BOSTON ( TheStreet) -- The video-game industry is dominated by a few large companies -- Activision Blizzard (ATVI - Get Report), Electronic Arts (ERTS) and Take-Two Interactive Software (TTWO - Get Report) -- and it's tough to single out a winner because their success relies on titles that are hits with gamers.
But each have in common three dominant trends that are inescapable.
First, due to the sluggish economy, consumer spending on home entertainment remains weak, as reflected in a decline in the sales of video-game consoles, as well as a jump in the resale of used games, both of which hurt new-game sales.
Second, there is a shift from console games to mobile gaming and online games, some played over social-networking sites, and that has created a new challenge for the already highly competitive industry.And, finally, the target market of video games is relatively fixed as it is largely composed of males between the ages of 18 to 35. But analysts are bullish on these companies as long as they continue to come up with gripping new games, either developed in-house or bought from outsiders. They each had at least one home run, a "franchise title," that defines the company and produces years of steady revenue as the game is revised. Revenue and profit margins depend on the success of those titles, as the longer they run, the better becomes the operating margins. Take-Two's top-seller has been the long-running Grand Theft Auto, while Activision-Blizzard's is Guitar Hero. Electronic Arts is known for its sports games, and its big seller is Madden NFL. Here's an analysis of the prospects for those three companies: