As the video game industry grows both in size and relevance, the bigger publishers just keep getting bigger. It's a shortlist that includes David Gardner's Motley Fool Stock Advisor picks Electronic Arts (Nasdaq: ERTS) and Activision (Nasdaq: ATVI), as well as Take-Two Interactive Software (Nasdaq: TTWO). The other smaller, weaker players continue to struggle.
The other day, an article from Reuters got me thinking. Appropriately titled "Smaller Video Game Publishers Under Pressure," it discusses the financial difficulties facing Acclaim (Nasdaq: AKLM), Interplay, and Bam Entertainment (Nasdaq: BFUN) -- bit players in the gaming world. Last week, in discussing Acclaim's dismal performance, Rick Aristotle Munarriz said it best:
This is in no way a fading industry. Just set aside the penny stocks like Acclaim and save those quarters for the arcade. The game is still going strong for those who know how to play.
It's not just that EA had no less than 27 games sell more than 1 million units last year, or that Activision had three of the top five sellers during the holiday season. Those are mere reflections of both companies' cash stability, brand power, and distribution. But also consider that some diehard gamers believe that Sega's sports games are better, yet its NFL football game can't outsell EA's NCAA Football, much less mega-hit Madden.
EA's sports games are so dominant they're affecting the platform wars. For example, while many prefer games on Microsoft's (Nasdaq: MSFT) Xbox to nearly identical versions on Sony's (NYSE: SNE) PlayStation 2, EA's PS2 games outsold their Xbox counterparts by 3.5-to-1. Why? At least partly because EA's sport franchises -- as well as its No.1 seller Need For Speed Underground -- are online capable only on the PS2.
Going forward, the big boys have the cash and marketing power to buy smaller players and potential blockbuster franchises on the cheap. It's underway. As Reuters points out, EA recently picked up the publishing rights to Acclaim's bestseller, Burnout. And just today, it signed an agreement to distribute KOEI's upcoming Samurai Warriors.
When it comes to the game publishers, don't play around. Stick with the industry Rule Makers. Things are only getting better.
Discuss these Rule Makers on the Video & PC Games, Electronic Arts, and Activision discussion boards.
Fool contributor Jeff Hwang owns shares of Electronic Arts.
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