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Workers in the development department of Exenet arrive at the office each morning and start to play games. Computer game makers around the world send the games they have finished developing to the company's headquarters in Petah Tikva and Exenet's staff checks each detail of the games. The workers then turn each game into a "location" game, one that is available only via the Internet, and can be accessed only by paying game portal subscribers.

Representatives of Exenet note several advantages to playing games on the Internet. Firstly, a gamer can play a game as much as he wants to, after hooking up to the Internet, and can stop whenever he's had enough. There are no guilt feelings for the money spent on a game that has become boring and no problems with bugs, reversed Hebrew fonts or slow operation on different versions of Windows.

Exenet makes sure that the games download smoothly. Exenet took its name from the ending of application file names (exe) and "net," which is associated with many high-tech companies. Tal Sagi, Exenet's product manager, relates that the company began as a developer of security systems and medical and multimedia technologies, but switched to developing Internet application technology after a few years.

Exenet developed technology that converts computer games, as well as other useful programs, from shelf products to Internet products. A study conducted by the company revealed that the average computer gamer buys five to eight games a year at a cost of $300-$400. "Players would much rather save that expense and pay a subscription fee to a portal where they can find many games," says Ari Last, Exenet's marketing manager for Europe.

In 1999 Exenet raised $5 million from venture capital funds, and a further $23.5 million in 2000, from both local and American VC funds and Bezeq. Strategic partners, such as America Online (AOL), also joined the company. Today Exenet has 85 employees, 70 of whom are in Israel while the others are in sales and marketing centers in Maryland and Hong Kong. Exenet also has marketing centers in Switzerland, Korea and Singapore, in conjunction with other telecommunications companies. A cooperation agreement was recently signed between Exenet and the main Swedish gaming portal MGON, which markets broadband games throughout Europe.

Similarly, Exenet has signed a commercial services contract with British Telecom. Exenet's business model is based on a share of the revenues from monthly subscription fees paid by gamers to the portals. The company also plans to sell gaming statistics data that it has compiled from commercial customers.

The conversion of games puts Exenet in the center of the gaming industry. The company is in constant contact with the 15 largest computer game manufacturers, including Electronic Arts, Disney, Midas and Eidos. Sagi and Last feel that the company will be able to provide fairly accurate data regarding the rating and the demand for various games and that this data is valuable to many content companies.

Exenet also hopes to generate advertising revenues from a display screen, developed by Exenet, that will appear on gamers' computer monitors while a game is downloading from the Internet.

"When we meet with game publishers," says Last, "we explain to them that although Exenet is replacing the purchase of games with a monthly subscription fee, it is preventing piracy. We have a dual-action security system - we don't allow offline games and we make piracy a bother that is not worth the effort."

Pirated games, which are particularly prolific in Israel, China and in Eastern European countries, are a real threat to publishers. The pirated software market, which includes games, is estimated to have an annual turnover of over $10 billion. The possibility of gnawing away at that market, even marginally, attracts publishers both large and small.