Video Game Industry

On a warm Monday afternoon three months ago, the producers of the hit video game Call of Duty found their offices under invasion. Security guards with Secret Service-style radio earpieces showed up on the second floor of Infinity Ward headquarters in Encino on March 1 and refused to tell employees why they were monitoring the entrances. Staffers congregating in the hallways suspected it had to do with the mysterious absence that day of their longtime bosses Jason West and Vincent Zampella.

Not too long ago, many in Hollywood would never have heard of Nintendo North America Inc. President Reggie Fils-Aime. Now that video games are rivaling movies and other media choices for consumers' time and money and Nintendo has skyrocketed back to the top of its industry, few could dispute that he leads one of the country's top entertainment outfits. Nintendo's Wii, best known for its user-friendly controller that senses player's movements, has sold nearly twice as many units as Microsoft's Xbox 360 and Sony's PlayStation 3. Nintendo's DS, meanwhile, is far and away the most popular portable gaming device on the market.

The video game industry eked out a 4% sales gain in the U.S. last month, rising to $5.32 billion as shoppers snapped up nearly 2.8 million copies each of Call of Duty: Modern Warfare 2 and New Super Mario Bros. Wii. But the uptick in the crucial holiday shopping month couldn't counter an otherwise bleak 2009, which saw sales of video games, consoles and accessories total $19.66 billion, down 8% from 2008, market research firm NPD Group said. December capped a stomach-churning year for the game industry, during which retail sales fell in eight of the 12 months, leading several major publishers to cut costs and workers.

Entertainment companies need to further restrict the way violent content is marketed to children, the Federal Trade Commission declared in a report released Thursday. Although the report says the film and video-game industries have "devoted substantial efforts" to their rating systems, the FTC recommended that those groups and the music industry expand their self-policing efforts. A major area of concern identified by the agency is the growing availability of unrated or "director's cut" editions of films, which the report says makes it harder for parents to select movies appropriate for their children.

Hammered by a steep drop in the sale of traditional packaged video games, Electronic Arts Inc. on Monday said it would cut 1,500 jobs, more than 16% of its workforce, even as the game publisher announced plans to acquire online game developer Playfish Inc. in a deal valued at up to $400 million. The dual moves -- one aimed at trimming expenses by about $100 million a year and the other at increasing profits -- came as the Redwood City, Calif., firm released its fiscal second-quarter earnings showing a 17% decline in revenue from its packaged games business, reflecting an industrywide malaise.

In January, Stephanie Barish took her son to a birthday party and made the fortuitous choice to wear a T-shirt with the logo for Indiecade, a festival she runs that is dedicated to independently made, artistic video games. While there, she met a fellow parent, Scott Malsin, who was then the mayor of Culver City. He asked what the T-shirt meant and was immediately intrigued. "I wasn't aware of that world at all, but as we spoke it immediately appealed to me, and I asked her if she would think about holding it in Culver City," said Malsin, who's now on the City Council.

The recession is hammering the video game industry. Marking the sector's fourth consecutive monthly decline, sales of video games and consoles in the U.S. fell 31% last month to $1.2 billion, down from $1.7 billion in June 2008, according to a report released Thursday from market research firm NPD Group Inc. It was the largest monthly decline since September 2000, when industry sales slumped 41%, said NPD analyst Anita Frazier.

Reflecting their disparate positions in the video game industry, Sony on Tuesday tried to get gamers amped up while Nintendo told them to chill out. Red-hot game maker Nintendo unveiled a new device for its No. 1 Wii console called the Wii Vitality Sensor, which clips to players' index finger and feeds their pulse into games.