Video games such as Electronic Arts Inc's Madden NFL 2003 interactive football software are a bright spot in what some retailers see shaping up as an otherwise drab holiday season for toymakers.
Shoppers may spend US$2.8 billion on games in November and December, a third more than last year, according to Wedbush Morgan Securities. Hundreds of new titles are being released for Sony Corp's PlayStation2, Microsoft Corp's Xbox and Nintendo Co's GameCube. The companies are cashing in as teens and young adults shift from traditional toys to interactive games.
"Video games are at the top of his list," said Latham Williams, referring to her 12-year-old son Powen at a Sony game store. "He'd rather do this than just about anything else."
Mattel Inc and Hasbro Inc are counting on old favorites to spice demand, such as Barbie in Rapunzel guise and toys tied to the latest Harry Potter movie. The lack of such blockbuster hits as Tickle Me Elmo characters or Pokemon cards will keep toy sales from topping last year's US$25 billion, according to research firm NPD Group.
Consumers concerned about their jobs are unlikely to splurge on toys, say analysts who predict weak sales. US households will spend US$1,625 on average over the holidays, about the same as a year ago, according to consultant Deloitte & Touche.
Video-game makers tend to prosper when the economy weakens because people spend more time at home, toymakers and analysts say.
"In poor economic times, the video game industry has done exceptionally well," said Robert Kotick, chief executive of Activision Inc, which produces Spiderman and the Tony Hawk Pro Skater series. "We're expecting a record year for the video-game industry."
Lower prices and better planning among console makers may boost demand. Last year, Microsoft's Xbox and Nintendo's GameCube weren't released in the US until a month before Christmas.
"We are definitely expecting a sales growth in the US," compared with the previous year's shopping season, said Yoichi Wada, the president of Tokyo-based Square Co.
The maker of the Final Fantasy role-playing game series this month raised its sales forecast for the year ending March by a third.
Capcom Co, maker of the Resident Evil series of action shooting games, forecast sales to rise 34 percent in the US and Europe in the fiscal year.
Many retailers aren't bemoaning the lack of blockbuster toys and the increased emphasis on video games.
The companies are paying more attention to inventories because of the sluggish economy. What's as important is to avoid a glut of merchandise that must be discounted once a hit fades, they said.
"We are planning conservatively," said John Eyler, chief executive of Toys `R' Us, the second largest US retailer of toys. Inventories were 2 percent below last year's stocks when the fourth quarter began, Eyler said.
The leaner inventories also are a result of the 10-day West Coast port shutdown in October, which delayed the shipment of some products by Mattel and other manufacturers.
Popular toys including Hasbro's FurReal Friends electronic plush cats may be out of stock before Christmas, analysts said.
"The general consensus is the top 30 to 40 items around Dec. 10 are going to run out," said Jim Silver, publisher of Toy Wishes magazine. "Not all retailers are planning to sell more video games."
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