Sony's (SNE) top video game studio executive said on Wednesday that a new online service debuting with its PlayStation 3 console in early November will open up a world of new content for gamers as well as new revenue opportunities for the company.

The service, which lets users buy games and communicate and compete with other players via the Web, again puts the company in head-to-head competition with Microsoft (MSFT).

Sony, one of the world's leading technology manufacturers and entertainment companies, aims to retain dominance over the roughly $30 billion global video game market with the PS3.

Rival Microsoft introduced its next-generation Xbox 360 game console in November of last year. The company's Xbox Live subscription service, which offers game downloads and online play, has been a hit on the new machine and Sony had been widely expected to offer a similar service.

The basic level of Sony's online service, known internally as PlayStation Network Platform, will be free, Phil Harrison, president of worldwide studios for Sony Computer Entertainment, said at the Game Developers Conference in San Jose.

Users will pay for subscriptions to game services and premium content, he told Reuters in an interview.

When asked if Sony would tap its music and film libraries, he said: "Obviously, the strategy is for more than just games."

INSPIRED BY WEB PHENOMS

Built in collaboration with Sony Online Entertainment, which already offers PC game downloads and a marketplace for trading virtual assets, the service was inspired by such successful businesses as Web bazaar eBay Inc. (EBAY) and online retailer Amazon.com (AMZN) — where communities of users contribute ratings and recommendations.

It also steals a page from social networking sites like Myspace.com, which has attracted tens of millions of users.

"We have to fall into step with consumer expectations," said Harrison, who said the social aspects of the network promise to get people more involved in gaming.

Among other things, the network aims to make gaming a more central part of people's lives.

"I believe that games can have the same social currency of a great television program," he said, invoking an image of people gathering around the water cooler to talk about a game they played the night before.

With broadband adoption on the rise and television viewership dropping, advertisers are exploring the possibility of buying ad space in games much like they now do on the Web.

"This can provide a tremendous revenue stream for our industry," Harrison said. Video game makers, who have seen sales fall as gamers wait and save for new consoles, have been under pressure to find new ways to offset rising game development costs.

Microsoft said on Tuesday that Xbox Live has logged more than 10 million downloads, which it said was "faster than iTunes did when it launched" — a reference to Apple Computer Inc.'s A(AAPL) popular music download service.

More than 85 percent of Xbox 360 consoles that are connected to the Internet have downloaded games, trailers and videos from the subscription service, Microsoft said.

Downloads appeal to many game makers, who can cut costs by selling direct to consumers. Online distribution also gives them a way to head off piracy and used game sales by providing a way to check that the player of a game is also its owner.

NPD analyst Anita Frazier said most publishers are "treading lightly" into the space since they don't want to alienate retailers, but added that such services would likely open the market for more games.

"If this allows more niche games to get out ... it's going to help grow the industry," Frazier said.

Harrison said he expects retail to remain the main outlet for purchasing games for the foreseeable future.

"It's not going to shift overnight," he said.

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