Silicon Valley Gamers Hope Internet Usage Can Save Their Business "To Release an A-Level Game on the PC, You Need Networked Options"

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Distressed by sagging sales and fierce competition, Silicon Valley's action-adventure software industry is hoping the Internet will come to its rescue.

Developers are expecting a boom in games played over the Net and computer networks. And although on-line gaming is still in its infancy, the day isn't too far away when an Internet user in San Francisco will be able to zap a fellow Webhead in London in a real- time global game of Doom.

"It's absolutely the next big wave for the games market," said Richard Garriott, founder of Origin Systems Inc., a subsidiary of Electronic Arts Inc. that this spring launched what many call the first test of Internet on-line gaming. In that test, Ultima, a role- playing game, was played by more than 3,000 people worldwide.

At this point, the games market will jump on any wave -- so why not surf the Internet? After peaking with a 67 percent jump in sales in 1994, growth in the domestic PC games market is expected to taper off through 1998, according to the investment firm Alex. Brown & Sons Inc. An estimated $1.96 billion worth of software will be sold this year, up 35 percent from 1995; however, annual sales growth will drop to 33 percent and 31 percent in 1997 and 1998, respectively.

The slowdown has dented the bottom lines of some of the biggest players in the market. Spectrum Holobyte Inc. this spring suffered another round of layoffs; Broderbund Software and Sanctuary Woods are hampered by low stock prices; Rocket Science Games Inc. hasn't parlayed millions of dollars in venture capital into profits; and Maxis is struggling. Even EA, whose name has been synonymous with video games, isn't exactly cutting a swath in the market.

"It's the Pac Man phase of the industry -- either be successful or be gobbled up," said Larry Marcus, an analyst at Alex. Brown. "It's also become a hits-driven business. Everyone is looking for a Myst- like game that sells more than 300,000 copies a year."

Developers, meanwhile, are betting the advent of set-top computing devices such as Apple Computer Inc. …


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