Video game giant Electronic Arts is about to try something radical: Later this year, the company plans to give away the newest game in its popular Battlefield franchise.

The move marks the first time a company has released a mainstream video game title for free in North America and the move could change forever the way video games are sold.

And what happens to video games matters.

According to the research firm NPD Group, sales of video games in the U.S. shattered records set in 2005, passing $12.5 billion U.S. last year. In Canada, sales of video games hit $1.5 billion, an increase of 56 per cent over 2006, or more than four times what Canadian movie theatres took in at the box office.

While EA will be the first major game studio to eliminate the sticker price and offer its products for free, others are not far behind.

The television industry is already using free online games to promote programming: Walt Disney Corp. plans to spend as much as $100 million U.S. over the next few years on such ventures. Disney's latest entry into the free-game market is based on its popular Pirates of the Caribbean franchise. While the game is offered for free, players are encouraged to spend $9.95 U.S. in subscription fees to get access to more weapons, better ships and special islands.

Time Warner Inc. has also announced that it will spend as much as $100 million over the next two years to create online video games that generate revenues through advertising or subscription fees. The company has a stake in the popular Internet game Gaia Online, which attracts more than three million players every month.

EA's new game, called Battlefield Heroes, will be supported by advertisements that appear on-screen between game levels and in online forums related to the game. It will also offer players the opportunity to pay a small fee -- likely between $2 and $5 -- for upgrades to their weapons or armour.

"As an organization, we felt that this was something that would have mass appeal," said Tammy Schachter, a spokeswoman for EA. "Traditionally, you buy a game in a store and you put it in your gaming system or computer and you pay $50 or $60 for the game. This is a downloadable, entirely free product based on the Battlefield franchise."

The market for video games is at an all-time high, but sales of games for PCs are slipping because of piracy and free "casual games" available online.

Handing games out for free, with the intention of making money on in-game ads, could make the video game industry even more profitable.

EA is headquartered in California, but it has its largest office in Vancouver. It has already tried giving away games in Korea, where the company began offering its popular FIFA Soccer game for free in 2006.

Gerhard Florin, EA's executive vice-president for publishing in the Americas told the New York Times earlier this month that the game has attracted more than five million players and is making more than $1 million U.S. a month in sales of ads and extras, such as special virtual cleats and jerseys that players can purchase for their in-game characters.

The company may be on the right track. A survey of 1,500 gamers released earlier this month by RealNetworks -- the company that runs the popular online gaming website RealGames -- found that 90 per cent of gamers said they would be willing to watch advertisements before or after playing a game, or during breaks in play, if it meant they could play the game for free.

The gaming industry is introducing "free" ad-supported games to maintain its grasp on people's living rooms at a time when movie studios and electronics companies are working to stream movies, television shows and music straight into people's homes over high-speed Internet connections, competing for gamers' time and attention.

"EA is really setting a precedent here. It's going to be interesting to watch," said David Riley, senior manager with NPD.

"It's an established franchise and an established brand. Ad-supported gaming seems to be the natural progression of the industry. You will pick up a lot of gamers. Consumers, if they like the experience, they will adopt it very quickly."

There have been three Battlefield titles released to date. In EA's Battlefield 1942, players assume the role of an Allied soldier fighting Nazis. In Battlefield 2, players take part in a fictitious war set in the present. In Battlefield 2142, players assume the role of infantry in a futuristic war. The franchise has been hugely popular, selling more than 10 million copies.

"Battlefield is one of the most successful games in our portfolio," said EA's Ms. Schachter. "We wanted to start with something that would have universal appeal. This game has zero barriers to entry."

Ms. Schachter said EA has been extra careful to craft Battlefield Heroes so that it appeals to all gamers.

The game designers have thrown aside the realistic graphics found in other titles in the franchise, instead bringing in cartoon-like graphics similar to those seen in the Walt Disney movie The Incredibles.

Player controls have been made much simpler and EA has introduced a match-making system that allows casual players to log on and play with others at their own skill level.

The game will be released on the PC platform. The company has not said whether it will make the game available for Apple computers.

Ms. Schachter said EA is considering releasing new titles in other popular game franchises using the ad-driven revenue model, but she would not elaborate.

Ottawa's Fuel Industries Inc., which has carved out a niche for itself by offering branded video games for companies such as Pepsi Cola Canada Ltd., General Motors Corp. and McDonalds Restaurants, said the move will be good for business.

"These announcements you see with big, powerful, successful companies like Electronic Arts, for us it's great because it legitimizes the space," said Warren Tomlin, chief creative officer at Fuel. "I think one of the reasons this space is so great for advertising is ... it actually enhances the realism of the game."

Mr. Tomlin pointed to Project Gotham Racing 3 for the Xbox 360. In the game, players take to the streets in souped-up cars and race through cities loaded with billboards and storefronts, with newspapers and empty drink cups flying around. All of this provides a fantastic opportunity for advertisers, according to Mr. Tomlin.

The market for advertisements within video games is expected to hit $732 million U.S. by 2010, according to the Yankee Group research firm.

Microsoft and Google have noticed the financial potential of providing in-game ads. In 2006, Microsoft Corp. acquired New York's Massive Inc., the world's largest provider of in-game advertising, in a deal that has been valued at between $200 million and $400 million U.S. Massive places advertisements on coffee cups, billboards, newspapers and even T-shirts within video games.

Google Inc. has also moved into the in-game advertising business. The company acquired Ottawa's Adscape Media Inc. last year for an estimated price of $23 million U.S.