Microsoft Notebook: Want to buy a virtual sword?

That was the basic question raised by the announcement last week that the next version of Microsoft's Xbox video-game system will feature an online marketplace. Gamers would be able to spend real money to buy extra levels, special vehicles, additional weapons and other bonus items from game developers.

Analysts predict strong interest in the concept from the companies that make and sell games. The Xbox marketplace would give them another way to derive revenue beyond the initial sale of the underlying video game.

Video-game publishers are generally "looking for as many channels to sell content to gamers as possible," said Schelley Olhava, industry analyst at the IDC research firm.

The system could help Microsoft persuade more developers to make games for the next-generation console. That, in turn, could attract more consumers to the Xbox system. Speaking at the Game Developers Conference in San Francisco last week, Xbox executive J Allard presented the concept as a selling point.

"We're creating a whole new online economy, where you can sell this incremental content," said Allard, an Xbox corporate vice president. The idea, he said, is to give publishers "the opportunity to get right to the customer."

But that could be just the first step toward a more comprehensive Xbox economy: Ultimately, Microsoft says, it hopes to expand the system to let people using the Xbox Live online gaming system buy, sell and trade virtual items among themselves.

For example, someone who spent hours designing a custom car inside a racing game could offer the digital vehicle for sale to other game players.

Microsoft says it envisions many of the deals falling under the general category of "micro-transactions," in some cases selling for less than a dollar.

The concept isn't entirely new to the video-game world. Fans of computer-based role-playing games, such as the popular EverQuest, already buy and sell virtual items related to the games among themselves -- and for real money, in many cases.

There's an active market for virtual game items on eBay, for example.

But Microsoft's move could bring the practice more into the mainstream. More than 1.4 million people already use the Xbox Live service.

The next-generation Xbox Live system will focus initially on giving publishers and developers the ability to sell items to video gamers. But Microsoft also wants the technology to eventually allow for sales from one game player to another, said Xbox executive Scott Henson, who oversees the Advanced Technology Group for the game business.

"We really are excited, longer term, to build that infrastructure and make it available gamer-to-gamer," Henson said. "We think this is going to be one of those keys that unlocks the potential of the audience, where people can participate in games in brand-new ways."

The online marketplace was one of several features of the next-generation gaming system previewed by Xbox executives last week. However, the company hasn't said publicly when it will launch the next Xbox console. Some analysts and others in the gaming industry believe the release could come later this year.

Regardless of the timing of the next generation, one upcoming game will offer at least a rudimentary sense for what a gamer-to-gamer online marketplace could ultimately be like. Forza Motorsport, scheduled for release in May for the current version of the Xbox, will let people swap their custom cars with other gamers online.

However, Henson said, gamers won't be able to actually buy and sell the cars for money under the upcoming version of the game. That type of virtual economy isn't expected until sometime further down the road.

In the next-generation system, the online infrastructure created by Microsoft would make the virtual economy common throughout the Xbox Live system, not just in individual games. Microsoft hasn't publicly given details of the planned system's underlying economics, such as whether it would charge transaction fees.

The idea of publishers selling gamers bonus content such as new game levels "totally makes sense," said Michael Pachter, an analyst with Wedbush Morgan Securities. But he said it's less clear how interested people will be in buying smaller virtual items, or custom creations from other video-gamers.

"If it substantially enhances the experience, then people will do it," he said. "If it doesn't, they won't."

Microsoft Notebook is a Monday feature by P-I reporter Todd Bishop. He can be reached at 206-448-8221 or toddbishop@seattlepi.com

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