Byline: Cynthia L. Webb

The Electronic Entertainment Exposition kicks off in Los Angeles in a few hours, but already some of the gaming industry's biggest guns have announced landmark partnerships.

Microsoft Corp. and Electronic Arts yesterday said that EA will develop games for Microsoft's Xbox Live online gaming service, which Microsoft says has nearly 1 million subscribers. The arrangement boosts Microsoft's position against competing game hardware developers Sony and Nintendo . "Through this long-term agreement, many of EA's major franchises will be coming to Xbox Live, with more than 15 titles expected in the coming months," Microsoft said. The titles include " Madden NFL 2005 ," " NBA LIVE 2005 ," " FIFA Soccer 2005 ," and " Battlefield ."

Colin Sebastian , a SoundView Technology analyst, spelled out what the deal means for both companies. "The lack of EA's popular titles in Xbox Live has been a hole in (Microsoft's) offering, and for EA, they'll be able to gain (market) share in Xbox," Sebastian told The San Francisco Chronicle.

The deal could help Microsoft "gain a more secure foothold in the market for videogames played over the Internet," The Wall Street Journal reported. "The pact marks the end to an impasse between the companies, which have been in on-and-off negotiations about the online business for about two years. It is a breakthrough in Microsoft's quest to establish itself in the online videogame business, which, without EA, was missing some of the most popular games. Online games, which let gamers play against each other on consoles connected to the Internet, are a sideshow to the $10 billion videogame industry. But the market is expanding quickly and is considered an important source of future revenue. Microsoft started its service in late 2002 and has about one million subscribers, about the same size as a similar service run by rival Sony Corp."

"We wanted EA from Day One," said Cameron Ferroni , general manager for Xbox Live, according to The Seattle Times. "It's always been both of the companies' goals to find an agreement that works for us. We're thrilled."

But the paper notes "None of the games is exclusively for the Xbox, which would have been a bigger coup. EA still intends to produce titles for Sony's PlayStation 2 , with whom it announced an exclusive partnership at last year's E3 to develop online sports titles."

More from the Journal: "Though the two companies have mended fences, the way their relationship evolves in coming years will shape whether Microsoft, a relative newcomer to the videogame industry, will thrive or continue to lose bucket-loads of money. The business, which started in 2001 with the debut of its Xbox console, posted a loss of $209 million in the three months ended Mar. 31." * The San Francisco Chronicle: EA, Microsoft Sign Partnership * The Seattle Times: Electronic Arts To Play Online With Xbox * The Wall Street Journal: Microsoft Is Taking Games Up A Notch (Registration required)

CNET's News.com explained more about why EA was playing hard to get for Microsoft's Xbox Live service. "EA, which runs several extensive online services for PC games, was the one notable holdout among major game publishers when Microsoft launched the Xbox Live service two years ago. EA executives objected to the design and business model for Xbox Live, under which Microsoft handles all networking, billing and other infrastructure tasks and game developers pay a flat fee to make use of the service." * CNET's News.com: Electronic Arts Embraces Xbox Live

And more on how EA plans to play both sides, Microsoft and Sony that is. " Chip Lange , vice president of marketing for EA Sports and Games Nation , said his firm will continue working with Sony, and the latest deal only adds to the company's business. ... But until Monday, EA's executives had derided Xbox Live, often likening it to a cable TV company that either refused to pay or paid very little to studios that actually make the shows. All of that changed Monday as EA promised it will have at least 15 game titles on Xbox Live by the end of this year. NCAA Football will be first to go online in July, followed by the hugely popular franchise Madden Football. Not coincidentally, Microsoft had recently announced it was scrapping its own sports lineup," The San Francisco Chronicle reported.

The Seattle Post-Intelligencer wrote that "In competing with Sony online, Microsoft has sought to build a more centralized system, making it easier for game developers to adapt their titles for Xbox Live." The paper also reported that last night's announcement shows that EA "is buying Microsoft's vision of online gaming," according to analyst Matt Rosoff .

And more good news on Microsoft's online gaming plans. The new agreement with EA "comes on the heels of rising sales for the Xbox, a distant second in the global console market to Sony's PlayStation 2. Helped by lower pricing and exclusive games, the Xbox was expected to have outsold the PlayStation in April for the first time ever," Reuters reported.

The San Jose Mercury News puts the numbers -- and competition -- of the two gaming giants in perspective. "While it lasted, EA's disagreement with Microsoft was a boon for Sony, which said it has sold millions of its network adapters that enable gamers to play online games on their PlayStation 2 consoles. Xbox business manager Aaron Greenberg said Microsoft has signed up nearly 1 million subscribers to its gaming service, up from 750,000 at the end of 2003. He said the company expects to have sold between 14.5 million to 16 million consoles by June 30. That compares to about 70 million PlayStation 2 units sold by market leader Sony." * The Seattle Post-Intelligencer: Xbox May Get More Fire Power * Reuters: Microsoft, EA Link Up For Online Video Games

* The San Jose Mercury News: Microsoft, EA Play Nice

In Other xCiting News...

... Microsoft is adding videoconferencing to the online gaming system. "The service currently supports voice chat while users are playing games and in online lobbies. A planned video camera that will plug into the Xbox will be teamed with enhancements in the Xbox Live service that will allow for video chats with up to five other simultaneous users. The video service is set to debut later this year in Japan, with North American and European availability yet to be determined," CNET reported.

Microsoft will also offer downloadable games later this year on Xbox Live, CNET and others reported. * CNET's News.com: Electronic Arts Embraces Xbox Live (Same link as above) * The Associated Press via washingtonpost.com: Xbox To Get Online Video-Phone Upgrade (Registration required) * Reuters: Microsoft to Launch Arcade Game For Xbox

Handheld Brouhaha

The competition between Sony and Nintendo is only expected to intensify at E3 this week. See my Filter column from Friday for more details on how the two rivals are duking it out in the handheld gaming space.

More coverage on the battle between the two companies, from The Wall Street Journal today: "When Japanese game maker Nintendo Co. unveils its latest hand-held game machine today, it will be doing more than answering a challenge from Sony Corp., which is expected to introduce a rival portable machine today as well. With its new Nintendo DS , the company that created Donkey Kong and Mario the plumber is taking a contrarian strategy, going against an industrywide push to make games that increasingly resemble movies and to make game machines that act like high-powered computers," the paper said. "Sony, whose PlayStation 2 is the world's best-selling console, and Microsoft Corp., maker of the Xbox game machine, are expected to wow attendees to this week's E3 videogame conference with lifelike battle scenes and other graphical pyrotechnics their machines offer. Behind the scenes, they will be seeking to woo software developers for a next generation of game consoles that are to be even more powerful." * The Wall Street Journal: Nintendo Steers Away From the Pack (Subscription required)

The Los Angeles Times reminded readers that Sony "is set to unveil its answer to Game Boy : the PlayStation Portable . Based on Sony's top-selling line of PlayStation video game consoles, the long-awaited PSP will let users drive fast cars and shoot enemies. It also can serve as a digital music player and portable video player. As for Nintendo, it plans its own debut today, of DS, for dual screen, a game device with two screens and a wireless connection so that users can play against other gamers and send instant messages. But there's no denying that Sony presents formidable competition for Nintendo. 'No one should ever underestimate the power of the Sony brand in the consumer market,' said P.J. McNealy , who tracks the video game industry for American Technology Research in San Francisco." * The Los Angeles Times: Sony To Nintendo: Two Can Play The Handheld Game (Registration required)

Products Galore

Expect lots of gadgets to come out of E3 this week to boost the playing power of the scores of new and revamped software titles that will be trotted out. The Seattle Post-Intelligencer gives a run-down of a company called MonsterGecko and its PistolMouse FPS , a $69.95 gadget to add a slice of reality to "shoot-em-up-style games." That's what we need -- tools to boost the reality of violent video games. * The Seattle Times: E3 Notebook: Packin' A Pistolmouse

Wi-Fi Swan Song

Microsoft is getting out of the business of selling wireless Internet networking products, CNET's News.com reported yesterday. "Despite quickly becoming one of the leading sellers of wireless networking products, Microsoft has decided to discontinue its entire line of Wi-Fi gear," the news service said. The official word from Microsoft, according to CNET: "After careful evaluation, the Microsoft hardware group has decided to scale back its broadband hardware and networking business. ... Instead, the plan is to apply the knowledge we have gained in that category to future products and services." * CNET's News.com: Microsoft Says Bye-Bye To Wi-Fi

A spokeswoman gave the same rundown to IDG News Service: "Microsoft will sell the remaining Wi-Fi products it currently has in stock, and the company will support its existing products through their two-year warranty period though service beyond that time frame will not be offered." * IDG News Service via NetworkWorldFusion: Microsoft Kills Its Wi-Fi Offerings

Disappearing Ink

Researchers at Swiss security conference Eurocrpyt "last week demonstrated computer-based techniques that can identify blacked-out words and phrases in confidential documents," The New York Times reported yesterday. They tested their technology trick on real U.S. government documents tied to the Sept. 11 investigation and other current events. "The researchers, David Naccache , the director of an information security lab for Gemplus S.A. , a Luxembourg-based maker of banking and security cards, and Claire Whelan , a computer science graduate student at Dublin City University in Ireland, also applied the technique to a confidential Defense Department memorandum on Iraqi military use of Hughes helicopters," the article said. The paper explained how the team uncovered text underneath blacked-out sections, which involves a complex sequence of realigning the document on copy machines, analyzing the type of font used and deducing how many words can be possibly written in a particular font that appears on a particular length on the page that is blocked out. * The New York Times: Illuminating Blacked-Out Words (Registration required)

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