The number of people playing games on the internet is set to explode over the next five years.

About 114 million people are forecast to be gaming online by the year 2006, says a report by US market researchers DFC Intelligence.

The gaming industry sees playing against opponents over the internet as the industry's new growth area.

But online gaming is still in its infancy, with experts saying it will be some time before it becomes part of the mainstream.

Making money online

"Online games should garner significant usage over the next few years," said DFC President David Cole. "The major question mark is whether individual companies will be able to monetize that usage."

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The report points out that the top online games are now able to generate revenue in excess of $100m each.

"The end of 2001 saw another major success story with the release of Mythic Entertainment's Dark Age of Camelot, one of the fastest selling online games of all-time," said Mr Cole.

"This could bode well for some of the big budget online games being released in 2002."

Console wars

Up to now, most people have been playing online games through their computers.

PlayStation 2 has online ambitions

But game console manufacturers are looking to muscle into this market. Microsoft has already announced ambitious plans to launch a global interactive gaming network for its Xbox, at a cost of $2bn.

And electronics giant Sony is offering a network adapter for the PlayStation 2, allowing for both low and high-speed internet connections.

The DFC report predicts that about 23 million consumers worldwide will be playing console games online by 2006.

"Microsoft's Xbox Live service is probably the biggest investment in online games yet. It is likely to be a major indicator of the future of console online gaming," said Mr Cole.

Some analysts are cautious about the potential for online gaming.

They say that online games will take years to become more than a niche market as they are largely dependent on the availability of broadband.