delicate time for the industry.”
