Multiplayer titles amass multimillion-dollar might

Byline: Terence Keegan

With the bow of Internet-connected vidgame consoles like Xbox 360 and PlayStation 3, the burgeoning biz of massively multiplayer online games (MMOs) is poised for massive growth.

Once the exclusive domain of the hardcore PC set, MMOs now play host to thousands of garners simultaneously worldwide.

Last year, 2.7 million MMO game licenses were sold, generating more than $110 million–up from just $17.7 million in 2000–according to vidgame tracking service NPD Group.

The games are still rooted in role-playing, dragon-slaying fantasy, but the field is rapidly expanding to encompass more genres, like strategy, and broader auds, like casual garners and kids.

“I think within two years (console games) will be 50% of our revenue,” says John Smedley, president of Sony Online Entertainment, one of the MMO market’s leading players.

Starting out in 1999 as the publisher of the wildly successful “Everquest” franchise, Smedley’s unit is now completing the network backbone for Sony Computer’s PlayStation 3 (set for a November debut), while also developing new games and laying the infrastructural trackwork to connect MMO players across the U.S. and around the world.

Retail sales of MMO games like Blizzard Entertainment’s “World of Warcraft,” Disney’s “Toontown Online” and LucasArts Entertainment’s “Star Wars Galaxies: An Empire Divided” accounted for 10% of all PC game sales last year, according to NPD. Those sales are just for the basic software on disc; some publishers rake in more revenue by charging monthly subscription fees of $10-$20 for optional online play and selling downloads of new game levels or accessories.

On Sony’s Station Exchange auction site, “Everquest II” players can sell access to virtual game elements for real money. Items up for bid have ranged from a $10 piece of armor to a $1,225 character ready for use with the game’s 70th level. (Sony pockets a listing fee and 10% of the final sale.)

Then there are the emerging in-game advertising opportunities that newer MMO titles can present, for everything from soda to summer blockbusters. “You’re talking about an (annual) revenue stream that’s now in the multimillion-dollar range on a per-game basis,” Smedley says.

Internet-connected consoles spell an even greater opportunity for publishers to establish MySpace-like MMO communities within the vidgame industry’s most lucrative market segment. The early success of games like Take 2 Interactive’s “Elder Scrolls IV: Oblivion” for Microsoft’s Xbox 360 has companies excited to build MMO components into an increasing percentage of console titles.

But the burden of long-term customer support continues to bat” many publishers from making a go with an MMO. Sony, which handles backend operations for its own online games (including “The Matrix Online,” which it bought from Warner Bros. Interactive last year) as well as others (including LucasArts’ “Star Wars Galaxies”), retains some 300 customer service staffers alone, with 180 of the employees in India.

“We do a large amount of in game customer support that’s very labor-intensive,” Smedley notes.

While the likes of Sony drive MMOs into the console space, the business proposition will remain risky for smaller developers. “Especially on the next-gen consoles, there’s a huge development cost,” says NPD analyst David Riley. “There has to be some proof of demand.” Still, there’s also cause for bullishness. “We know MMOs do exceptionally well on PCs, and that’s not going anywhere,” he adds.