Diller looks to vidgame universe

Interactive Corp. faces challenges

By BEN FRITZ

After the industry grew 43% last year, it's easy to understand why any media company, especially one focused on interactive media, would be salivating at the idea of getting into videogames.

But with power concentrating in the hands of a few major players -- as proven by Activision's merger with Vivendi games and EA's bid to acquire Take-Two Interactive -- and development costs for consoles into the tens of millions of dollars, it's also easy to understand why potential entrants would be scared off.

That's the paradox faced by Barry Diller's collection of online media properties Interactive Corp.

"Of course, we started out looking at the traditional publishers," says Shana Fisher, senior veep of strategic planning. "We saw limited original (intellectual property) in development and release, extremely expensive distribution models, and the same game genres that have not really changed in years."

IAC's solution? Look to the Web. The conglom last fall bought a controlling interest in vidgame technology company GarageGames and is using it to launch a new site called InstantAction. IAC will spend $50 million-$100 million on InstantAction, which will offer games that aren't quite as big as, say, "Halo 3," but are significantly deeper than the typical casual game on the Internet.

Some are being made in-house by GarageGames, but IAC is also working with independent developers and hoping to bring onboard outside publishers.

"The market is well served with tons of casual games, but nobody is grabbing real or lapsed gamers who may be too busy to sit in front of a TV and play videogames for hours at a time," notes InstantAction head Andy Yang.

Online gaming also enables a wider variety of business models than just straight purchases. InstantAction will experiment with several different monetization plans, including pay-per-play, advertising, subscriptions, and virtual property trading.

IAC is certainly not the only company investing in online videogames. Disney, MTV Networks, and Cartoon Network are all spending big on Web games aimed primarily at kids. Jagex, British developer of the ultra-popular kids' online game "Runescape," recently launched a service similar to InstantAction called FunOrb.

Like every other nook and cranny of the videogame biz, high quality play on the Web is about to get crowded fast. Which is why IAC wants to strike now.

"We look at this as a once in a lifetime opportunity," says Fisher. "You don't find a market like this every day."