Analysis: Sony's breach a hiccup to online game phenomenon

Mon May 23, 2011 4:41pm EDT
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By Liana B. Baker

NEW YORK (Reuters) - When service was finally restored to Sony Corp's PlayStation Network earlier this month, millions of customers rushed back to it, impatient to get back to battling friends in sports or shooter games.

It was hardly the response many had expected after a major security breach, one that shut down Sony's games network for nearly a month in the United States and exposed the personal information of more than 100 million customers.

While the Sony incident has made headlines and produced lawsuits, it has also made clear that security worries are not about to derail the up-and-coming online gaming industry.

"Some gamers are more concerned about the lack of online access than a personal information breach," said Ted Pollak, portfolio manager of the video game industry focused Electronic Entertainment Fund.

Pollak said that for many online gamers their connection to the multiplayer experience, playing games with friends over the Internet, is a significant part of their life and having it taken away is no small matter. It is analogous to a sports fan not being able to watch sports on television.

To tap into that passion, video game publishers are pouring millions of dollars into their online offerings. Some virtual worlds, such as World of Warcraft, are already teeming with 12 million players.

"Online gaming is still in the hyper-growth phase," said Sterne Agee analyst Arvind Bhatia. "Even if Sony's breach makes online gaming suffer a bit from this, we won't notice it because growth rates are so strong."

Sony estimated on Monday that the outage caused by hackers who broke into the system and stole personal information from users will cost the company $170 million in profit this year. The network is still offline in some markets.   Continued...