Video Game Slump Nothing New

by The Investment U Research Team

Reports from last month indicate that the sales of video games were lower in April and have been lower for the past two months. But the numbers, while down, still represent a large increase of 2007.

But there’s something else going on here as well: Nothing new…

There haven’t been any spectacular new games or consoles on the market this year. No new Halo’s or Vice City’s, no new Wii’s. The industry is still making money and players are still buying occasional games here or there, but they aren’t splurging on new stuff like they have in the past.

But this content drought isn’t a bad thing.

It just means that companies like Take-Two Interactive Software (Nasdaq: TTWO) and Activision Blizzard (Nasdaq: ATVI) will find themselves well positioned for a hungry gaming audience when they do release the next big thing.

Just because gamers are “playing the hell” out of their current games doesn’t mean that they’re satisfied. Once they feel a little more financially confident, they’re going to rush out to buy the next blockbuster. And the game market is primed for one right now.

Like the first good movie in the summer film season, gamers will make the game – and the company producing it – ridiculously profitable.

While there are numerous shops out there that could produce a title like this, THQ (Nasdaq: THQI), Microsoft (MSFT), and Electronic Arts (Nasdaq: ERTS) don’t seem like the companies to do it. Our bet would be on Take-Two to bring a game like this to market.

And with its stock price halved over the past year, it represents a strong value with numerous profitable franchises.

Symbols mentioned in this article: TTWO, ATVI, THQI, MSFT and ERTS.

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