Three Game Makers Near Sideline

Atari had a niche for itself selling cheap, mass-market games for kids, and Majesco's core business was selling games and videos for portable game machines such as Nintendo's Game Boy Advance.

To a certain extent, each company has strayed in recent years in an attempt to compete in the sexiest part of the market: frontline games for core gamers. And each has stumbled in that effort.

Midway, for instance, blamed the revenue shortfall in its most recent quarter on disappointing sales of Unreal Championship 2; Atari saw disappointing sales last year of expected hit Driver 3; and Majesco's struggles have coincided with the expansion of its console lineup and the development of other frontline titles.

Deep Pockets Give Hope

But just because the companies are struggling doesn't mean they're going to go out of business. Viacom(VIAB Quote - Cramer on VIAB - Stock Picks) Chairman Sumner Redstone now owns more than 80% of Midway, meaning the company may be able to tap into his riches until things turn around.

Additionally, Atari is majority-owned by France-based Infogrames, which has pledged to financially support its troubled affiliate.

Even the industry leaders have posted poor or deteriorating financial results lately: Electronic Arts(ERTS Quote - Cramer on ERTS - Stock Picks) and Activision (ATVI Quote - Cramer on ATVI - Stock Picks) both swung to losses in their most recent quarters after posting prior-year profits.

And THQ's(THQI Quote - Cramer on THQI - Stock Picks) quarterly loss remained the same as the previous year's, despite an 80% jump in sales.

The Console Factor

The video-game industry as a whole is going through one of its periodic slowdowns in expectation of the new consoles. With the first of those consoles, Microsoft's(MSFT Quote - Cramer on MSFT - Stock Picks) Xbox 360, expected to debut later this year, companies have been increasing development efforts -- and consumer demand seems to be slackening.

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