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Gaming’s bite-sized bonanza

Social website games shoot it out with console titles

FarmVille” seems an unlikely competitor to games like “Grand Theft Auto” and “Modern Warfare 2,” but start counting the number of regular players, and the unassuming Facebook game might surprise you.

More than 32 million people tend their virtual crops each day, and the game has a total user base of 80 million. That’s roughly seven times the number of people who play the online smash “World of Warcraft.”

Social gaming is one of the hottest sectors in the videogame industry — one that’s luring players and big-name developers away from the console world.

The bite-sized games are played on social networking sites like Facebook, Twitter and MySpace. They don’t demand a lot of time from users but they have an addictive quality that brings people back. And their marketing model, which has players recommend the games to close friends, has resulted in phenomenal growth.

A February study by Information Solutions Group and PopCap Games found there are approximately 100 million people in America and the U.K. regularly playing social network games such as FarmVille and Mafia Wars. Not a bad number for an industry that’s less than 3 years old.

While Microsoft, Sony and Nintendo don’t have a reason to be worried about their futures, traditional game publishers could see an earnings impact in the years to come if the field continues to expand at its current pace. Many insiders, including Will Wright, creator of “The Sims,” expect social gaming to ultimately make up around 25% of the overall market.

One of those publishers, Electronic Arts, is looking to gain an early foothold in the field. In late 2009, EA paid $300 million to acquire social games developer PlayFish. Industry leader Zynga, makers of the most popular social games (FarmVille, Mafia Wars), has reportedly been approached by several publishers about a buyout, but has repeatedly declined offers. Analysts believe the company could be preparing to go public, with a valuation of $1 billion or more — which would instantly make it the gaming industry’s third-largest publisher.

Other game-makers are hoping to use internal talent to carve out a slice of the social gaming pie for themselves. Take Two Interactive plans to release “Sid Meier’s Civilization Network,” a new take on one of gaming’s most loved (and most addictive) franchises, in June. And the company is experimenting with a Facebook tie-in title for its upcoming “Red Dead Revolver” release to build enthusiasm and expand the potential audience.

The budding interest among established companies hasn’t stopped the talent drain away from traditional models, though. Several notable developers have opted to abandon traditional games to focus on the social networking space. Richard Garriott, creator of the “Ultima” franchise (which basically cleared the path for the role-playing game genre), recently launched Portalarium, which will focus on social games. And last June, Brian Reynolds, whose credits include “Alpha Centauri” and “Civilization II” left behind the studio he co-founded to join Zynga.

“My belief is this is a harbinger of things to come,” Garriott says. “Any developer who pooh-poohs it is underestimating what is about to happen.”

Most social network games are free to play. The developers make their money through microtransactions — tiny purchases that range from $1 to $10 for in-game items. It’s a model that has been particularly successful in Asia.

That revenue stream could come in handy. As Facebook subscriptions slow in the U.S., social-gaming companies are looking for areas to expand into. Zynga is reportedly preparing for an alliance with the Japanese investment firm Softbank to move into Japan. Social networks are still seeing significant growth in that part of the world.

It’s a key expansion. Japan is one of the largest gaming countries in the world — as well as the home to Nintendo, Capcom and several other major game developers. If social network games take off there as they have in the U.S., and manage to once again lure away key talent, it could be another notable blow to videogames as we know them today.

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