Online Gaming Firm Attracts Fans

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Online Gaming Firm Attracts Fans

By John Makulowich
Contributing Writer

Victim and vanquished are common terms in the virtual venue where Simutronics Corp. of Rockville, Md., and St. Charles, Mo., plies its trade. But in the war of the Internet, the firm is clearly one of the victors, a profitable Internet content company.

The online multiplayer gaming company, one of the true grandparents in the industry, traces its origins all the way back to 1987. Some of its longtime fans, players of the popular text-based chat games, CyberStrike and GemStone, soon to be CyberStrike 2 and now GemStone III, travel almost as far back in time.

These devoted fans are among the group that helped set a record for GemStone in 1997 on America Online by logging more than a million person hours of gaming in a single month. In December 1996, GemStone III received the AOL Members' Choice Award.

For Neil Harris, executive vice president in charge of distribution and business development, the best is yet to come. He notes that privately held Simutronics, which now tags itself "The Internet Games Company," plans to launch CyberStrike 2 in the second quarter of 1998.

This game, featuring stunning 3-D action graphics, has so far impressed not only beta testers. It also impressed Sony Interactive Studios America, one of the original developers of interactive entertainment software for the PlayStation game console. Sony signed an agreement with Simutronics to publish CyberStrike 2 next year.

Harris said Simutronics is the leading developer of online games and was No. 1 on AOL with a 40 percent market share from 1995 until 1997. Talking about the company's prospects and CyberStrike 2, Harris gets so excited and talks so fast, he quickly approaches early stage hyperventilation.

"CyberStrike 2 will feature single-player and multiplayer modes," says Harris. "It will take place in a number of detailed 3-D environments. They range from industrial compounds to alien landscapes. Rather than simply violence, our games encourage socialized behavior. They reward team players. One bit of evidence is that nearly 25 percent of GemStone players are female."

Sporting a 65 percent increase in revenues from fiscal 1996 to 1997 ($3.35 million to more than $5.4 million), the company is on a winning streak since it departed AOL in the wake of that company's decision mid-year to charge set monthly fees.

Simutronics generates its money through several streams: subscriptions to its games; premium subscriptions and transactions; retail products, that is, boxed games for individual players; advertising and mailing list rental; and distribution of third-party titles. While game development generates 20 percent of current revenue and Internet distribution 80 percent, the company plans to establish an Internet-based game channel next year. It will include third-party as well as Simutronics titles and game support content, such as chat, message boards and downloads. In 1999, it plans to set up a presence at the retail level.

One analyst impressed with the company, and especially with Neil Harris, is Mark Mooradian, group director of content for Jupiter Communications of New York. He notes that while the amount of revenue generated through online games is minuscule, it is rapidly growing.

"People outside the industry don't realize Simutronics has been there for years in online-only games. In fact, the company has been a pioneer in a lot of ways over the last decade. When AOL switched to unlimited pricing, Simutronics went from being one of AOL's best content customers to being one of its greatest liabilities. Simutronics had been doing very, very well being paid under the old system," says Mooradian.

The company should do well in the future, if market projections hold up. According to industry data gathered by Harris, online games are projected to generate $1.6 billion by 2001. Computer and video games, the parent category for Simutronics' offerings, is a $5 billion industry today.

Along with GemStone III and CyberStrike 2, the company also offers Adventures of Hercules & Xena and DragonRealms. To shape its future, Simutronics now counts among its key alliances arrangements and partnerships with Universal, AT&T, Excite, Time Warner and Viacom.

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