A recent edition of Fortune describes innovations in computer gaming that are likely to be as disruptive to incumbent players like Electronic Arts and Activision as the move toward cloud computing is to providers of shrink-wrapped software. While the incumbents have been engaged in the innovation equivalent of an arms race – ever more powerful equipment to drive ever more powerful graphics to drive the addictions of armies of young, male, gamers – alternatives are springing up all around them.

Nexon and MapleStory
Nexon, a privately held Korean company, has introduced a free-to-play role-playing game called MapleStory here in the U.S. It apparently has over 5 million active players in the U.S. already, and far more internationally (some 83 million worldwide). The sweet spot that MapleStory goes for are young girls who spend hours developing their on-line characters and interacting with one another through the medium of the game. How does MapleStory make its money? Through a variant of the “Freemium” (as Wired’s Chris Anderson recently put it). You get the players hooked on the game, but charge them for add-ons that make the games more satisfying. In the case of MapleStory, it’s purchasing virtual fashions and accessories via pre-paid cards sold at Target. Amazingly, these little expenses are up to $1.6 million a MONTH!

WildTangent drives profits two ways
In the world of creating substitutes for player-based games, a company called WildTangent offers about 500 free-to-play titles that draw 12 million U.S. visitors to its website each month. Offering graphics that are far less than one might get on a videogame console, but which are probably acceptable to many kinds of casual users, the company makes its money in two interesting ways. First, by displaying ads. Second, by offering ways of avoiding the ads! The first way of avoiding the ads is to buy a $20 version of the otherwise free games. The second, and this is innovative, is to buy a prepaid card at (you guessed it) Target that allows you to turn off the ad displays during the games.

The Wii
And no mention of developments in the world of gaming would be complete without noting that the Nintendo Wii, a cheaper, less graphics intensive platform has been wildly popular since its introduction. A classic disruptive technology, the Wii meets more sophisticated players at acceptable levels on some dimensions (such as graphics) but introduces a new dimension of performance competition, the ability to physically interact with the machine, which also makes new types of games possible. Further, it took hold among entirely new groups of users (what Clayton Christensen famously calls “non-consumers”) such as girls and women who turned up their noses at the gory combat games favored by their male peers.

In our book, MarketBusters, we talked about how innovations such as these in gaming can either change the "unit of business" for an industry and/or change its "key metrics," which are the measures of how processes work that ultimately drive profitability. Clearly, in gaming, there are entirely new business models afoot which might drive the next generation of breakthrough growth.