A million Internet users have flocked to the fantasy world of "Rift" since its March release, in a trend that threatens games consoles such as Sony Corp.'s PlayStation and Microsoft Corp.'s Xbox.
Trion Worlds Inc.'s "Rift" costs $50 for initial access to a space where customers can link with other gamers to fight fantastic creatures and each other. By 2013, revenue from games that can be played online or on a mobile device will jump 50 percent to $32.6 billion, overtaking those of console games for the first time, according to PricewaterhouseCoopers LLP.
Trion and rivals such as Activision Blizzard Inc., whose titles include "Call of Duty," are aiming for a bigger share of that market as they flaunt their latest hits this week at Gamescom in Cologne, Germany, Europe's largest video-game fair. The battle is also heating up among hardware makers, with consoles that only enable games probably losing ground to connected devices, according to Microsoft, whose Xbox 360 was the top-selling console in the U.S. in June.
"The impact of smartphones and tablet PCs is a watershed event for the console games developers," said Reimar Mueller, a consultant at PwC in Frankfurt. "When you look at the handheld consoles, like the Nintendo DS, they are limited to playing games, whereas if you buy a smartphone, it's an entertainment device that lets you do everything."
Online offerings include Activision's "World of Warcraft," a "massively multiplayer" role-playing game with more than 11 million players, and titles from Zynga Inc., which has 232 million active monthly users for titles including "Farmville." Rovio Entertainment Oy's "Angry Birds" game has been downloaded more than 300 million times to computers and mobile phones.
U.S. retail sales of packaged games and hardware fell 26 percent in July, researcher NPD Group said. Consoles accounted for 67 percent of video-game sales in the U.S. last year, or $10.3 billion, according to PwC figures. In Asia, console games revenue contributed to 34 percent of the total, or $7.7 billion.
"The overall console market is stagnating," Oliver Kaltner, who is responsible for Microsoft's game business in Germany, said in an interview in Cologne. "If you are offering gaming consoles only, this might limit your sales potential for the future because consumers expect more. They expect connection to their movies, they want to connect with their friends and families."
Microsoft, which boosted sales of the Xbox after introducing the movement detection sensor Kinect last year, plans to add voice control that can work both in games and in the Bing search engine on the console this Christmas, Kaltner said.
Microsoft is also addressing mobile-phone users, bringing the Internet Explorer 9 browser to its Windows Phone software and introducing 18 new games this fall. "Gaming is one of the major components you have to have on a smartphone," he said.
A "standout case" of a company exploiting digital opportunities in games is Electronic Arts Inc., the world's second-largest maker of games, said Piers Harding-Rolls, head of games analysis at IHS Screen Digest in London. The maker of "The Sims," "Star Wars" and "Harry Potter" games bought companies such as Playfish Inc. and PopCap Games to expand in the social games market and supports multiple platforms.
Electronic Arts's soccer game "FIFA 12" will be available on 12 platforms, including games consoles, mobile handsets, Facebook and Apple Inc.'s iPad, said Jens Uwe Intat, general manager for EA Publishing in Europe.
"The massive growth in the industry right now is in online, mobile, social" platforms, John Riccitiello, chief executive officer of Redwood City, California-based Electronic Arts, said in an interview.
Nintendo Co. last month slashed the price of its 3DS portable console by as much as 40 percent. It sold 214,821 3DS units in Japan last week, the most since 371,326 units in the last week of February, when the 3DS was introduced, Tokyo-based researcher Enterbrain Inc. said.
Nintendo "didn't have a sufficient amount of high-quality software at launch or straight after launch," said Nick Gibson, an analyst at Games Investor Consulting Ltd. in London.
Nintendo's decision has also put pressure on Sony to cut the price of the PlayStation Vita portable player that will come to Japan by the end of 2011 and to the U.S. by next year.
Sony will add a host of social-networking applications to the handheld system, allowing users to access sites including those run by Facebook, Foursquare Labs Inc. and Twitter Inc. The console costs as much as $430 in Europe.
Sony also said yesterday it will lower the price of its Playstation 3 console to $249 from $299 with immediate effect. Sony plans to release a new version of its portable handheld games player PSP this fall for 99 euros in Europe, Jim Ryan, chief operating officer of the company's European operations, said in Cologne. The current model sells for 169 euros.
Before today, Sony had declined 42 percent this year in Tokyo trading, while Nintendo was down 51 percent. Microsoft fell 9.2 percent on the Nasdaq Stock Market. Electronic Arts was up 22 percent.
Sony slipped 0.8 percent to 1,687 yen on the Tokyo exchange today. Nintendo rose 2.8 percent to 12,030 yen.
Nintendo is preparing a successor to its Wii console for 2012, called the Wii U, making it likely Sony and Microsoft will soon follow with successors to Xbox 360 and PlayStation 3, Gibson said. PWC said it expects the next generation of consoles to be released by 2015.
While Trion will publish games for any platform with a Web connection, a gamer can go into a store and buy "Rift" in "a nice shiny box" for a console if they want, CEO Lars Buttler said. The console in this case is just the access point and a broadband connection is necessary as the game updates continuously on Trion's servers.
The console "is no longer the ultimate platform," Buttler said. "There will be another generation of consoles, but this next one might be the last."