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AOL lowers game rates

The online giant drops prices for certain games, calling into question whether it can maintain its pay-for-play model.

America Online today lowered its hourly rate for games, calling into question whether the online giant can maintain a pay-for-play model for games that are free elsewhere on the Net.

Hourly rates have been reduced to 99 cents from $1.99. The price cut will affect only "parlor" games, which include popular offerings such as Blackjack, Bridge, Poker, Backgammon, and Chess. Pricing for other game categories on the service will remain the same, such as "Game Shows Online," which are free, and more interactive, graphics-heavy "Extreme Games," which cost $1.99 per hour.

AOL said its reasoning behind the cuts was swayed by market demand, and a robust population of online gamers coming to the service. AOL's games channel had 3.4 million unique visitors and 6 million hours of usage during August, according to Pam McGraw, an AOL spokeswoman.

"We're really seeing a lot of enthusiasm for people wanting to play parlor games, so we wanted to reduce the price," she said.

However, observers see the rate cut as a response to competitive pressure from other Internet services. A slew of AOL competitors offer similar games for free. Services including Yahoo Games, Excite's games channel, and Total Entertainment Network have already gained traffic for providing the variety without the cost.

These factors may force AOL to eventually remove hourly fees in the near future, according to Seema Williams, an analyst at Forrester Research.

"The challenge for AOL is to bring pricing in line with the needs of consumers," said Williams.

In the past, AOL has vacillated in its policies for online gaming fees. The online giant dropped its pay-for-play plan when it went to flat-rate pricing, which gave users unlimited access for $19.95 per month. When its parlor games became free to members, AOL saw an 80 percent growth in usage, according to Williams.

Once AOL noticed the skyrocketing popularity of the service, it reinstated the pricing plan in June 1997. The change, not surprisingly, did not go over well with gamers.

"At that point they got considerable backlash from users," said Williams. "Ever since then, AOL went through all kinds of machinations to what they were to do to their games channel."

There are many sites that still charge users hourly rates to play games, including Microsoft's Internet Gaming Zone. Williams said these gaming sites only charge because they are offering more technologically advanced, graphics-heavy games where providers are unable to serve advertisements.

Nonetheless, Williams added that charging for more simple offerings may not make sense in the future for AOL.

"There are plenty of services that want to get [AOL's] users to play public-domain games," she said. "And these aren't difficult games to provide."