Playboy (PLA) has already cut its staff and cut its office space ... but you know things are bad when Hef starts cutting back on the amount of skin his Bunnies are baring.

According to industry reports, Playboy is planning on a mix of new sites aimed at tackling a tamer market -- and none of them involve nudity. According to Playboy insiders, the company is developing a "free, safe-for-work site" its calling TheSmokingJacket.com, as well as additional subscription content with a slightly tamer feel.

Broadening your appeal beyond a core product is no easy task. But if done successfully, it can forever change the fortunes of a company. Just look at Nintendo (NTDOY) and its efforts to make video games mainstream and not a niche product for pimply-faced teenagers.

It's easy these days to get excited about video game stocks. But investors should beware: Not everything is what it seems.

Part of the recent enthusiasm around video game stocks comes from game maker Activision's (ATVI) announcement on Thursday that it was raising its guidance for its Q1 results, which will be released on May 6. The company expects earnings of 72 cents per share, up from its earlier forecast of 70 cents per share. Shares were up nearly 4% on the news and the stock is up about 19% for the year.

Nintendo is also the source of some intrigue as it pushes ahead with ambitious plans to bring video games to the classroom and to implement 3D video game technology. Plus, the company is rolling out a souped-up DSi video game console with a bigger screen.

Nintendo fans and movie buffs, unite and rejoice! At long last, Netflix (NFLX) has said its streaming video service will be available for the Nintendo Wii this spring. Wii is bringing up the rear a bit here, as consumers with an Xbox 360 from Microsoft (MSFT) or a Sony (SNE) PlayStation 3 already enjoy access to Netflix films.

Here's the fine print: Wii users have to have a broadband connection and a Netflix subsription that costs $9 per month or more. Upon receiving a special "instant-streaming" disc for the Wii, they will have access to their instant queue, essentially using the Wii as a portal through which to play the films (of course, a TV is still necesssary). Currently, there are about 17,000 titles (movies and TV shows) available for streaming, a far cry from the 100,000 names a Netflix subscriber can get in good old-fashioned disc format.

The holidays have ended, and the real sales have begun. Those choosing to sacrifice sentimentality for savings found retailers only too willing to help, as prices were slashed in the wake of the Christmas rush. Recipients of gift cards stand to see their purchasing power extended, as well, now that redemption time has arrived, and retailers are looking to squeeze in any extra sales they can to pump up their top lines before the books close on the fiscal year, which, for many, comes at the end of January.

Toys "R" Us has offered a deal on Nintendo (NTDOY) Wii games, with the second coming at half price, and Target (TGT) is nearly halving the price of wine glasses and dropping the tag on an argyle women's sweater by nearly a third. Walmart (WMT), which kicked off its cuts at the end of September, is throwing a $50 gift card on top of any Microsoft (MSFT) Xbox 360 buy.

If the Wii were still cool, Nintendo (OTC: NTDOY) wouldn't have had to take a heavy hand to its full-year earnings forecast. The company's profit fell 52% year-over-year for the past quarter, due in large part to a decline in the game's popularity. Demand has slipped, with Sony (NYSE: SNE) and Microsoft (NASDAQ: MSFT) gaining ground with the core market of zealous gamers. Also, it's seen its position eroded by Apple's (NASDAQ: AAPL) iPhone, which is picking up some momentum as a gaming platform.

Nintendo's Q3 operating profit dropped to JPY64 billion ($709 million), falling far short of the analyst estimate of JPY90 billion. For the year ending March 2010, the company has chopped its forecast to JPY370 billion, far lower than the analyst expectation of JPY442.8 billion.

After dominating the gaming industry for the past three years, Nintendo's Wii gave up its position in the top spot to Sony's PlayStation 3 last month. The company has also been hurt by an increase in the value of the yen, which has hurt all Japanese exporters. Yet, even by local standards, Nintendo isn't measuring up. Its stock price is down 28% this year, compared to a 14% increase in the Nikkei 225.

Alas, recessionary pressures have now even affected the gaming sector. Sales of video game merchandise slammed 31% lower in June to $1.17 billion, posting the worst year-over-year decline in nine years.

And the slump hit all areas -- hardware (like the Wii or PlayStation), software (like game titles), and accessories (like the amped-up new guitar for Guitar Hero). Specifically, hardware sales were off 38% on a year-over-year basis to $382.6 million. Nintendo (OTC: NTDOY) Wii sales fell 45%, sales of the Sony Corp. (NYSE: SNE) PlayStation 3 dropped by a staggering 58%, and only Microsoft's Xbox 360 offering managed slight sales improvement.

Nintendo's (OTC: NTDOY) ADRs are down well over 6% as I write this. The video-game giant posted quarterly earnings that weren't necessarily as fun as one of its Super Mario adventures.

This source says that Nintendo's quarterly operating income plunged more than 40%. The forecast for the year was likewise troubling. Nintendo believes its profit may drop 12%. This guidance was worse than expected. We've talked here before about Nintendo perhaps seeing a slowdown in the Wii fad. We've also discussed the issue of currency pressures. According to this article, the problems caused by the yen might be abating somewhat.

One of the things I have long coveted (other than my new obsession, the House of Pain Adidas) is a Nintendo Wii. You see, I am a bit behind on the gaming world, but I like the Wii because I could play golf with Tiger Woods and my (bad) swing. Perhaps I may be able to get a Wii for less than the shoes now, as long as I am not in the U.K..

Electronic Arts (NASDAQ: ERTS), a video-game publisher which competes with Activision Blizzard (NASDAQ: ATVI), Take-Two Interactive (NASDAQ: TTWO), and THQ (NASDAQ: THQI), reported earnings for the fiscal third quarter on Tuesday. It wasn't EA's finest moment. After accounting for adjustments, non-GAAP income was $0.56 per share. That represented a horrible decline. Last year at this time, EA earned $.90. Operating cash flow was likewise ugly. For the past twelve months, EA generated a little over $80 million of the green stuff. In the previous similar period, EA saw over $260 million in cash from operations Non-GAAP revenue was essentially flat.

Although Microsoft Corporation (NASDAQ: MSFT) and Sony Corporation (NYSE: SNE) sell fine gaming consoles, both companies still are far behind competitor Nintendo Co., Ltd (OTC: NTDOY). The small white box known as the Nintendo Wii has outsold both competitors since it was released over a few years ago and, month after month, it proves its sales dominance over far more capable and advanced consoles. But, as gearheads and feature freaks continue to not understand, better doesn't translate into popular. While the Xbox 360 and Playstation 3 compete on many levels from polygons to high-def audio, the Wii provides engaging gameplay. And, it appeals to more than thumbstick junkies.

It's not that the Wii is the best gaming system ever. It just has mass appeal where the other two do not. It also, for the longest time, had a price advantage at $249. While both Sony and Microsoft made numerous price drops and bundle reconfigurations to try and compete on price, the Wii has remained steady at $249 and has handily outsold the other two. Is it really that good? Numbers don't lie. Sony, as an example, spends so much making the incredibly advanced Playstation 3 that it may never make any money off the console itself, no matter how hard it tries. Same goes for Microsoft, which probably loses less money per console than Sony. The "making money with software and royalties" gambit and losing a ton on the hardware itself is dicey and will continue to be so.

Sony Corp. (NYSE: SNE) or Microsoft Corp. (NASDAQ: MSFT) both just can't seem to get over the fact that the Nintendo Ltd. (OTC: NTDOY) Wii gaming system is beating both in terms of sales. On Black Friday sales a few weeks ago, the Wii was at the top of searches on the web and was, by far, the best-selling game console -- a title it's held for over a year now over both the competitors.

Yet, Sony and Microsoft consistently indicate that the Wii is on a different playing field since it does not offer a true gaming experience. What are these companies smoking? The gaming experience is not a gimmick, but it is apparently what has connected with millions of new game players, from the geriatric set to entire families. Not a true gaming system? Please. The customer experience is what counts, not the polygon count and the Swiss army knife approach of "do everything and anything" gaming consoles that can even cook your breakfast for you. Goofiness aside, you get the idea.

Microsoft's entry-level price for the Xbox 360 is now $199 -- $50 cheaper than the Wii, which has held onto its $249 price tag since it was introduced in the U.S. When Microsoft tells Cnet that "I think for us, we don't really see the Wii as a direct competitor, we actually very much complement the Wii experience ... it's obviously clear that we're going head-to-head with the PS3 in this generation." Unbelievable.

Nintendo Co., Ltd. (ADR) (OTC: NTDOY)'s Wii game console continuet to burn up the sales charts, selling hundreds of thousands every month. In fact, the lower-priced and graphically-inferior Wii has blown through almost every sales expectation since its release nearly two years ago. Last month, the Wii was responsible for 49% of all game consoles, and it's sold nearly 30 million since its November 2006 launch. Wow.

But, with success comes a large target on the back. Nintendo has been named in a patent lawsuit claiming the Japanese gaming company. Hillcrest Technologies says that Nintendo has violated various patents it holds dealing with the wireless, dimension-aware gaming controller that ships with every Wii console.

The "Wiimote," as it has been dubbed, uses gyroscopes, Bluetooth wireless technology, and is incredibly simplistic on the surface (there are a minimum of buttons, unlike the competition). But inside the Wiimote, the technology making it possible to swing it like a tennis racket is quite complex. Hillcrest's claim rests primarily on wireless technology it invented to allow the physical motion of a controller to select items on a viewing monitor. Hillcrest has already licensed its technology to several gaming companies, but the question remains: why did it take almost two years to bring the lawsuit against Nintendo? Something smells here.

Microsoft (NASDAQ: MSFT), a competitor of IBM (NYSE: IBM) and Google (NASDAQ: GOOG), will report its earnings for the fourth quarter on Thursday. According to Trey Thoelcke's earnings summary, the software giant will be expected to produce sales of about $15 billion on earnings per share of 47 cents. These numbers would represent double-digit growth rates for each metric.

According to this estimates page at AOL Finance, Microsoft has cultivated a reputation for being reliable when it comes to delivering on Wall Street expectations. It certainly has the assets to keep this trend going. The company's operating-system monopoly, as well as its incredible success with the Office suite of products, guarantees a steady stream of cash flow and bottom-line predictability. Other investments, such as the Xbox 360 and the company's various Internet properties, aren't as guaranteed. In fact, Microsoft has engaged a very strange battle (strange to me and others, at least) to buy Yahoo! (NASDAQ: YHOO) to bolster its future prospects on the 'net.

So, here's what investors should be looking for. I will be very interested in what management has to say about its thoughts regarding Yahoo! and its utility for Microsoft. Is it an absolute necessity? I doubt it, and I really do hope that shareholders will finally get some closure on this subject. The best thing would be for Microsoft to announce that it is done with the portal. And in terms of the Xbox 360, I would be interested in hearing any new marketing strategies being readied for the holiday season and if the current recessionary environment will have any effect on sales. Microsoft recently reduced the price for one Xbox 360 model as a way of increasing that system's value proposition in relation to the Sony (NYSE: SNE) PlayStation 3 and the Nintendo (OTC: NTDOY) Wii. The company also has entered partnerships with General Electric's (NYSE: GE) NBC Universal and Netflix (NASDAQ: NFLX), according to Variety, to make its Xbox Live asset even more attractive to users looking for cool content such as movies and TV shows.

Activision closed on its transaction with Vivendi Games Thursday and officially became Activision Blizzard (NASDAQ: ATVID), according to an article at SmartMoney.com. And I am pretty excited at the prospects for the new business (I am a shareholder). It's going to be a tough competitor against Electronic Arts (NASDAQ: ERTS) and Take-Two Interactive (NASDAQ: TTWO). (Of course, the latter two might merge at some point.)

Activision is riding high with its Guitar Hero franchise, and Vivendi Games brings an incredible asset to the table in the form of online gaming sensation World of Warcraft. I can't say I know much about World of Warcraft the game itself, but I know it has a huge following. What else do I need to know, right? For 2009, management at Activision Blizzard expects pro-forma operating income of over $1 billion and perhaps $1.20 or more in terms of earnings per share. That puts the stock, which rose over 5% on Thursday and closed with a price of $31.77 per share, with a P/E ratio a little over 26. That isn't too bad a valuation considering the growth potential. And when the holiday season comes around, I'm sure people will still be buying the publisher's software for gifts, recession or not. Whether it's the Sony (NYSE: SNE) PlayStation 3, the Microsoft (NASDAQ: MSFT) Xbox 360, or the Nintendo (OTC: NTDOY) Wii, gamers will be buying the company's products for these platforms in droves.

The stock has retreated from the highs it reached back in June when I wrote about it, but I am still bullish on the thesis here. Activision Blizzard should do really well, but with the markets in turmoil, you can probably wait for a pullback before buying.

Disclosure: I own Activision Blizzard; positions can change at any time.

Electronic Arts (NASDAQ: ERTS) issued Q4 and full-year numbers on Tuesday. The competitor of Activision (NASDAQ: ATVI), THQ (NASDAQ: THQI) and Take-Two Interactive (NASDAQ: TTWO) reported adjusted fourth-quarter revenues of $919 million, which was good for a 50% increase. Earnings per diluted share were $0.09 on an adjusted basis, also representing a 50% jump. For the full year, adjusted revenues jumped 30% to $4 billion and earnings per diluted share rose 36% to $1.06. Not too bad.

EA, according to Briefing.com, also beat Wall Street's expectations by quite a bit. EA was forecast to only break-even on a non-GAAP basis, so the difference was a nice $0.09. In terms of operational cash flow, EA increased the metric by 33% during the fourth quarter, but for the full year, operational cash flow decreased 15%. Ah, such is life, I guess. Nevertheless, EA produced 27 titles that sold over a million units this year -- three more than in the previous year. Fifteen of its titles sold over 2 million units -- five more than the last fiscal period. Titles such as Army of Two and Rock Band, as well as various sports franchises, drove the results.

Things sound pretty good, don't they? EA is definitely a major force on the Sony (NYSE: SNE) PlayStation, Microsoft (NASDAQ: MSFT) Xbox 360 and Nintendo (OTC: NTDOY) Wii platforms. But EA has had some challenges during this console cycle, and there is the perception that it needs a major merger to combat the threat posed by the Activision and Vivendi Games transaction. And let's not forget that Activision is on fire all on its own. That's what the whole attempted takeover of Take-Two is all about.