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California Games Law Impact: Negligible?

Stocks in this article: SNE GME MSFT ERTS ATVI TTWO

NEW YORK ( TheStreet) -- On Monday, the U.S. Supreme court said that it would make a decision on whether a California law that forbids the sale of violent video games to minors is constitutional; analysts say that while a decision in favor of the law could hurt game industry sales, the extent of that hurt would likely be limited.

IBISWorld analyst Toon van Beeck said if the law is declared constitutional, there could be a loss of sales for the video-game industry, and the companies that could be affected include Sony (SNE), Game Stop (GME), Nintendo, Microsoft (MSFT), Electronic Arts (ERTS) and Activision (ATVI). However, he noted, those sales could be transferred to other games. These minors could simply just "spend their money elsewhere" on other types of games, so the negative impact could end up being limited.

The video game industry -- which mainly includes games and game consoles -- is a $44.3 billion industry, van Beeck noted, and $29.9 billion of it comes from U.S. games sales alone. Those under 18 years of age comprise about 27% of the games side of the industry, according to van Beeck. He said that California is the biggest state for industry sales as a whole at 13.5%.

The analyst said that retailers are already sustaining an 80% compliance rate of not selling "mature" games to underage individuals.

Consoles comprise about 18% of industry sales, while about 67.6% of sales go to games.

Sterne Agee analyst Arvind Bhatia, who covers games companies, including Electronic Arts, Activision and Take-Two (TTWO), said "I have not heard any companies I cover express any real concern about this."

In fact, Bhatia doesn't think the law has much of a chance of making the cut with the Supreme Court. "At the end of the day, free speech matters," he explained, and the games in question "are another form of expression." Like van Beeck, he pointed out that "retailers" are already "extra cautious" about ID-ing underage children.

Then, of course, there's the long-held economic notion that banning a product -- such as video games -- for a segment of the population, only increases the demand for the product all the more.

-- Reported by Andrea Tse in New York

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Copyright 2010 Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

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