A million Internet users have flocked to the fantasy world of “Rift” since its March release, in a trend that threatens games consoles such as Sony Corp. (6758)’s PlayStation and Microsoft Corp. (MSFT)’s Xbox.

Trion Worlds Inc.’s “Rift” costs $50 for initial access to a space where customers can link with other gamers to fight fantastic creatures and each other. By 2013, revenue from games that can be played online or on a mobile device will jump 50 percent to $32.6 billion, overtaking those of console games for the first time, according to PricewaterhouseCoopers LLP.

Trion and rivals such as Activision Blizzard Inc. (ATVI), whose titles include “Call of Duty,” are aiming for a bigger share of that market as they flaunt their latest hits this week at Gamescom in Cologne, Germany, Europe’s largest video-game fair. The battle is also heating up among hardware makers, with consoles that only enable games probably losing ground to connected devices, according to Microsoft, whose Xbox 360 was the top-selling console in the U.S. in June.

“The impact of smartphones and tablet PCs is a watershed event for the console games developers,” said Reimar Mueller, a consultant at PwC in Frankfurt. “When you look at the handheld consoles, like the Nintendo DS, they are limited to playing games, whereas if you buy a smartphone, it’s an entertainment device that lets you do everything.”
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U.S. retail sales of packaged games and hardware fell 26 percent in July, researcher NPD Group said. Consoles accounted for 67 percent of video-game sales in the U.S. last year, or $10.3 billion, according to PwC figures. In Asia, console games revenue contributed to 34 percent of the total, or $7.7 billion.

“The overall console market is stagnating,” Oliver Kaltner, who is responsible for Microsoft’s game business in Germany, said in an interview in Cologne. “If you are offering gaming consoles only, this might limit your sales potential for the future because consumers expect more. They expect connection to their movies, they want to connect with their friends and families.”
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