Finishing a big conversion effort, Sony Online Entertainment today launched its fantasy-themed Free Realms online game on the PlayStation 3. The title is the first free-to-play massively multiplayer online game launched on any game console, and it means that Sony can now introduce its pay-as-you-go business model to console gamers.

The effort is a major attempt by a traditional console game company to modernize itself in the age of free content. Most games on the PlayStation 3 cost $60 upfront. Cheaper downloadable titles are available on the PlayStation Network. But Free Realms marries a new kind of business model to the hardcore audience that plays on game consoles.

“This is a major effort on our part that took 18 months to engineer,” said John Smedley, president of Sony Online Entertainment, in an interview.

The marriage shows a lot of business potential, but there are a lot of complications to doing this the right way. Free Realms launched in the spring of 2009 as Sony’s first free-to-play MMO on the PC. Previously, Sony charged monthly subscription fees. With free-to-play (a model popularized in Asia and now going strong on Facebook), users play for free and pay real money in small amounts for virtual goods such as better weapons or decorations.

San Diego, Calif.-based Sony Online Entertainment got more than 17 million registered users for Free Realms, and while Sony doesn’t disclose revenues for the game, Smedley said that it monetizes well with the free-to-play model. So bringing the game and its pioneering model to the console became a priority.

Smedley said that Free Realms, a fantasy role-playing game where you can create your own cartoon-like characters and explore a vast virtual world, works well in the living room because it is a family-friendly game. The company began work converting Free Realms and DC Universe Online from PC games to console games about the same time.

It was tough work because PC players use a mouse and keyboard, while console users play with a controller. Communicating in an MMO is very important (players have to team up against enemies), but there wasn’t a good way to do it with the consoles. Some players connect a universal serial bus (USB) keyboard to their consoles, but most don’t. Fortunately, Smedley said, the number of players using internet voice communications is very high on the PlayStation 3. So most of the communication in the virtual world can now be handled via voice conversations.

DC Universe Online, a comic superhero MMO with a traditional subscription fee, is also available now on the console and the PC. Smedley said that console gamers are now spending twice as much time playing the game as the typical PC player.

Because of the way the games had to be built, the Free Realms players on the PC are separate from those on the console, as if they were in parallel worlds. That’s one of the trade-offs of having a different online infrastructure, Smedley said. But it’s kind of a small miracle that Sony has been able to pull this off in the first place.

Many MMOs have been announced for the consoles in past years, and a few have launched. Microsoft has had unusually bad luck in this respect, commissioning a Marvel Comics MMO for the Xbox 360 that was ultimately canceled.

Free Realms has a lot of variety to offer players. There are more than 30,000 wearable combinations of gear for players. They can assume roles as wizards, blacksmiths, medics, archers, warriors, ninjas, brawlers, chefs, miners, demolition derby drivers, kart drivers and more. There are also more than 800 quests for users to play. While the main business model is free-to-play, Sony is also offering subscription fees for the game if users prefer, at $4.99 a month.

Now that Sony has finished these two console MMOs, it will be much easier to do others in the future, Smedley said. He can’t announce anything, but he expects Sony will do more and explore new platforms for MMOs as well.