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Evolving Market for Online Gaming Services

Though 2007 was another strong year for video game makers, the gaming console hardware business is very costly, according to the latest market study from In-Stat.

Therefore, the three main vendors have turned to online gaming either to generate additional revenue streams or to promote brand loyalty, the high-tech market research firm says.

"The primary differences among Nintendo's, Sony's, and Microsoft's online efforts are mainly of scope," says Stephanie Ethier, In-Stat analyst.

Microsoft is looking to create a number of revenue streams through its Live service, including its subscription service, paid casual games, and additional paid content.

Sony is following a model similar to that of Microsoft's, except for the subscription service. Nintendo is limiting its revenue to paid downloads for Nintendo and partner games.

In-Stat's market study found the following:

- From 2004 to 2011, annualized growth of console subscribers will be 42.7 percent, and growth of handheld subscribers will be 37.1 percent.

- Of the respondents to an In-Stat gaming survey who currently own and use an Xbox or Xbox 360, 32 percent subscribe to Xbox Live.

- Another potential revenue generator is in-game advertising, particularly dynamic advertising.

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