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Online Games: Put Up or Shut Up Arkadium and Ultimate Arena Add an Intriguing Element to Online Games: Cash Betting.
July, 21 2003

Business 2.0, 07.21.03
Rafe Needleman

Sometimes, between the interviews that fuel this column, my brain finds itself in need of a diversion. So I fire up an online game (currently I'm hooked on an old favorite, Continuum) and lose myself for a few minutes. Who doesn't? Multiplayer games never repeat themselves, and there's a sort of innocent pleasure in playing tag or shoot-'em-up with a bunch of strangers in a little online sandbox.

Online games also provide community, and I take a perverse glee in blasting an annoying trash talker into oblivion. And now, finally, we can do this for money.

I spoke recently with the CEOs of two very different online game companies. First there's Kenny Rosenblatt, the CEO of Arkadium, which runs a service for people who play arcade and board games such as Tetris and chess. Like WorldWinner and SkillJam, Arkadium offers tournament-style games, where you place a bet and play for points, with the winner taking home the pot (minus a service fee). But unlike many of its competitors, Arkadium also allows you to play its games head-to-head: You can place a wager against one individual. In the case of a betting game like backgammon, the wagering is integrated into the game itself.

Legally, games played against other people are considered "games of skill." These games are state-regulated, and can be played online in all but a handful of states (4 to 11, depending on whose lawyers you believe). Gambling games -- "games of chance" -- are regulated by the federal government, and online casinos have been forced offshore.

Arkadium has a lot of community aspects to it: All games have chat windows, and you can examine players' records to see if they're winners or losers before you play against them. But Rosenblatt expects that most games will eventually be played by people who know one another, whether they initially meet in Arkadium's chat rooms or are already friends. Arkadium takes a percentage of the winnings of each game, which is a great business model if the company can attract a large community of players.

But these games and their communities are sedate compared with Ultimate Arena, which is running a more technically challenging and dynamic service that supports people who want to play fast-paced first-person-shooter (FPS) games like Unreal Tournament and America's Army (the only games it has online right now). Obviously, the government-produced (and very popular) America's Army game adds a huge measure of credibility to this platform.

Ultimate Arena lets you play one-on-one grudge matches, team games, or last-man-standing "death match" games. In all cases, players pony up entry fees, which are then distributed to the winner or winners, minus UA's 15 percent vig. According to CEO Mike Cassidy, the biggest single pot in a UA game was about $80, but several hard-core users are racking up thousands of dollars through the system.

I initially gave the nod to Arkadium's business as the more sustainable: Its users tend to be older, and there's a highly social aspect to games like chess and mah-jongg that, at first blush, seems lacking in a game like Unreal Tournament.

But while Arkadium does have a more person-to-person slant than its direct competitors, it faces the heavy marketing challenge of taking business away from them. And, on further reflection, I think the action lies with the FPS kill-for-money model. For one thing, these games are just as social, if not quite as civil. And the players are old enough to gamble -- 70 percent of PC gamers are over 18, and the average age is 26, according to Cassidy. More important, many people who get into games like Quake, Unreal, and America's Army get into them deep, racking up dozens of twitchy hours a week. A devoted player who enters games in which he's fairly matched might win or lose a few bucks a week. But even if he's losing money, he might consider that a small price to pay for the reliable, high-quality servers that Ultimate Arena is going to have to run to keep the games fair. (The technological barriers for arcade- and board-game wagering sites are high too, but not as high.)

All game wagering sites claim that they have strong anticheating and antihustling technologies, so adept gamers or hackers can't sucker other players and take their money.

Computer games are already a bigger industry than movies, but aside from buying popcorn and sodas, movie audiences don't continuously line studios' pockets during a show. Adding the option of playing for coin, the game industry is pulling itself even further away from stodgy old Hollywood.