On Nov. 15, a year to the day since the launch of its Xbox game console, Microsoft plans to make the dreams of many console gamers come true. On that day, the Redmond, Wash. software maker will launch "Xbox Live," it's Xbox-dedicated, broadband-only online game service.

Currently, online gaming is a niche of the very large video game market, and one that for the most part is relegated to PC gaming. The video game market as a whole racked up $9.3 billion in revenues in 2001, outgunning Hollywood's box office take of $8.1 billion by a cool billion dollars. And game makers are already aiming to overtake the $14.3 billion music industry and nearly $19 billion home video industry.

But the online side of video games -- is small potatoes next to those numbers. Many PC game makers package an online version of a game with the offline software in order to extend game play and make their offerings more competitive. These game makers typically absorb development costs, and the costs of maintaining servers and other network infrastructure, as part of their efforts to remain competitive in the marketplace.

Other game makers have tried to capitalize on the Internet in a different way. For instance, both Sony and Microsoft offer subscription-based "massively multi-player online roleplaying games" (MMORPGs) for PCs. Sony's

With Xbox Live, Microsoft is aiming to make online gaming much more accessible, by offering it through a gaming console, rather than through a PC, while at the same time absorbing many of the costs that game makers face when creating a game which can be played online (and Microsoft, as one of the world's largest game publishers, also stands to benefit).

Revenue from online PC games like MMORPGs is expected to reach $1.5 billion by 2006, according to industry forecasts. Online console gaming is expected to generate about $250 million in revenue by 2006.

In May, Microsoft announced that it would commit $2 billion to bring Xbox Live to its customers in North America, Japan and Europe by this fall. As part of that commitment, the company began building four data centers -- in Seattle and Tukwila, Wash., and Tokyo and London -- to run the service.

The Xbox Live service will boast a number of features, including:

• Gamertag, a unique online ID for all gamers across the service
• Friends list, a feature that will allow gamers to find friends online and invite them to a game
• Xbox Communicator, integrated voice communication that allows for voice interaction with teammates and opponents, and also features voice masking, global muting and parental control
• Matchmaking, which allows players to enter games and find opponents based on similar skill levels
• High-speed downloads to the Xbox hard disk.

To access the service when it launches, gamers will have to buy a $49.95 starter kit, which includes 12 month's worth of access to the service and a headset kit for voice communications. Microsoft has also said at least six online games will be available for its console at launch, and about 16 will be available by the end of the year.

Microsoft's major competitors in the space, Sony and Nintendo, have not been sitting on their laurels. Sony plans to release a network adapter for its PlayStation 2 console later this month. Nintendo also plans to release an adapter but has not released a date.

Unlike Microsoft, which will only support broadband connections, Sony plans to release an adapter for both broadband and dial-up connections. Nintendo plans to release separate adapters -- one for broadband and one for dial-up. However, neither Sony nor Nintendo have taken as aggressive a position as Microsoft when it comes to online gaming. Instead of providing their own gaming networks, the companies will rely on game publishers to shoulder development costs and maintain servers and other infrastructure.


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