Online Video Game Studio Red 5 Raises $18.5 million

Red 5 Studios, an online video-game developer led by members of the team behind the wildly popular "World of Warcraft" game, said on Monday it has raised $18.5 million in venture capital from Benchmark Capital and Sierra Ventures (Reuters reports).

"World of Warcraft" from Vivendi's Blizzard Entertainment has a subscriber base of more than 6.5 million globally. Red 5 is already working on a massively multiplayer online game for Webzen, Inc.

Mark Kern, Red 5's chief executive and former team leader on "World of Warcraft," said his California-based game studio will create original games for online game operators and distributors -- much as Pixar Animation Studios did in the movie world with its animated films such as "Toy Story" and "Finding Nemo".

Benchmark General Partner Bill Gurley predicted that massive online games like "World of Warcraft" will become a dominant form of entertainment. "Major media companies are paying attention in a major way," said Gurley, whose firm's investments have included "Second Life" virtual reality game maker Linden Lab and mobile game maker Jamdat, which sold to video game publishing giant Electronic Arts Inc. earlier this year for $684 million.

In another survey of the video game market, Bank of America sees short-term growth for video games, but says that console price cuts needed to attract users. More than 40% of the survey's respondents said they planned to buy the Wii soon, compared with 33% for the PS3 and 14% for Microsoft's Xbox 360.

Sony's PlayStation 3, at $500 and $600, is the most expensive video game console on the market today. It was released in the U.S. on Nov. 17 amid long lines and shortages, and sold 197,000 units during that month, according to market research company NPD Group. Nintendo's Wii, at $250, sold 476,000 units between its Nov. 19 launch and the end of the month, according to NPD's figures. 

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