SAN FRANCISCO (CNN/Money) - Tomorrow, the annual Electronic Entertainment Expo -- better known as E3 -- opens in Los Angeles. And though the convention floor will be packed with geeks, gamers, and businesspeople, few attendees will be as busy as David Devine, CEO of Butterfly.net. "I have a lot of meetings scheduled," he said from his office in Shepherdstown, W.V., a few days before the convention began.

It's easy to see why. On May 9, Butterfly.net launched its "gaming grid" network system and a new partnership with IBM (IBM: down $1.24 to $84.45, Research, Estimates). Last August, you may recall, Big Blue announced its "Grid Computing Initiative," a system of networked computers that could be physically located anywhere in the world, but made accessible via the Internet for client companies in need of instant, always-on computing power. At the time, Dave Turek, IBM's vice president for deep computing and Web servers, suggested that grid computing would "find its way rapidly into more conventional commercial development." With the announcement of the Butterfly.net partnership, that forecast is coming true.

"This is the first ray of light for a technology that's been developed in a lab environment," says Scott Penberthy, vice president for business development at IBM. "Now it has immediate application to a real commercial need in business."

The Butterfly.net program is just one of many new initiatives taking place in the gaming world -- one of the few technology sectors that wasn't devastated by the implosion of the last three years. Today, game companies must make huge gambles when introducing new games with strong online components. Rolling out server capacity, fiber connections, and customer support is a very costly proposition when success depends on the fickle whims of gamers' tastes and preferences. If a game proves too popular (or not popular enough), cost control can be a major problem.

Given these up-front cost risks, game publishers have been hesitant to roll out major online initiatives. "There's a lot of potential in the online space," says Stan McKee, chief financial officer at videogame maker Electronic Arts. "But it's going to take some time until it's a significant part of the business."

For now, here's how the Butterfly.net application works: The software links servers together in a new way, distributing the workload more efficiently and at a lower cost. What's more, with the hardware muscle of IBM behind it, Butterfly.net can essentially act as an outsourcing firm for other game publishers. If a game turns out to be a smash hit, a company can quickly call in more capacity on the fly.

Game console manufacturers such as Microsoft (MSFT: down $2.02 to $54.01, Research, Estimates), Nintendo, and Sony (SNE: down $1.16 to $57.65, Research, Estimates) are ever-so-slowly rolling out online game plans, but none have launched yet. "The real key here is getting the cost low enough and leveraging the value of technology across games," says Butterfly.net's Devine. Using the Butterfly.net system, Devine estimates, he can get costs down to $1 per player per month, down from the current cost of $6 to $10 per player per month.

"That would definitely be useful," says EA's McKee.

Butterfly.net has already met with all the major console manufacturers, and will likely meet with them -- and a host of other video game firms -- again this week.

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The E3 crowd is already buzzing about the wave of console price reductions that swept the industry last week. On May 14, Sony announced that it was cutting the price of its Playstation 2 by a third, to $199. Microsoft quickly followed suit, matching that price for its Xbox gaming console. "The race is on to grab market share," says Michael Gartenberg, research director with Jupiter Research.

One thing's for sure: The gaming market is moving quickly, and it shows few -- if any -- signs of slowing down. McKee points to a recent Media Metrix study that found that visitors spent 4.6 billion minutes at his company's site in March. That figure puts EA fourth overall, behind only AOL (AOL: down $0.60 to $19.38, Research, Estimates), MSN, and Yahoo! (YHOO: down $0.83 to $17.17, Research, Estimates). Impressive numbers, for sure. But they also may explain why EA's stock currently trades at a price/earnings ratio of roughly 89.

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