Microsoft Corp. this week is launching the most ambitious attempt yet to create an online video-game service, gambling that the product will spur sales of its Xbox system.
The new Xbox Live service allows users of the system to play against each other over the Internet. While computer gamers have been able to play online for years, the makers of game consoles are just beginning to experiment with connecting players to more than just their family-room television set.
Sony Corp. and Nintendo Co., however, have limited their efforts primarily to selling adapters to connect their consoles to the Internet. Microsoft is taking the concept a step further by fashioning a central network to host the games and allowing players to talk to each other through headsets.
"Everybody agrees that online is the next big thing. Where they might disagree is on the timeline" for when it might take off, said J Allard, general manager for Xbox at Microsoft.
The new Xbox service, which begins tomorrow, requires that customers have a high-speed Internet hookup, such as those provided by cable companies and DSL providers. A year's subscription to the service will cost $49.99 and include a headset to communicate with other players.
Microsoft launched the Xbox last year, and sales so far have lagged far behind those of market leader Sony's PlayStation 2. But the software giant has surprised some in the industry by holding its own against Nintendo's GameCube in the U.S. market.
Sony had a full year's head start in selling the updated PlayStation 2, helping the company secure its No. 1 position. Sony has sold 14.5 million units in the United States, according to Jupiter Research. Microsoft's Xbox and Nintendo's GameCube have sold 4.7 million and 3.9 million units, respectively.
While Microsoft is not alone in developing online capability for its game consoles, Sony's and Nintendo's bets have been more conservative.
Nintendo, for example, has recently started selling the add-on hardware GameCube owners need to plug in to the Internet, but that's about it. There's only one game with online playability available so far, a game from Sega called Phantasy Star Online.
"We're skeptical, at least for now, about the business potential and how much consumers are willing to pay for this form of entertainment," said George Harrison, senior vice president of marketing at Nintendo.
Microsoft, on the other hand, has invested heavily in creating a centralized experience. This approach, Microsoft argues, allows the Xbox to provide a sort of unified experience for its customers. When Xbox owners sign up for the service, they pick a name (or a "tag," as Microsoft calls it) that stays the same no matter what game they play. The idea is to help players form relationships and build their reputations online.
Sony, too, is selling add-on hardware to gamers who want to play online; a spokeswoman said the company hopes to sell 400,000 adapters this year. While Microsoft's system requires broadband access, PlayStation 2 owners can play some games if they have a slower dial-up Internet account.
Sony, though, is not building the networks. Rather, it is leaving that up to the video-game publishers to decide how they want to establish their online presence. One inevitable result of this is that going online will be slightly different from one game to another for PlayStation 2 owners.
The Xbox approach seems to have won over some gamers. "They're definitely polar opposites," said Dan Amrich, senior editor of GamePro magazine. "Of the two, I prefer Xbox Live because they take care of everything."
Keon Blackwell, a student in Baltimore, stopped playing football online with the PlayStation 2 when he got accepted as a beta tester for Xbox Live.
Blackwell said he got frustrated when playing football against people who had slower dial-up connections. "I'm not too interested in PlayStation 2 online anymore," he said.
For game publishers, there are pros and cons for both sides. Xbox's more aggressive support of Xbox Live has attracted some early publishers because Microsoft's approach means they have to invest less in building their online networks.
"Microsoft made it a little easier for us," said Jason Bell, senior vice president of creative development at game publisher Infogrames, which makes Unreal Championship, a new game that uses Xbox Live's network.
Infogrames plans to support PlayStation 2 online, but the company is in the process of finding corporate partners to provide technical support.
"We couldn't possibly ignore" users of the top-selling game console, Bell said.
Some game publishers worry that Microsoft's approach could give the company greater access to their customers -- and thereby give the software giant greater leverage in developing future games.
That's one reason that Electronic Arts, the world's largest video-game publisher, has tried online options with some of its PlayStation 2 games but has resisted supporting Xbox Live.
Jeff Brown, vice president of corporate communications at Electronic Arts, said its first attempts to take the PlayStation 2 online have been a success. About 245,000 people have signed up to play the company's popular sports games, Madden NFL 2003 and NBA Live 2003, on the PlayStation 2. But that's just a fraction of the approximately 2 million copies of Madden NFL 2003 alone that have sold to date.
"Clearly this is going to grow into a business some day," Brown said of online gaming. "But you've got to get upwards of a million before you say this is a big opportunity."