Video Games

Only a few years ago, bigger guns, badder enemies and louder explosives mattered most in video games. Now, small is beautiful, and Apple Inc.'s iPhone is largely responsible. The surprising emergence of the iPhone and its phone-less sibling, the iPod Touch, as hand-held game consoles has started to change the dynamics of the $40-billion game software industry.

The Hollywood moguls behind such films as "The Dark Knight," "Watchmen" and "Pirates of the Caribbean" are looking for their next blockbuster in a new realm: video games. An increasing number of big shots from the movie business are seeing new opportunities in the $50-billion global interactive entertainment industry.

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.

Yahoo Inc. will offer 400 free, advertising-supported games to increase revenue. Yahoo will use Double Fusion Inc.'s marketing technology and NeoEdge Networks' ad networks to sell and place video spots in the downloadable games, the company said.

Electronic Arts Inc. on Tuesday canceled Tiberium, a spinoff of its popular Command & Conquer franchise of shooter games, and said it would lay off an unspecified number of employees at its Playa Vista office. "The game was not on track to meet the high quality standards set by the team and by the EA Games label," EA spokeswoman Miriam Sughayer said. Sughayer said the Redwood City, Calif., developer would strive to place most of the affected workers into other EA projects. "This is not about cutting back financially," she said.

National Geographic, best known for its yellow-framed magazine and often breathtaking nature shows, is getting into video games. National Geographic Ventures, a unit of the nonprofit National Geographic Society, will work with game publishers to turn its material into games for PCs, consoles and hand-held devices. "Our content is extremely well-suited for a global gaming audience," said Paul Levine, the National Geographic executive who will lead the new games division. The games will be drawn from a broad range of content and themes across National Geographic's properties.

Blockbuster Inc. plans to allow some customers to rent video games on the Internet. The pilot program will begin during the second quarter and be available to subscribers of its Total Access service. Blockbuster plans to make online video-game rentals available nationally in the second half of the year, the Dallas-based company said.

A parents group is warning about explicit footage in a new Grand Theft Auto video game, even though a California law banning such material from being sold to children was struck down as unconstitutional Friday. Common Sense Media, a nonprofit group that reviews games, movies and other entertainment for children, sent out a message late Thursday warning against Grand Theft Auto IV: The Lost and Damned. "Heavy violence, strong language -- and now nudity," the group said.

It's no coincidence that most of the blockbuster video games of the last two decades have been gorefests and war simulations. Their creators were single guys in their teens and 20s whose all-night coding sessions were fueled by Doritos and Mountain Dew. John Smedley was one of them. In the mid-1990s, he helped make the trailblazing online game EverQuest, a slash-'em-up fantasy world that only a Dungeons & Dragons-obsessed geek could love. But Smedley has grown up, and so has the industry.

This battle of disc jockeys is playing out in court. The publishers of Scratch: the Ultimate DJ, an upcoming video game, have sued Activision Blizzard Inc. They accuse the Santa Monica game company of embarking on a "sinister strategy of intentional interference and unfair competition." In the suit, filed this week in Los Angeles County Superior Court, Genius Products Inc. and Numark Industries lay out a tale of alleged corporate intrigue and backstabbing.