INTERACTIVE MEDIA & MARKETING;GAMING CHALLENGES THE 'NET;$4.5B IN STANDALONE VIDEOGAME SYSTEMS VS. ONLINE COMPETITORS

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Robert Rice, 24-year-old developer of Internet games, believes he's found the true definition of the overused phrase "killer app."

As VP-business development for Arckosian Entertainment in Raleigh, N.C., he's helping develop "the first real-time 3-D multiplayer Internet game," which he thinks will eventually put videogame giants like Nintendo of America and Sega of America on the skids.

The sci-fi fantasy game, "Gnarl Covet," is slated for publication in fall 1996. It will harness the Internet to link multiple players at multiple locations 24 hours a day.

Mr. Rice and several other Internet gaming pioneers say this is only the beginning of a slow-but-sure revolution in which the Internet will become electronic gaming's backbone, supplanting today's $4.5 billion standalone videogame industry.

"When you're playing a game on today's videogame systems, you can't shock it or scare it or make it cry. But with real-time interactive PC games like ours on the Internet, you can do that, and it's going to revolutionize gaming. I don't think the bigger videogame companies are going in the right direction," Mr. Rice said.

Several other CD-ROM/Internet games are due next year, and they're expected to find eager customers.

Among them: Aristo International, New York, due to release in April a series of four Internet sports games titled "Interleague," allowing players to engage in real-time basketball, baseball, football and hockey team competitions modeled on fantasy sports games.

No price has been set for Aristo's game yet, which will be offered directly on the Internet through Internet provider PSINet, with which Aristo formed an alliance last month.

Industry watchers agree that it will be smaller companies and start-ups, not the established brand players, that will pioneer Internet gaming.

"Just like with any new technology, you'll see companies you never heard of leaping to the forefront, and especially companies that have no interest in sticking to standardized points of view with existing equipment," said Mike Riley, exec VP-interactive for Sendai Publishing Group, publisher of the popular gaming magazine Electronic Gaming Monthly.

The magazine maintains one of gaming's hottest Internet sites, Nuke (http://www.nuke.com), which is tracking Internet gaming closely.

Meanwhile, videogame giants Sega, Nintendo and Sony Corp. are watching Internet gaming with anxiety and skepticism.

Of the three, Sega has made the boldest moves, forming a new division called Sega Soft to develop software for PCs and videogames, with plans to explore Internet-accessible games.

But Sega believes demand for Internet gaming isn't hot enough yet to warrant backing away from standalone systems.

"We're heavily exploring the interactive arenas, and we think it will be at least two years before something comes along that takes advantage of the new type of gameplay the Internet offers," said Kerry Bradford, Sega's director of interactive media.

Nintendo, which has traditionally lagged Sega in testing new technology frontiers, was recently rumored to have met with browser marketer Netscape Communications Corp., but Nintendo would not elaborate on any plans.

"We don't think the Internet will be a hot growth area for gaming right away; the majority of consumers are slow to adapt to new delivery systems. But it will become a viable reality in five years," said George Harrison, director of corporate communications at Nintendo.

However, all three videogame giants have included internal architecture in their next-generation videogame systems to support eventual Internet access.

The Internet currently allows certain low-level games, such as trivia and role-playing games, to flourish. But technology doesn't yet allow for the kind of quick-response, high-speed action games popular on dedicated videogame systems.

It's also questionable how software developers will market and price Internet gaming offerings.

Nevertheless, hardcore gamers are itching to connect in real time.

Cupertino, Calif.-based Catapult Entertainment this year launched the Xband Network, offering head-to-head competition for videogame players using Sega and Nintendo systems. Players are linked via a private dial-up network, not the Internet.

The service costs $9.95 monthly for unlimited access to interactive games, messages and updates on players and scores. (There is also a one-time cost of $19.95 for a special modem.)

"People are finding interactivity to be an incredible enhancement to playing games. They're tired of playing against the computer, and they want to communicate about the games, too. We offer a forum for that," said David Watkins, Catapult exec VP-marketing.

He would not reveal total subscribers, but industry experts say Xband is the largest current interactive gaming network.

Marketers offering promotions on Web pages are also driving experimentation with low-level consumer games, including trivia contests and sweepstakes.

Web site developer Magnet Interactive Studios, Washington, created a virtual reality board game promotion in connection with the Dec. 15 release of the Sony Pictures Entertainment film "Jumanji" (http://www.spe.sony.com/Pictures/SonyMovies/Jumanji).

"Any new entertainment products Magnet develops from now on will have an Internet or online gaming component, because we're looking at the Internet as the next big conduit for gaming," said Gregory Johnson, chief technology officer and creative director of Magnet Interactive Group.

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