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No big Net gaming profits yet

Game developers can't expect to rake in Net profits right away, a new report reveals. But revenues will leap to more than $1.6 billion by 2001.

Online gaming will take off in a big way. Eventually.

For now, game developers don't expect to be making big money from the Net, according to a Forrester Research report.

Online game revenues will reach only about $540 million by 1999, a relatively small amount, the report predicts. But technological advances used by new online gaming sites that will include chat and commerce could rev up the market big time. By 2001, revenues will leap to more than $1.6 billion, Forrester adds.

While there are a handful of online games, such as Berkeley Systems' You Don't Know Jack: the netshow online, the gaming market is largely limited to other platforms, such as dedicated consoles and PCs. But both America Online and the Microsoft Network, arguably the two most powerful online players, have announced that they'll focus on online gaming.

Right now, there are major obstacles to making money through Internet gaming, the biggest of which is the lack of technology to make it work.

Of the 55 game developers and publishers that Forrester interviewed, more than half--55 percent--said they were most concerned about technological obstacles. Basically, games require speed and users can't get enough of it yet.

Developers also are concerned about finding an audience for online games. Sure, there's a solid audience of hard-core gamers out there, but their target group, males aged 12 to 24, is already saturated with console games. "Squeezing this base for a few more dollars won't build a new market," the report states.

Moreover, the Net is so filled with games that are free (Forrester estimates that only 9 percent of Internet gamers pay for the privilege of playing) that it will be difficult for anyone to start charging. "Forrester believes that the Internet game business will face significant problems getting off the ground," the report notes.

But in spite of the many impediments, there's still hope for the future. While games are not the hot ticket on the Net, they sell quite well on other platforms and there's no reason to believe that the Net couldn't become a profit center.

"In spite of the problems, progress is possible," the report asserts. "We believe that a new market maker will soon emerge on the scene: online gaming centers." Those centers will "combine player matching services, contests and tournaments, game reviews, and online chat to attract a following," it says.

The report points to Microsoft's Internet Gaming Zone, Mpath's Mplayer, and SegaSoft's Heat as examples for the future.

"Online game centers will clear away the technology, customer acquisition, and business model underbrush that hold this market back."