Where the Net’s Your Playing Field

For years, the makers of home video game consoles have chased the elusive dream of online play--using the Internet to not only connect far-flung players but deliver a giant menu of interactive entertainment.

Going online means being able to challenge opponents from across the world, not just across the living room. It means being able to download new levels, characters, weapons, outfits, missions and arenas for existing games. And it means a regular diet of new, “episodic” games and upgrades.

The prospect of charging eager gamers for these goodies has lured numerous companies through the years into the morass of online gaming. Nintendo Co. in the mid-1980s gave Japanese owners of its 8-bit NES console the ability to trade stock and bet on horse races. Sega Corp. last year spent $100 million to launch an online game network for its ill-fated Dreamcast console. Despite these efforts, the concept of Internet-capable consoles has yet to catch on with all but a small group of dedicated players.

The latest to fall under the online spell are Microsoft Corp. and Sony Corp., both of which announced ambitious efforts to take their new consoles online. Even Nintendo is taking another crack, albeit more cautiously.

The short-term potential looks bleak. Online revenue for consoles in the United States is expected to be a puny $620,000 this year, rising to just $3 million in 2002, according to an upcoming report from Jupiter Media Metrix. Online revenue from PC games, meanwhile, is expected to reach $350 million this year and $550 million next year, said Billy Pidgeon, analyst and author of the Jupiter report.

So why bother? The answer, said Jason Bell, senior vice president for creative development at French game publisher Infogrames, is simply that hope springs eternal. Console firms see big money in being a portal for digital entertainment. “It’ll be a cable channel model,” Bell said. “Publishers will develop content that they will sell to Sony or Microsoft, which will provide all the back-end support such as customer support, online infrastructure. Microsoft and Sony will be the equivalent of a television network.”

In the meantime, what can gamers expect in the next two years? Here’s a look at the strategies shaping up for each console.

Xbox

Of all the console manufacturers, Microsoft is in the deepest.

Its Xbox console, expected to ship Nov. 15, will have a built-in Ethernet adapter and an 8-gigabyte hard drive, giving it an enormous technical advantage over other consoles.

Microsoft is betting on broadband, even though fewer than 10million households have high-speed Internet connections, according to Forrester Research in Cambridge, Mass. The company line is that dial-up connections cause lags and delays that make “twitch” games problematic. The hard drive also speeds up action by caching data and taking the load off the central processing unit.

A showcase Xbox title will be “Unreal Tournament,” a classic shooter to be released next year by Infogrames. Gamers will be able to frag opponents over the Internet and communicate by talking into headsets. Microsoft and other console companies believe that players can be most effectively lured online by the social pull of playing against another person.

Another universal dictum is that getting online has to be seamless and simple. Ideally, once the console is hooked up to a broadband connection, the gamer pops in a disc and is automatically online.

To make this happen, Microsoft is devoting more engineers to creating an online environment than to making the box itself, said J Allard, Microsoft’s general manager for the Xbox. Microsoft also has 100 servers to test more than 20 online games being developed by other game companies. “We’re making a huge investment,” Allard said.

To pay for that investment, Microsoft is expected to charge players a monthly subscription fee for the service. Although a price has not been settled on, Microsoft’s internal market research has shown that many consumers are willing to pay as much as $10 a month, on top of any fees to get high-speed Internet access.

Microsoft also is said to be in talks with Square Co. to bring “Final Fantasy XI” to the Xbox, according to company sources, but those discussions are complicated by the fact that rival Sony recently purchased a 19% stake in Square.

Another glitch might be Square’s strategy to develop a platform called “Play Online” for millions of “Final Fantasy” fans, regardless of whether they are playing on the Xbox, PlayStation 2 or PC. This runs contrary to Microsoft’s aim of creating a tightly controlled environment for Xbox players only. The idea is not only to prevent PC viruses from infecting consoles and to keep hackers at bay but also to cultivate Xbox online as an exclusive games channel for delivering future content, be it games, music or other forms of digital entertainment.

“Microsoft is clearly the most aggressive of the three in this space,” said P.J. McNealy, senior analyst with Gartner Group Inc. in San Jose. “And they think this is going to be a big enough advantage for them that it will drive console sales.”

PlayStation 2

Sony has been relatively silent on its online plans since issuing a spate of announcements at the Electronic Entertainment Expo, an industry convention held in May.

At the time, Sony said it had pulled together a cadre of companies, from Real Networks and AOL/Time Warner to Cisco Systems Inc. and Macromedia Inc. Sony also said it plans to ship a modem and a 40-GB hard disk drive to plug into the PS2.

The relationship with Real Networks is likely to make available the company’s audio and video compression technology, potentially letting Sony pipe in not just games but also Sony’s--and perhaps AOL/Time Warner’s--vast library of music and movies.

In the short term, it will be just games. Sony’s first online title is “Tony Hawk Pro Skater 3,” released this week by Activision Inc. As with “Unreal,” the lure is the ability to connect online with other players. Eventually, Activision plans to publish additional levels, skate parks and characters for gamers to download.

For now, “Tony Hawk’s” sole online feature will be multi-player gaming, mostly because there’s no hard drive for players to store additional content. Sony doesn’t plan to sell a hard drive in the U.S. until sometime next year.

This is Sony’s Achilles’ heel in the online race. The PS2, unlike the Xbox, has no built-in hard drive or modem. Consumers must shell out additional money, close to $150, to buy the equipment. Console players have traditionally been loath to buy extra gizmos. That hasn’t stopped Sony, which is working with Square to bring “Final Fantasy XI” to the PS2. It’s also thinking about bringing “EverQuest,” a popular PC role-playing game run by Sony Online Entertainment, to the PS2, according to Sony sources.

GameCube

Nintendo Co.’s GameCube, in stores Nov. 18, will not have a modem or a hard drive. That doesn’t mean Nintendo has no online plans for its console. The Japanese company is actively investigating the possibilities and has kept its options open. The GameCube has three ports, one of which is a high-speed serial connector capable of housing a snap-on modem. The other two are generic parallel ports for peripherals such as a hard drive and a keyboard.

“It’s a major initiative for us,” said Jim Merrick, Nintendo’s U.S. director of technology. “We all see the potential of online games, but we don’t like to talk about it until we have something to show.”

Chances are Nintendo will have something to show next year. Shigeru Miyamoto, creator of “Mario” games, has said the GameCube will go online next year, and the company is working with Sega to bring its popular role-playing game “Phantasy Star Online” to the console.

Nintendo has reason to be cautious. Because its core audience skews more toward younger consumers, it has to worry more about security and privacy issues. Younger consumers also have less disposable income and no credit card with which to pay for online services. “When kids go online, it opens up a whole can of worms,” Merrick said. “Nintendo currently has a position of trust in the home. We’d like to maintain that trust.”

Dreamcast

Although the Dreamcast is no longer in production, there are still more than 175,000 Dreamcast gamers who pay Sega about $10 every three months to play “Phantasy Star Online.” An additional 300,000 play a free version.

“Phantasy Star Online” was built to be played over both high-speed and dial-up connections and does not require a hard drive, making it adaptable to most platforms. Sega plans to bring the title to GameCube, Xbox and the PC next year.

One of the hard lessons Sega learned in the last two years of running its online game service is that free trial periods don’t work.

“Consumers have to pay from the very beginning,” said Steve Ackrich, vice president of development for Infogrames, whose “Unreal Tournament” made its online console debut on the Dreamcast. “The minute something is free, people expect that it’s always going to be free.”

But until there are enough people to charge, many game publishers don’t see the point in spending vast amounts to develop elaborate online features. Instead, they’re concentrating first on multi-player capabilities to give their games a competitive edge at stores.

“Ultimately, it’s not going to be about this” generation of consoles, said Bobby Kotick, chief executive of Activision. “It will be the next cycle that will translate into meaningful opportunities. Until then, there’s just going to be a lot of good learning in the next two to three years.”

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Alex Pham covers video games. She can be reached at alex.pham@latimes.com.