Video Industry

For video game companies, these are feast years. With hundreds of new titles this holiday, the industry is expecting record sales. But not everyone is benefiting from the boom. A number of firms--including Infogrames, 3DO Co., Acclaim Entertainment Inc., Irvine-based Interplay Entertainment Corp. and Midway Games Inc.--are pressured by debt, declining sales and mounting costs.

Taking a page out of Hollywood's product-placement script, Electronic Arts Inc. has inked a deal with Intel Corp. and McDonald's Corp. to incorporate their products into its upcoming computer game, "The Sims Online." The multimillion-dollar deal is a milestone for the game industry, which traditionally has paid to use other companies' logos in their games. Sony Corp., for example, has paid tens of thousands of dollars to car manufacturers such as Honda Motor Co.

A long-awaited federal report on the marketing of violent entertainment to children is expected to criticize movie and video game retailers for selling mature-rated material to children and chastise the music industry for failing to heed federal officials' recommendations.

The Federal Trade Commission offered chapter and verse against the recording industry Tuesday for failing to heed criticism that it markets violence to children. The report, a follow-up to its September study, largely credited the movie and video game industries for their efforts to stop targeting children as an audience for adult material.

A much-anticipated sequel to last year's scathing Federal Trade Commission report on the marketing of violent entertainment to children is expected to single out the recording industry for failing to respond to federal officials' recommendations. The film and video game industries are said to have shown some progress but have not completely ceased the marketing of inappropriate material to children, according to industry sources familiar with briefings given to congressional aides.

Hollywood has systematically marketed violent, adult-oriented films, music and video games to children, using popular cartoon shows, comic books and even young kids themselves to do it, according to a Federal Trade Commission report released today. Despite the entertainment industry's participation in warning label programs designed to shield children from violence in such products, the FTC found that advertising and other marketing tools were routinely used to attract young customers.

As the computer gaming industry converges on Los Angeles for its annual trade fair, two Southern California game makers reported red ink Tuesday, caught by consumers' wait for the next generation of game consoles to be released. Santa Monica-based Activision, publisher of the popular "Tony Hawk's Pro Skater" video game, said Tuesday that it lost nearly $53 million in its fiscal fourth quarter ended March 31. That includes a charge of $70 million for a company restructuring.

Microsoft Corp., which will demonstrate its secret video game machine today in San Jose, is starting a separate games business unit and plans to spend more to promote its new entertainment device than it did to launch Windows 95. The machine, called the X-Box for now, is an all-in-one entertainment center that will let people play games, listen to music CDs, watch DVD movies and surf the Web, officials said Thursday. Designed to rival Sony Corp.'

Blockbuster Inc., the world's largest chain of video rental stores, raised $465 million in an initial public offering that capitalized on the company's name even as investors worry about the threat from cable television. Blockbuster, which is owned by Viacom Inc., the fourth-largest media company, sold 31 million shares at $15 apiece, $1 below the $16-to-$18 range set before the sale. The IPO represents an 18% stake and valued Dallas-based Blockbuster at $2.63 billion.

For more than a decade, the computer game industry has struggled to shed its geek image and gain recognition as a legitimate entertainment business. And just when it finally accomplishes that goal--hauling in $6.3 billion in revenue in 1998--it faces the much greater challenge of dealing with intense scrutiny over ties to recent violent acts in schools. Game executives are divided over how to deal with this unwanted attention.