Microsoft Places Big Bet On Multiplayer Gaming

Microsoft has spent hundreds of millions of dollars on its online service, Xbox Live, analysts say. To attract more online users, Microsoft is bundling free but limited access to its online service with the Xbox 360. But to play games against others, users must subscribe for $50 a year. That doesn't include the cost of games, or the required high-speed Internet access.

The Redmond, Wash., company's strategy may usher in a new era in the $25 billion games industry. Sony Corp. and Nintendo Co. are expected to make online gaming a key component of their new systems, scheduled to be released next year.

But the big move into online gaming carries risks. It is not clear that companies like Microsoft and Sony will be able to lure large numbers of players -- each has attracted a small fraction of users to online play with their previous consoles. The companies also must be careful about new business models for distributing games -- such as games-on-demand -- so as not to alienate game publishers, who still rely heavily on in-store sales. And games designed for multiple players have a mixed record of attracting customers.

Added Michael Pachter, an analyst with Wedbush Morgan Securities: "At the end of the day, we don't play games for social interaction ... We play games to escape." Microsoft's strategy is "absolutely flawed," he said.