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Analysts upbeat on game industry

Wall Street analysts painted bright pictures for the video game industry in reports released Wednesday.

Bear, Stearns analyst Jeff Vilensky said that after generating a record $9 billion in revenue last year, video game sales have grown 20 percent so far in 2002 and look to be on track to at least maintain that growth through the holidays.

"Concerns with travel and the economy mean consumers are turning to at-home diversions, and video games are benefiting," Vilensky wrote. "This is really one segment of retail that continues to show staying power through the remainder of the year."

Vilensky noted that unemployment among teenagers, one of the key demographics for the game industry, has risen to 17.9 percent this year. But, he said, a loss in discretionary spending shouldn't hurt game sales too much. "As far as leisure goes, this is still one of the most inexpensive forms of in-home entertainment," Vilenksy wrote.

In a separate report, U.S. Bancorp Piper Jaffray analyst Tony Gikas predicted higher-than-expected earnings for game publisher Take-Two Interactive when it reports third-quarter results Thursday.

Gikas wrote that he expects Take-Two, publisher of the controversial but huge-selling game "Grand Theft Auto 3," to report earnings of $110 million, or 9 cents to 10 cents a share, compared with the consensus estimate of 7 cents a share forecasted by First Call.

Wedbush Morgan Securities analyst Michael Pachter made similar predictions for Take-Two last week, sending the company's shares soaring in post-Labor Day trading.

Gikas said Take-Two's domestic sales were up and averaging 200 percent for the summer. And the momentum is likely to continue, he said, as Take-Two prepares for the October release of the next "Grand Theft Auto" installment, "Vice City." Gikas expects the new title to generate advance orders of at least 4 million units.

"We stronglybelieve that 'GTA-Vice City' is the most anticipated toy and video game titlefor the upcoming holiday and conservatively estimate that it will sell in excess of 10 million units during the initial 12 months of its release," Gikas wrote.