Net auction services, online pornography and strategic leveraging of e-commerce have been among the few Web ventures to show a profit on the Internet. But online gaming is threatening to make its own fiscal splash.

Sales for the electronic gaming industry as a whole -- which includes game sales for computer and consoles such as Nintendo and Playstation -- may actually surpass the revenues of the film industry in 1999.

And online gaming has provided a new revenue model for some game companies: instead of just selling software for a one-time fee of $50 apiece, they charge gamers monthly fees to play -- creating an ongoing source of revenue.

The economic clout of the industry, as well as the impact gaming has on computer hardware innovations and adoption, should have all journalists keeping an eye on this rising online trend.

One barometer is the size and scope of E3 -- the Electronic Entertainment Expo -- which begins its fifth annual convention today in Los Angeles. E3 will take up nearly twice the space that Internet World, a general Net conference and expo, took up in March at the L.A. Convention Center. This is a reversal from years past, in which IW made by far the bigger splash.

Online Gaming

Many game companies see online gaming as more than a new genre of entertainment software to sell in stores. Games such as 'Ultima Online' and 'Everquest,' in which the game can only be played while connected to the Internet, charge gamers monthly pay-to-play rates. This is the everfont -- a persistent revenue source.

Take the game 'Ultima Online.' Since its release in September 1997, more than 125,000 copies of the Origin Systems software have been sold at $49.95 a copy. With gamers paying an additional $9.95 per month to play the online-only game, 'Ultima Online' represents a potential $1.25 million in MONTHLY revenues -- on top of the actual unit profits. And Origin has already released an expansion package, 'Ultima Online: The Second Age,' for $39.95. ? Competing head-to-head with 'Ultima Online' is 'Everquest.' (see sample review.)

Released in March by Sony Entertainment, the game is approaching sales of 100,000 units in just two months. Its price structure includes a $10-per-month fee for online play, and Sony programmers are already working on an expansion pack.

And lest you think computer giant Microsoft would be left out of this potentially lucrative online revenue source, their online role-playing game 'Asheron's Call' -- currently in the beta-testing phase -- is scheduled for a Christmas release.

In online-only games such as 'Everquest,' gamers create a character to play in a virtual fantasy world - this is the Internet extension of traditional role-playing game systems such as Dungeons and Dragons. After selecting their characters' race and traits, typically including their trades and skills, players enter the online world.

Solving puzzles and killing monsters earn characters experience, which allows their characters to sharpen their skills and learn new trades and magic spells. The money and goods players find and pilfer allow them to buy better equipment, including weapons and armor.

The current generation of online games features impressive three-dimensional modeling of creatures and objects, so that it is easy to becomes immersed in the world your character inhabits. Besides fighting creatures and solving puzzles, many players becomes engrossed in the social aspects of online gaming, including having their characters 'marry' the characters of other people.

The competition to keep up with -- and stay ahead of -- others you are playing with (and against), and the opportunity for social interaction that goes beyond the limits of chat rooms, keep gamers coming back month after month.

And while electronic games have always been addictive solely for their gameplay, studies have shown that the competitive and social elements of online games are what tend to drive people back to the virtual worlds on a daily basis. Stories of occupational and romantic problems arising from addiction to online games are not uncommon.

With such a loyal, persistent constituency for Internet-based gaming, it's not surprising that software companies are beginning to look more seriously at offering online-only fare. For while computer games commonly offer online options, Internet play is usually free. The recurring revenue of monthly dues are specific to games such as 'Everquest' and 'Ultima Online,' whose primary gameplaying features require that players be connected to the Net.

Struggling with how to cover the (successful) industry

Most mainstream media outlets have never been sure what to do with the electronic gaming industry. The technology itself and the hardware that runs it are suited to dry business coverage. The flashy nature of games, and the structure and approach of software reviews, are suited to Entertainment and Lifestyle sections.

So some publications choose to only cover the industry from a business angle, focusing on trends and game company mergers, while others write 'game reviews' and trend stories.

Meanwhile, as traditional media struggle with how to cover electronic games, the industry continues to increase in size and revenues.

In 1998, computer and console game sales combined for an estimated $6.3 billion in U.S. sales. Compare that to the film industry, which grossed about $6.9 billion at the box office last year. Since the gaming industry enjoyed nearly double revenue growth, it is expected to surpass film revenues in 1999.

To be sure, these sales drive more than just the electronic entertainment industry: games tend to leverage the newest computer hardware innovations. So to get the most out of a new title, gamers must also have the newest computer, the best 3-D video card, and so on.

The industry's success, combined with the popularity of the Web, has driven the news media to broaden its coverage of the electronic gaming industry. Pieces such as 'Virtual Life and Death on the Net' on MSNBC.com and 'Seduced by the Game' in the Los Angeles Times are indicative of the increased coverage and attention.

The annual spectacle that is E3 -- dwarfing its mainstream Web cousin

With the huge potential profits of online gaming, it is no coincidence that game companies are blowing generous portions of their promotional budgets to push their online offering at E3.

While few new computer titles offer the huge, pervasive worlds of 'Ultima Online' or 'Everquest,' which are only available online, one-third of the 1,900 new titles featured at E3 are expected to offer options for online play.

After a two-year hiatus in Atlanta, the annual gaming convention has returned to Los Angeles. E3 -- owned by the Interactive Digital Software Association -- runs Thursday, May 13, through Saturday, May 15, at the Los Angeles Convention Center.

When Internet World made its annual spring stop at the LACC in March, it was a slimmed-down, trimmer expo than in past years, whereas E3 looks to be bigger and badder than ever.

About 400 exhibitors will show off more than 2,600 titles at E3, sprawling across 525,000 square feet and 4 convention halls. Compare that to Internet World, which was limited to the main hall.

To get a feel for the size and scope of E3's 1999 stop in Los Angeles, try the virtual convention map at http://www.e3.net (click on the E3 Map). Just browsing through this Web-based map of companies and booths at E3 gives a visceral feel for the enormity of the convention.

While games are front-and-center at E3, other industry fare such as educational software and other interactive, non-gaming titles, and miscellaneous hardware such as video cards and controllers round out the offerings at the sprawling Electronic Entertainment Expo.

For general info on E3, check out the convetion's Web site at http://www.e3expo.com.