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"The child is father of the man," William Wordsworth wrote in 1802. Nearly 200 years later, Sony Corp. used that idea to develop a hugely successful role-playing game that changed how the company thinks about online entertainment. The game, EverQuest—archly dubbed "EverCrack," for its addictive qualities—began as a project inside an American unit of Sony. The idea was to develop a fantasy game in which tens of thousands of people could adopt roles and play in cooperation with each other online. [For more on how EverQuest is played, see accompanying article.] Sony, afraid of being an overbearing parent, sent its game-developer offspring out into the world in 1998 as an independent company known as Verant Interactive Inc.. Sony’s progeny prospered. When Verant introduced EverQuest in 1999, it became the most successful online role-playing game ever. By 2000, Sony was ready to make the child the father of the man. It bought back the 80% of Verant that it didn’t own and gave the company’s management responsibility for a host of Sony’s other online-game-development activities. That strategy, too, seems to be working. Sony has been able to exploit the opportunity presented by EverQuest by bringing to bear far more resources than Verant could have mustered on its own. Sony also hopes that Verant will be able to work its magic on the other online projects that it now controls. In other words, at a time when many companies are debating whether to set up innovative ventures either as separate companies or as part of the core business, Sony’s answer: Both. By choosing that answer, Sony has created an inspirational dot-coming-of-age story. Already, EverQuest generates $70 million a year in revenue for Sony through sales of software and through the monthly subscription fee that nearly 400,000 users pay to keep playing. EverQuest has also given Sony a huge lead over rivals in online games, which many expect to become a mainstream form of entertainment. Sony executives think EverQuest could be the MTV of the online world—the breakthrough idea that finally takes full advantage of the entertainment capabilities of a new medium, just as MTV did for cable TV. By 1996, online role-playing games had thrived among college kids for more than a decade. But the games were played via text, not graphics, and they amounted to just a niche. A teeny-weeny niche. Brad McQuaid, who was then working for a Sony software design team in San Diego, had a brainstorm. With Internet connections getting faster and faster, he envisioned a virtual game with mind-blowing 3D graphics that could be played by thousands at a time and would find an audience beyond college-age kids. He asked his bosses to experiment. There were major concerns. An ambitious game like EverQuest, which has 24,000 computer-generated characters, is expensive. It would take years to build. Sony had no assurance people would buy the game software in the first place, let alone cough up a monthly fee like cable-TV subscribers to keep playing. John Smedley, a designer at the time, argued to senior executives that, no matter what happened with EverQuest, the company needed to get back into developing games that would be played on a personal computer. At the time, all internal game development focused on the PlayStation, a Sony game machine that reigned as the most successful Sony product launch since the Walkman. Sony executives went along, figuring that, even if the attempts at a PC-based game didn’t work out, the EverQuest group’s skills could be translated to the next generation of PlayStation games. McQuaid, who became EverQuest’s executive producer, slowly built his team from two to 20. But, by late 1998, it became clear the EverQuest work wouldn’t apply to the PlayStation. In addition, development costs for EverQuest were escalating. "We realized the PC group was pretty self-contained and would become increasingly a distraction to our core business," says Kelly Flock, who at the time headed both the PlayStation and PC game-design efforts. He went to Japan and convinced executives at headquarters that, while EverQuest and the whole area of online games looked very promising, its developers should be spun out into an independent entity. Sony contracted with them to finish EverQuest but gave them the freedom to sign up another source of funds to publish the other games they had under development. It’s not that Flock or anyone else at Sony had a grand plan when they spun out Verant. Sony seemingly made Verant independent simply because that’s what it does with projects that don’t fit internally. David Cole, president of DFC Intelligence, a video-game market research firm, says: "It seems like Sony is constantly spinning things off. I’ve almost given up trying to keep up." Flock, himself, admits the experience was serendipitous. "If we’d known that Verant was going to be the model of a successful online entertainment publisher," he says, "we would have tried to immediately" make Verant the core of Sony’s online-game work. Still, the benefits of having Verant be independent were clear. "It was certainly easier to retain those people who were beginning to chafe a bit about being kind of an after-thought" in a business focused on the PlayStation, Flock says. The benefits of the Verant strategy became even clearer on March 16, 1999, when EverQuest was launched. More than 12,000 subscribers jammed the company’s servers that day. By the end of the first week, 40,000 eager gamers had subscribed. There were so many that thousands got booted in midplay, while others found the game obnoxiously slow. Jeff Butler, who set up Verant’s customer-service department, remembers the company’s Internet service provider running an additional underground fiber-optic line from Los Angeles to Verant’s offices in San Diego in just seven days to meet the demand. While EverQuest’s developers had initially dreamed of someday having 70,000 subscribers, 225,000 copies of the software had been sold within six months, and EverQuest had 150,000 active subscribers. By now, EverQuest has sold more than a million copies of the base game software at $39.95 a copy. Sony also collects $9.95 a month from each person who subscribes to play the game—and its numbers are growing by about 20,000 people every 30 days. As EverQuest’s revenue kept climbing, Sony executives saw that subscription-based games had huge potential; to that point, Sony’s Sony Online unit offered only free games, supported by advertising, that were online versions of brands such as Jeopardy! and Wheel of Fortune. EverQuest’s explosive growth also made it clear that Verant, with 70 employees, didn’t have the resources to take full advantage of its hit. As it turns out, Verant hadn’t strayed far from Sony: Besides having the contract to develop EverQuest and having Sony retain a stake in Verant, the Verant management team had picked a Sony unit to finance the other multiplayer games it was creating. So, the transaction was relatively straightforward when Sony Online bought the rest of Verant on May 31, 2000. "The good news for EverQuest is that Sony allowed it to go outside to develop but then didn’t lose sight of it," says Heidi Mason, managing director of Bell-Mason Group, which advises companies on creating and managing ventures. Following the acquisition, Sony Online closed its New York offices and transferred headquarters to Verant’s offices in San Diego. With that, the experiment in the niche of role-playing games subsumed Sony Online’s old business model. Flock, who was named chief executive of Sony Online after the deal was completed, says: "The creative vision of the Verant guys...led toward an epiphany for senior management at Sony." Although Verant’s employees had returned to a giant corporation, they were now in a division focused entirely on online games. Their vision of the future of games ruled. They could get all the marketing support they needed. By this spring, Verant’s 70 employees had become a group of 370 at Sony Online, so the company has added office space, moving into a second building. But little else has changed at the new/old headquarters. The red Verant Interactive logo even remains displayed on the original four-story, black-glass office building. Executives have done "a fantastic job of keeping a small-company atmosphere in a big company," says Gordon Wrinn, who has been with Verant since 1999. "We’re really flexible. We can really get things done in a quick and orderly way without the needless bureaucracy that sometimes is part of a big company." McQuaid says the combination of Verant’s culture and Sony’s resources has even attracted several of the developers who created Electronic Arts’ Ultima Online, EverQuest’s competitor. "I think we’re pretty well-positioned for the future," he says. To build that future, Sony is pouring EverQuest profits back into designing new games. For one, Sony next year will launch Star Wars Galaxies, a role-playing game that it is developing and will manage for LucasArts Entertainment Co.. Flock says major brands such as Star Wars are needed to help online games keep reaching an ever-larger audience. "We’re not quite at the point where [online gaming makes its breakthrough] and becomes a million players and then jumps to 20 million over the course of two years," he says. But, he adds, "at some point it’s going to do" that. Research firm Forrester Research Inc. says the growing availability of high-speed access to the Internet will help online games account for nearly one-fourth of interactive entertainment revenue by 2004, up from just 2% last year. Already, online gaming is the most successful form of Web entertainment this side of pornography. McQuaid declares: "This industry will grow over the next five to 10 years. I think it will rival mainstream movies." THE WORLD OF EVERQUEST EverQuest is called that for a reason: No one ultimately "wins." Everyone just keeps pursuing whatever quest they set themselves. Don Quixote would love this game. To start, a player chooses a character of a certain "race" (such as barbarian, troll, half-elf, or erudite) and "class" (such as cleric, rogue, wizard, or monk). The player then picks what mix of skills (agility, intelligence, stamina, and charisma) his character will possess. Players even pick a deity for their characters to worship, ranging from Bertoxxlous (lover of death and disease) to Quellious (master of inner peace and enlightenment). All characters live in a universe known as Norrath, where there are 40 worlds, each corresponding to one of Sony’s 40 servers. Every world has many cities, not all of which are friendly to all races, classes, and beliefs. Each world can accommodate 2,500 players at a time. Players set their own quests, whether that is slaying online dragons, casting spells, creating guilds, or just traveling from imaginary city to imaginary city. (Sony Online uses software language filters which prevent players from pitching products, having online sex, and doing other things that are deemed inappropriate.) Many quests require cooperation between players. For instance, to kill a ferocious beast with icy breath named Vox—who lives in a cave at the end of a maze and is protected by ice monsters—would take 40 to 50 well-organized players working together for four to five hours online. Along the way, players must learn to create goods or provide services so their characters can buy food and clothing. Players improve their skills and make their characters more powerful by collecting worldly possessions, such as clothing, weapons, and gold coins. Characters may be killed by other players or by computer-generated characters. Players often get so involved in their characters that they develop their own pidgin-English languages, such as one known as "Fakespeare," contrived to be an Elizabethan patois. At the peak on any given day, there may be 85,000 players online. Players average 20 hours a week at EverQuest, while the really dedicated—more accurately, possessed—log as many as 80 hours a week. The game is so compelling that Sony executives recently asked eBay to prohibit the sales of EverQuest clothing, swords, "powers," and clues going for as much as $3,500. That’s right: People were paying real cash for fantasy goods to help them prosper in the game.
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