The digital gaming industry is gathering in Los Angeles for the Electronic Entertainment Expo, known as E3, which opens on Tuesday.

The conference and exhibition will bring together about 62,000 video and computer game programmers, marketers and other game industry professionals.

The industry has become a huge earner world wide, defying the technology slump to bring in an estimated $9.4bn (�6.4bn) in US sales during 2001 - a 40% jump from the 6.6bn (�4.5bn) spent in 2000.

E3 brings together a fiercely competitive sector

Game software and the new online gaming market are likely dominate the event at the giant downtown Los Angeles Convention Center, which will be hosting representatives of 420 companies.

On Monday, the new entrant to the market, Microsoft, announced it was investing a billion dollars in online gaming, which it considers to be the sector's new growth area.

Online gaming claims to offer a new level of excitement and possibility to users, letting them wage virtual aerial dogfights and lay waste to whole planets with like-minded users from anywhere in the world.

But some analysts say that online games will take years to become more than a niche market, dependent as they are on broadband availability.

Giants

"At the end of the day, online console gaming is going to be a very small market for the next couple of years," said Schelley Olhava, senior analyst market research firm IDC.

Microsoft is also trying to expand market share in the "console" market, dominated by giants Sony and Nintendo.

Currently, Sony's PlayStation 2 is the market leader among consoles.

Microsoft's Xbox is the new console on the block

And last week Sony, which has already sold more than 30 million units, cut $100 (�69) off the US retail price of its $300 (�206) console, sparking similar reductions by Microsoft and Nintendo.

Another growth area expected to be much in evidence at E3 is game publishing, with the producers of games software seeing record revenues.

The number one game publisher Electronic Arts, based in northern California, reported revenues of $1.7bn (�1.2bn) in the financial year 2001-2002 - grabbing 16% of the market.

An estimated 4,000 computer gaming professionals now live in so-called Silicon Valley in northern California, once the home of silicon chip makers, then the ill-fated dot.com industry.

Regulation

"The Silicon Valley could eventually be renamed Game Valley," said Doug Lowenstein, head of the Interactive Digital Software Association.

But one cloud on the horizon for electronic games publishers is regulation.

US politicians are becoming increasingly concerned about the content of games such as Grand Theft Auto 3, which lets users play at being inner-city criminals, gunning people down and fighting with pursuing police.

Sony's PlayStation 2 is the console market leader

The popularity of the game has made its US publisher, Take 2 Interactive, number three in the game publishers' ranking, just behind Nintendo and Electronic Arts.

But California congressman Joe Baca has become concerned about he game's influence.

"When kids play video games, they assume the identity of the characters in the game, and some of these characters are murderers, thieves, rapists, drug addicts and prostitutes," he said recently.

Mr Baca is now trying to introduce legislation that would ban the sale of adult-themed games to those under 17.

Another route to riches is offered by Grand Theft's rival in the game charts: Electronic Art's the Sims, a best-selling game that lets users build and nurture a family.

The potential effect of any regulation is likely to be one of the major themes at the E3 conference, which runs from Wednesday to Friday.