Destination: Online Profit

They're back in the game, those Garriott brothers: Richard, who created the Ultima series of online games, and Robert, with whom he later teamed to start Origin Systems, ultimately sold to Electronic Arts. This time the gaming moguls have partnered their locally headquartered online game development company, Destination Games, with NCsoft, the Korean company that created the online Lineage game, a popular hit worldwide.

Richard Garriott explains, "We were saying, 'We need a strategic partner that has public stock.' NCsoft was about a year ahead of us on the business curve. They had recently gone public in Korea. ... And so we just folded the companies together."

Online subscription games are currently a thriving business. As Richard points out, "Retail games are flat. PC sales are flat. On the other hand, the subscription-based online game market is growing at a 100% rate per year."

Subscription games are either retail or download models where the user logs on to the games via the Internet. With Lineage, there's no retail model, and it's small enough to be downloadable; the user just types in a credit card number and zip, they're signed on and ready to play. In Asia, the online gaming frenzy has caught on to the point that public game rooms are set up along the streets -- much like a bar, where customers enter and play, socializing all the while. The socializing promotes more online game use, much like groups gathering to watch a football game in a bar and ordering more rounds of drinks.

The Lineage game, which the Garriotts will help their new L.A.-based Korean partner, Jake Song, market in the U.S., is the largest online game played worldwide, and boasts more than 2.7 million subscribers, according to Richard. With $10 to $30 monthly subscription rates, Richard says the game generates somewhere in the neighborhood of $100 million in revenues. "Our profitability is about 50%." He expects the company to make about $50 million this year.

NCsoft Austin currently has 45 employees. "We're going to do a major relaunch of Lineage in the U.S., after we kind of retune it with these U.S. features, in October," says Richard, who expects the number of employees to double in the next six to nine months.

For more information on NCsoft, see www.destination games.com.