Battle on the Net

When you have tallied one million online users, and you're adding 3,500 more every day, you don't need to play ball with the competition. Such is the case with Blizzard's online gaming area Battle.net.

As a result of the healthy numbers, Blizzard Entertainment will offer its highly anticipated title, Starcraft, and all future releases exclusively on its free multiplayer online gaming service, Battle.net.

Currently, the only game available on Battle.net is Blizzard's Diablo.

Starcraft will join the Battle.net offerings upon its release later this year, and if it's as successful as GS predicts it will be, this could put the squeeze on third-party online gaming providers.

Still, the question remains: Is the free model working? And if it is, for whom? And just how much of a threat to the other fee-based gaming services is it?

One industry analyst GameSpot News spoke with today described the free model as a mixed bag - with no clear winners and losers: "Having some free sites broadens the audience, so in the near term it's something of a positive."

And long term? "It's certainly bad for the entertainment software business as a whole. Who takes the financial hit for this sort of service?"

There is some speculation that Battle.net has consumed at least a third of the profits of Diablo's retail sales. If that figure is near accurate, the negative impact on Blizzard's net profit would be severe. Blizzard however claims the cost of maintaining Battle.net is "nominal, and does not at all affect our bottom line."

While sales would amortize the cost (whatever they might be) of providing a free online gaming service initially, as sales leveled off it's conceivable that profits derived from retail sales would at some point be adversely affected by costs associated with tech/server maintenance.

"All the free model has done is add a level of cost to the cost of producing the game," another analyst said.

Blizzard will reportedly begin selling ad space, which thus far has been unpaid, on Battle.net.

"The idea that they're going to float the boat with advertising is overblown, but I don't think they have any choice....The reason these services don't charge is because they can't - it's just a whole lot easier to send bills to six advertisers than to 60,000 subscribers," the analyst added.

Blizzard told GameSpot News "we do for gravy money."

Battle.net reportedly attracts some 3,500 simultaneous peak-time users, and was launched last January with the release of Diablo. Starcraft is expected to ship before Christmas of this year.