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Electronic Arts Launches Online Service for PS2

The move reflects expectations that online games will be an integral part of its business.

September 16, 2003|Alex Pham | Times Staff Writer

After losing hundreds of millions of dollars in the online games business, Electronic Arts Inc. is hitting the reset button.

The world's biggest video game publisher on Monday introduced a service that makes more than a dozen of its PlayStation 2 titles interactive online. The move reflects the Redwood City, Calif., company's belief that online games eventually will be an integral part of its business.

"There's no question this is a strategic imperative of the company," said Frank Gibeau, executive vice president of marketing for EA. "Online gaming on the console is here to stay. We want to be the leader in the online gaming sectors."

The service -- free for now -- lets players find online opponents, compete in tournaments, chat with other players and post high scores for such games as "Madden NFL 2004" and "The Lord of the Rings: The Return of the King."

Most online games are played on personal computers. Playing them on consoles, such as Sony Corp.'s PlayStation 2, is in the relatively early stages, said Schelley Olhava, senior analyst at research firm IDC.

"It's not mass market now," Olhava said, "and it will be some time before it does become mass market."

EA has tried the online games business before, with most of its efforts aimed at PC users. It lost more than $200 million building EA.com, a subscription-based service, and it lost tens of millions developing "Majestic" in 2001 and "The Sims Online" in 2002, two online games that flopped.

EA's latest online endeavor comes as the industry faces a quandary: Many executives predict online games have huge potential, but no one knows how to make them profitable.

This year, IDC expects revenue from online consoles to reach $42 million in the U.S. Next year, the figure is projected to grow to $116.7 million, Olhava said. Globally, video games are a $25-billion annual business.

"You've got to credit EA for trying, despite the fact that they've had some bumps in the road," said Stewart Halpern, analyst with RBC Capital Markets in New York. "If you're a significant player and you have the resources that EA has, it makes sense to be experimenting."

EA's efforts mirror Microsoft Corp.'s Xbox Live service, launched last November. The service, with 500,000 subscribers, lets Xbox owners connect to other players, chat and compete online via Microsoft server computers. The Redmond, Wash., company will charge about $6 a month for the service.

Although EA publishes games for the Xbox, it has refrained from adding online features to titles for the console. Its announcement Monday sends a clear signal that EA intends to compete with Microsoft in online games, analysts said.

"Right now, it's just hard to predict which model or models will be successful," Halpern said.

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