"Currently, sales and subscriptions to Web-based games generate $353 million. Online-game advertisements generate between $450 million and $550 million, the research company said.

One segment that's giving the online-game industry a boost is "massively multiplayer online games." According to the Yankee study, in the United States alone, there will be 5.2 million people subscribing to these games by 2008, generating $556 million in revenue. By comparison, the approximate number of people subscribed to these games in 2003 was 2.4 million, with a revenue base of $209 million.

Asia is said to be the next big market for massively multiplayer online games. While most retail game publishers in the United States have so far ignored Asia because of widespread piracy there, that's less of a problem with games that have huge subscriber bases, because the Bulk of the revenue from those games is derived from monthly subscriptions. Many online-game developers have been eyeing China because of its sheer market size. "