Tat, I think you're half-right here -- the mass news media are selling fear, but they're not looking to eliminate a rival. They're selling fear for its own sake -- "be afraid" gets people to watch the TV news.

The other motivation: The mainstream media is powerfully normative. They ridicule and condemn oddball behavior. As long as MMOs are a niche pastime, the mainstream news media will be there to point a finger and laugh at MMOers, or condemn the community for being a haven for pedophiles, pornographers, perverts, organized crime, drug dealing and terrorism.

The good news is that this will pass. The bad news is it'll take 10-15 years, until MMOs become mainstream and the mainstream media itself is playing. At that point, MMO gaming results will probably be included as part of sportscasting.