Millions of people are flocking to inhabit virtual online worlds, says research by analysts Screen Digest.
Final Fantasy Online is one of the most popular worlds
The market for massively multiplayer online games (MMOGs) in the West is now worth more than $1bn (£511m)
Games such as World of Warcraft and worlds like Habbo Hotel are fast becoming "significant platforms" in the converged media world, the report said.
"There's a whole ream of different genres and spaces emerging," said the report author Piers Harding-Rolls.
Revenues from subscriptions to MMOGs will hit $1.5bn by 2011, he said.
But the growth in MMOGs remains limited compared to developing markets such as video on demand, which is expected to be worth $11.4bn from revenues in four years' time.
The range of MMOGs has started to diversify in recent years with new genres and types of games. There has also been an expansion in the different ways the games generate revenue.
Subscription MMOGs still dominate the market, accounting for 87% of all revenues, said the report, which examines the market only for North America and Europe.
World of Warcraft, which has eight million subscribers worldwide including three million in the West, in which it has more than a 50% share of the market, it said.
TOP FIVE MMOGs*
World of Warcraft (above)
Final Fantasy Online
City of Heroes/Villains
*determined by subscription revenue
Source: Screen Digest
"Over the last couple of years, certainly in Europe, the MMOG market has mushroomed partly due to the success of World of Warcraft," said Mr Harding-Rolls.
"There are lots of things driving growth. There has been a shift from what were traditional, core games into a more casual space."
Mr Harding-Rolls said a number of new MMOG genres were emerging, including:
Virtual world building games, such as Second Life
Virtual pet rearing games, such as Neo pets
More casual MMO puzzle games
Sports games in which you have to buy items and build up your character
"The inherent social and community-building aspects of MMOGs are widening the sector's influence on other social networking sectors and online games markets," he said.
Earlier this month at the Game Developer's Conference, in San Francisco, the developers of MMOGs predicted that big media companies would be moving into the market.
The Screen Digest report agreed, predicting that "traditional media companies are seeking to bring their non-gaming brands into the 3D online environment.
"These companies aim to build online communities, increase brand awareness and gain access to key consumers that can be monetised to offset falling offline advertising revenue."
Mr Harding-Rolls predicted that the continued roll-out of broadband and the availability of next-generation consoles would help drive MMOG growth.
More than 10 million people will subscribe to MMOGs by 2011, and many millions more will play online games driven by other payment schemes, such as advertising and virtual purchases, the report predicted.