More ground for gaming

NEW YORK (CNNMoney.com) -- Microsoft, Sony and Nintendo are making significant progress in the battle for the living room. A new study by Nielsen finds more than 41 percent of U.S. homes have a gaming system - an 18.5 percent increase from 2004.

Nearly 46 million homes were console homes in the fourth quarter of 2006, giving more than 148 million people the ability to pick up a controller whenever they wanted.

Want more video game news and commentary? Click the glazed eyes.

A fair number, it turns out, chose to do just that. In that same fourth quarter period, nearly 94 million Americans turned on their PlayStation, Xbox or other gaming device. At any given moment of the day, Nielsen said, 1.6 million people are using a video game system.

Surprisingly, the increased proliferation of gaming systems has not meant a substantial decline in television viewing, said Nielsen. The average console user watched just 18 minutes less of TV per week in the fourth quarter of 2006 than someone who doesn't own a video game system.

That doesn't mean controllers are gathering dust, though. The average user (a broad category of people ages two and older) use their game machines for 2 hours and 15 minutes per day.

Nielsen has previously announced plans to launch a tracking service for console usage. Later this year, the company, which tracks ratings for television programming, will report on the popularity and average user of specific games and systems.

The Nielsen report comes as good news to game makers, who have been trying to earn a space alongside the stereo and cable box for years. As video games become more and more a part of mainstream culture, the possibilities for additional revenue streams increase exponentially.

While still in its infancy, advertising is expected to become a notable source of income for publishers, which has generated some substantial deals. Microsoft (Charts), last year, paid $200 million to purchase in-game ad company Massive Inc. And in February, Google (Charts) bought Adscape Media Inc. for $23 million. Publishers such as Ubisoft, THQ (Charts) and Take Two Interactive (Charts) utilize ads in their titles.

Parks Associates said 2005 revenue from dynamic in-game ads was $80 million in 2005 and forecasts it could grow to $605 million.

Online connectivity also continues to be a growing part of gaming culture. Nielsen's study found that since the end of 2003, the number of houses capable of connecting to the Internet has grown 77 percent - a number that's not as surprising when you factor that the last two generations of home consoles have offered online services built in or as an add-on. At present, Nielsen estimates that 16 percent, or roughly 4.4 million households, are subscribed to a service to connect their video game machines to the Internet.

The report did not consider online numbers for the PlayStation 3 and Nintendo Wii in its count, since both were released so late in the fourth quarter of 2006.

Beyond playing games with friends and strangers, this makes the console a more viable multimedia machine. Microsoft currently sells full-length movies and television shows via its Xbox Live Marketplace. Sony (Charts) will likely follow-suit in the coming months, though it has not yet made any formal announcements.

Who's playing? No surprise there. It's mostly men. Nielsen said 77 percent of the average audience for games is male - mostly under the age of 34.

Morris is Director of Content Development for CNNMoney.com. Send him and email at chris.morris@turner.com.