By Darren Waters
Technology editor, BBC News website
Sony's PlayStation is to challenge Microsoft's Xbox in its one undisputed area of dominance - the online world.
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The PlayStation 3 will be "network ready" out of the box when it launches in November and will offer a range of services similar to Xbox Live.
"The entertainment world is changing," said Sony's Jamie MacDonald at a conference in London, "and gaming is moving to a network-centric world".
Speaking to developers, he said online games would transform the industry.
Mr MacDonald, vice-president of Sony Computer Entertainment Europe's Worldwide Studios, said: "The PlayStation 3 has been designed so that the network experience is part of the PlayStation experience.
"It is easy to connect, easy to download files."
He said development studios had to re-think their strategies for games releases, arguing that the online space gave them a powerful new relationship with studios.
He said: "But the relationship will only start at the point of sale in the network-centric world. Developers have to change their whole approach."
By 2009, the online games market is expected to be worth about $14.9bn annually.
Mr MacDonald said services such as downloadable content, upgrades and episodic content meant developers would no longer be able to say a product was finished once it had been released.
He said bigger companies would be ideally placed to deal with the extra physical and financial resources needed to develop for a next-generation console.
Smaller companies and freelance staff could be used as outsourced talent to work on specific elements of a game.
He said: "There is room in the network-centric world for large developers producing 20-hour triple AAA titles and for smaller developers to work on smaller projects."
Sony has launched an Electronic Distribution Initiative (EDI) which, said Mr MacDonald, could be used by smaller companies to develop titles and content for the online audience.
Microsoft's Xbox Live service is well established
He likened the material produced through the EDI to low-budget, independent movies.
Xbox Live, Microsoft's online service, has grown in the last four years to incorporate game demos, trailers and movie trailers alongside offering an online gaming experience with downloadable content and extras.
Peter Moore, corporate vice president of the Interactive Entertainment Business in the Entertainment and Devices Division of Microsoft, described Xbox Live recently as the "key weapon" in the next generation console battle.
He said gamers were moving from being hardware focused to service focused and said Xbox Live offered gamers the best online services.
Mr Moore speaking at a conference in Barcelona last week, described Xbox Live as "widely admired, often copied".
Like Xbox Live, Sony's network service is to be holistic, offering gamers a consistent experience across games with options such as friends lists and match-making.
Unlike the Xbox 360, the PlayStation will incorporate a browser so that gamers can surf the web via their console.
"Part of the reason behind having a browser is because being able to connect to the web is part of the network experience," said Mr MacDonald.