The $7 billion interactive-entertainment sector, which includes video-game software, consoles, hand-helds and other paraphernalia, is perceived as virtually recession-proof by many industry analysts and pundits. Video-games packed with otherworldly adventures and fantasies, shooting and combat, high-speed racing and curvaceous karate-kicking sex-kittens are more enticing than ever to a populace looking for escape-and a reason to shoot down an enemy, any enemy.
It's not only the action/adventure, fighting and extreme-sports genres that are expected to fuel a fourth-quarter buying frenzy; family-friendly character-based games based on the films "Harry Potter and the Sorcerer's Stone" and "Monsters, Inc." and Nintendo Corp.'s reliable Mario are expected to propel the category. Toys, both traditional and interactive, are expected to hold their own despite the sagging economy.
"During recessions, the toy category holds up pretty well," said Sean McGowan, president of marketing-services company PlayDate. Even if one or both adults in a household have lost a job, "parents don't like kids to feel the pain."
Families' average annual spending on toys per child this year will be a little more than $300, a figure that remains flat compared with last year, Mr. McGowan said. The toy category will grow just 2% to 3% this year, he predicted. "There's no one or two products that will dominate, but there's a move toward creativity and learning toys and video-game buzz with three major platforms."
A research note by Merrill Lynch analyst Hayley W. Kissel last week underscored analysts' confidence in the interactive and toy sectors. "Powerful licenses together with multiple video-game platform launches should drive toy-store traffic, creating a positive environment for holiday toy sales," Mr. Kissel wrote. He noted: "In all previous economic downturns toy sales have been stable."
Retailers and analysts expect the interactive-entertainment and toy segments to bear up as people look to home entertainment for an escape. With the cross-country family trip canceled until further notice and dreams of a new Lexus fading fast, discretionary dollars are being funneled into gift-giving. "People are going to stay home, and they're going to be spending more money on their kids," said Tom Alfonsi, senior VP-merchandising, for K-B Toys, which operates stores, KBtoys.com and eToys.com. He also noted film properties-Warner Bros.' "Harry Potter" (Nov. 16); Walt Disney Co./Pixar's "Monsters, Inc."; New Line Cinema's forthcoming "Lord of the Rings" (Dec. 19); and Nickelodeon's Paramount-distributed "Jimmy Neutron" (Dec. 21)-will spur toy, action-figure and collectible sales not only among kids but adults.
Pricing, always considered a factor in the holiday gift spend, is not viewed as an overriding negative. Nintendo's $199 GameCube and Microsoft Corp.'s $299 Xbox video-game consoles target different audiences; Sony Computer Entertainment's PlayStation 2 is also $299. Games for all three systems are about $50 a pop. The family-friendly GameCube won't necessarily draw the hard-core 16-to-26-year-old males salivating over the Xbox, which has its own spending power.
"Kids hold two jobs so they can buy video-game consoles and software," said one grown-up gaming aficionado. "It's just a no-brainer."