Game Makers Swear Off Violence, but for How Long?

Violence and mayhem are mainstays of American video entertainment. But many game developers have scrambled to temper their products after last week's terrorist attacks on the World Trade Center and Pentagon.

Over the past week, games with potentially offensive content have been pulled from shelves, postponed or repackaged. Stocks of video game publishers suffered sharp losses Monday on concern that the tragedy, as well as its impact on retail spending, would hurt sales. Analysts also say retailers like Wal-Mart could become more reluctant to carry violent games.

But, all things considered, many expect the reaction to be cosmetic, and that the temporary changes won't take a lasting toll on the finances of game publishers. "They'll probably end up back on the shelves," said James Lin, video game analyst at Jefferies. "But for the time being, they're doing the right thing."

Playing It Right

In a brief but strongly worded statement, Doug Lowenstein, the president of the Interactive Digital Software Association, an industry group, urged game manufacturers to "go through a process of self-examination and questioning that is different than ever before," adding that "what was acceptable on Sept. 10 may not be acceptable ever again." The IDSA traditionally opposes efforts to regulate the content of entertainment media.

On Wednesday, gamemaker Take-Two Interactive (TTWO) lowered its earnings and revenue forecast for the fourth quarter, citing the terrorist attacks. The company, which is based a few blocks from the WTC, also revised its publishing schedule and the content of some games because of the terrorist attacks.

In a prepared statement, Take-Two said it was making "content changes" to two games, "Grand Theft Auto 3" and "Smuggler's Run 2," which had "particular references to New York City and Afghanistan," and delaying their release until the second half of October. The games, now "deemed inappropriate," were originally planned for release on Sony's PlayStation2 this month.

Shares of Take-Two gained 32% to $10.28 despite the warning.

According to Lin, Take-Two has a game due for release in January called "State of Emergency." The company had to alter the packaging because the cover showed a group of people, carrying sticks, against a backdrop of a burning World Trade Center. The company also pulled a "helicopter rescue" game called "City Crisis," Lin said. Take-Two wouldn't comment when asked about the titles.

"There's no question in my mind that people are going to tighten up some of the rules and that tastes are going to change a bit," said John Taylor, managing director and analyst at Arcadia Investment, who likened the video game sector to the movie industry. "They're feeling that less violent, and more family-oriented games are going to be more appropriate for some time."

International standards could also become stricter following last Tuesday's hijackings. "I have heard the German market is all of a sudden getting picky about these things, which wasn't the case prior to Tuesday," said Taylor.

But any restrictions on content could be short-lived. A case in point is Electronic Arts (ERTS), which said today it was restarting its popular interactive online game "Majestic," after suspending play for a week. Majestic is a role-playing game centered on murder and corporate intrigue in which game players occasionally get frantic calls from actors posing as game characters. EA reconfigured the game so that participants can choose to resume play, through a subscription service, when they feel ready.

Money Talks

The Entertainment Software Rating Board, an industry watchdog, gives games containing violence an "M," or "mature" rating. There aren't too many games in the market containing military or terrorist themes, said Lin, though 3DO (THDO) came out with a game a couple of years ago called "Gulf War: Operation Desert Hammer."

There's no denying that games, like movies, gather inspiration from real events. "After what happened last Tuesday, I wrote to my sales force that in some sick and morbid way somebody's going to make a game that's loosely based on this," Lin said ruefully. He also noted that real-time strategy war games are culturally acceptable in war-torn countries like Israel.

Many analysts don't think the latest change in the video game industry will be a long-term cost to the video game publishers. Consumption levels are falling, but many analysts believe sales will hold up. Video games, while relatively inexpensive, also have a "higher replay value" than movies, said Lin, noting that some games take over 30 hours to complete. And Christmas should be a strong selling season for the sector, with Microsoft (MSFT) and Japan's Nintendo releasing new video game consoles this fall.

"We're going to have a Christmas," said Lin, who has buy ratings on 3DO, Midway Games (MWY) and Activision (ATVI), which recently postponed a new Spiderman game that depicted skyscrapers resembling the World Trade Center.

"Going into Christmas, these publishers are going to be nuts -- especially since they're all public companies -- to pull big titles that could be violent or deemed tasteless," the analyst said. "That would be too much of a revenue miss, and I can't imagine they're going to do that."

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