The Ascent of the Video Game Industry

by Chris Connor

R.I.P. Old School

Long gone are the days of old school games such as Pong, Pac Man, and Donkey Kong.  The video game has evolved from a very simplistic experience into a multi-billion dollar industry.  In fact, only movies garner more of America's entertainment spending than video games.  Video games (computer and console) now have the power to grip gamers with incredibly realistic graphics, involving story lines, addictive role playing, management capabilities (i.e. managing a person's life in the Sims or trying to "level up" a character in Diablo 2 or Baldur's Gate 2), and the ability to play against friends or against people all over the world. 

Hello New Breed

Without a doubt this is one of the most exciting times in the history of video games. The long-awaited sequel to the best console of all-time (PlayStation) was launched in the fall and two more next generation consoles systems will appear on the gaming scene over the next year, Microsoft's {MSFT} Xbox and Nintendo's {NTDOY} GameCube.  Furthermore, Nintendo's Game Boy will finally have a true upgrade (instead of just adding color) as the Game Boy Advance is set to be shipped in June.  If that was not enough, Sega {SEGNY}, a company famous for critically acclaimed games, decided to finally leave the hardware business and focus solely on making games for all gaming platforms.  This will benefit gamers by not forcing them to buy a Sega console to play the company's massive library of quality games like NFK2K1, NBA2K1, Jet Grind Radio, and Sonic the Hedgehog.

Long Awaited Features  

These next generation machines will usher in certain features that gamers have craved for years such as backward compatibility (Game Boy Advance and PlayStation 2), the ability to play games that are compatible with both a handheld and a console (Game Boy Advance and GameCube), and play console games over high speed Internet connections (each console will have a broadband adapter).  PlayStation2 or a Game Boy Advance will offer backward compatibility,  which allows gamers to play the games that they have owned for years without having to hold onto the old machine.  The Game Boy Advance is also set to make quite a tag team with the GameCube, because a gamer will be able to play the same game on both systems.  In other words, a gamer can level up his character in an RPG on his Game Boy Advance in the doctor's office and then transfer that data to the Game Cube later in the afternoon to continue playing the game at home, in front of the larger television screen.  Finally, consoles are getting ready for the broadband era through the inclusion of a broadband adapter.  This prudent move allows for the consoles to be positioned for the eventual adoption of Internet networked gaming.  

Investing in the Gaming Revolution

ADRs of both Nintendo and Sega are traded in the U.S., but as bulletin board issues.  This frees both companies from many of the regulatory requirements associated with a listing on a major exchange, thereby severely limiting the amount of readily available financial information.  ADRs of Sony are traded on the NYSE, but gaming only contributes a small portion to the electronic conglomerate's total operations.  Similarly, sales of the Xbox are likely to pale in comparison to those of Microsoft's operating systems and Office suite.  

This leaves the only publicly-traded game makers as the only the way to gain direct exposure to this burgeoning industry.  Below is a list of the top publicly-traded game makers.