Gaming's Coming Famine

Despite the reported boom times in the video game industry, I'm wondering just how shaky the foundation might be.

The buzz right now surrounds the pending launch of Sony's (NYSE: SNE  ) new PSP handheld gaming console that will challenge the supremacy of Nintendo's DS console. Add to that upgrades of Xbox, PlayStation, and even the GameCube, not to mention (but we will) potentially higher prices to be commanded by the next-generation games that will take gaming to the next level, and the gaming industry is in the midst of some fat times.

Industry's stock prices have been on the move, too. Activision (Nasdaq: ATVI  ) has risen about 21% over the past three months, Electronic Arts (Nasdaq: ERTS  ) is up about 15%, and THQ (Nasdaq: THQI  ) is up almost 30%. Retailers have also been feasting: Electronics Boutique (Nasdaq: ELBO  ) has advanced almost 10% in the last week alone. There's little argument the industry is gorging on the buffet.

So why do I wonder about a looming famine? The pressure on the game makers to go that one step further, to become "edgier," shows just how ephemeral is the strength of the industry. Electronic Arts' Need for Speed racing game is a mild step into underground drag racing, an illegal "sport" that has killed many. Yet I admit to enjoying bouncing off the walls and guardrails on occasion. And I'll be the first to confess I actually find Take Two Interactive's (Nasdaq: TTWO  ) Grand Theft Auto franchise quite fun to play, despite the premise that you're a criminal and the goal is to commit crimes, even murder. Still, I find it a slippery slope we're on when someone moves beyond such fantasy scenarios and turns the assassination of a president into a video game.

Last November, just in time for the 41st anniversary of President Kennedy's assassination, British game maker Traffic unveiled JFK Reloaded, a re-creation of the tragedy that unfolded Nov. 22, 1963, in Dallas. You get to play Lee Harvey Oswald and win points for how accurately you can kill the president. That's entertainment?

And what are we to make of Midway Games' (NYSE: MWY  ) upcoming re-release of Narc, in which characters are able to take virtual drugs during the game play? Toke up on some marijuana, and the action crawls like a slo-mo replay. Drop some rave-club ecstasy tabs, and you can calm hostile enemies. Heck, you can even spark up some crack cocaine to become a skilled marksman! Apparently, Midway's game makers have never really witnessed the ravages of crack or its actual effects on the human body, let alone the toll it takes on users' lives. Instead, the addiction is now made cool.

For me, it's a sign of desperation on the part of game companies that they need to generate publicity (and perhaps sales) by going to such extremes. By reaching for such "street cred," they reveal a lack of values that doesn't show up on a balance sheet or income statement. It also shows how far the industry's fallen when we've gone from Pong to showcasing a bong.

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Fool contributorRich Dupreyis, sadly, old enough to remember when Pong was cool. He owns shares in Electronics Boutique does, but does not own any of the other stocks mentioned in the article.


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