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.

Electronic Arts (NASDAQ: ERTS) is one game play that's expected to weather the "frugal consumer" era reasonably well, hence I'm Reiterating my Buy rating for the company, first recommended on June 11, 2009 at a price of $21.87.

Near-term, a great deal is riding on ERTS' signature franchises, Madden NFL and NCAA Football, and the company also will have to introduce a new, innovative game if it hopes to maintain momentum created by the earlier franchises. Given that downside risk, there's a Revised Sell/Stop Loss, up to $13 from $11. The First Call FY2010/FY2011 EPS estimates for ERTS are 93 cents to $1.20.

Las Vegas isn't the only gaming mecca struggling for numbers; Macau saw the number of visitor arrivals to its shores drop 3.5% in April to about 1.87 million.

For the first four months of the year, visitor arrivals by land have dropped 15.5% on a year-over-year basis, while arrivals by air are slumping as well, off 5.9% for the first third of 2009. Total visitor arrivals in 2009 are down 8.1% from the same time period last year.

There is something rotten in Denmark, to quote from Hamlet, Act I, as well as in Las Vegas, Louisiana, Mississippi, Colorado, Iowa, and Florida. Gambling havens, once thought recession proof, are in trouble. Customer numbers are down, as are gambling, gift shop, hotel, and restaurant revenues. Casinos in Las Vegas have been hard hit, according to a recent article in the Wall Street Journal, because of billions of dollars of debt to finance overambitious expansion plans. Tropicana Entertainment filed for Chapter 11 in May, defaulting on $2.67 billion in bank and bond debt. But smaller casinos are also feeling the pain.

Isle of Capri Casinos Inc. (NASDAQ: ISLE) recently reported 4Q and FY2008 results. Snake eyes. Investors know they are not in for good news when the CEO spends the first few paragraphs of an earnings release discussing what a "transformational period" the last year has been. That's corporate-speak for "money losing," beginning with a $78.7 million write down in the value of some of the company's international assets and ending with a $51.3 million loss from continuing operations in 4Q 2008. All told, Isle of Capri Casinos lost $96.9 million from continuing operations in FY2008.The company cited increased competition in riverboat gambling in Biloxi, a smoking ban in casinos in Colorado, and a flood in Natchez as reasons for the lackluster performance. The company admits it needs to renovate 1,200 of its hotel rooms in order to attract customers back to the slots and tables.

The stock is currently trading at $4.23, near its 52-week low of $3.97.

Spurred by a near epidemic occurrence of brain-degenerating conditions as we age, people of all ages and backgrounds are stepping up their personal efforts to improve and maintain their brain health. According to a story in USA Today, sales of brain fitness software reached nearly $230 million in 2007. USA Today stated, "SharpBrains, (a market research firm) estimates the brain fitness software market will reach $2 billion in 2015 in the United States."

Prudent investment strategy might include a speculative foray into this popular and growing field. In light of this, you may wish to pay heed to blogger Steven Mallas, and read his take on Activision (NASDAQ: ATVI).

First on the list for brain maintenance is physical activity, which probably accounts for the outstanding sales of Nintendo's Wii Fit. from Nintendo Ltd. (OTC: NTDOY). Active lives promote healthy blood circulation, which helps to feed steady amounts of oxygen to the hungry brain. Good hard work, cardiovascular exercise and even regular sexual activity can all help to keep your heart pumping adequate levels of oxygen into your brain.

Media companies are turning to the internet as a distribution avenue more and more as each month passes, whether it works or not. Sony (NYSE:SNE) will release "Angel of Death" online and hope that this somehow drives DVD sales.

The way the release will be done is clearly set up to alienate consumers and will only drive resentment. According to The Wall Street Journal, "The series will be released online eight minutes at a time, over 10 weeks." After that, the DVD of the program will come out. It will not appear in theaters or on TV.

Imagine how annoying it will be for potential viewers to have to go to websites over and over again before they can get the all of the "Angel of Death" content. Many people will simply abandon trying to collect all of the installments.

Sony will probably get plenty of hate mail.

Douglas A. McIntyre is an editor at 2 47wallst.com

Online games may be banned in Corporate America (at least during work time) but they have actually proven fairly useful for building customer loyalty. How?

Well, companies need to find ways to cater to their power users, who are often similar to gamers. After all, they are passionate; have strong networks; and are not afraid to speak their minds (and spread their messages across the Net).

Some of the companies leveraging this concept include: AT&T (NYSE: T), Car and Driver, Scholastic (NASDAQ:SCHL)and Univision.

Oh, and they are using the technology platform from Lithium.

Of course, the co-founder and CEO of the company, Lyle Fong, is a long-time gamer. With his brother, he started Gamers.com. What's more, his brother won a Ferrari because of his gaming acumen.

Shares of video game retailer Gamestop Corp (NYSE: GME) are getting shot down over 10% in premarket trading despite the company's record first quarter earnings.

So let's take a look at the numbers. Earnings per share came in at 37 cents for the quarter, two cents above the 35 cents that analysts had been expecting to see. At 37 cents per share, the company showed a pretty remarkable 151.4% earnings growth from the same period last year.

Revenue figures were also very respectable for the company, with a reported $1.813 billion (a 41.8% year over year increase), and well above the $1.72 billion estimate. Same-store sales got a boost of 27.1%, and if you take a look at new videogame software growth, that figure is an amazing 72%.

CNBC reports that the video game industry is making progress in its efforts to offer downloads of high-quality games over the internet. Nintendo has introduced WiiWare, which lets users download games for the Wii from independent publishers. Developers set the price -- far cheaper than the high-budget games put out by the big publishers -- and Nintendo takes a chunk of the revenue. CNBC adds that "Digital delivery of all forms of entertainment is widely considered to be a foregone conclusion. Only the timeframe is in question. Not only will publishers have to learn to adapt, but game retailers such as Gamestop (NASDAQ: GME) will have to figure out how to compete directly with companies that are also clients."

What happens if the downloading trend takes off as most experts assume it will? The story of Trans World Entertainment (NASDAQ: TWMC) could be a harbinger of things to come if Gamestop is unable to adapt. As the number-one operator of mall-based CD stores, Trans World has seen its sales and profitability plummet -- the shares have declined from over $13.00 in 2005 to the current price of $2.60. The market was very late in pricing in the disastrous effects that the MP3 would have on the brick-and-mortar industry.

Maybe Gamestop can adapt. But with a P/E ratio of over 30 for a company whose business model will have to change drastically over the course of the next decade, investors may want to keep in mind the collapse of Trans World Entertainment.

Whoever invented the Wii Fit, a virtual gym that can be used in conjunction with the gaming console, deserves a medal. Heck, he or she deserves a raise because it's going to be a huge seller for Nintendo Co. (OTC: NTDOY).

This game is perfect for someone like me who doesn't exercise as much as he should, which in my case means hardly ever. The Wii Fit, which will be available May 19, also will be useful for parents trying to get their children to exercise more. "Wii Fit is all about breaking the definition of video-gaming, about something that keeps you and your family fit and engaged," said Reggie Fils-Aime, president of Nintendo's U.S. division, in an interview with The Wall Street Journal.

GameStop Corporation (NYSE: GME) is the world's largest video game and entertainment software retailer, offering software, hardware and game accessories for the PC, as well as video game systems from Sony (NYSE: SNE), Nintendo (OTC: NTDOY) and Microsoft (NASDAQ: MSFT). The firm also owns two e-commerce sites and Game Informer, a leading video and computer game magazine. GameStop operates 5,123 retail stores across the United States and in 15 countries worldwide. Amazon.com (NASDAQ: AMZN) and Best Buy (NYSE: BBY) are competitors.

The stock is up nearly forty percent over the past five months, sparked by such issues as better than expected EPS/sales results in Q2 and Q3; upside guidance for Q4 EPS; and solid same-store sales improvements in Q2 (29.1%), Q3 (46.3%) and the nine-week holiday period (20%). The news has the stock cycling through a positive trading channel. The price is consolidating near the base of that channel, where oversold CCI, MACD and Momentum technical parameters suggest the potential for a rise back toward the top.

Nintendo has done extraordinarily well with its Wii game console. The Wii regularly outsells Sony (NYSE: SNE)'s PlayStation 3 and Microsoft (NASDAQ: MSFT)'s Xbox 360. But, the most successful Nintendo product is the older DS which, according to The New York Times, outsold the Wii, 1.53 million units to 981,000, in November, based on sales figures compiled by NPD Group.

What makes the figure more interesting is that the Nintendo DS is three years old. The DS is compatible with older Nintendo games, but does not have the "hot" new features of current devices like HD TV playback.

The success of the DS may point to a "rotation" in the video game sector, and that is a movement away from expensive and complex machines that have multiple functions, high prices, and harder to understand features. Keep it simple, stupid.

It would make some sense that the market for large, complicated machines would be limited. Playing video games appears to be of interest to a broad section of the population, but reading 300-page instruction manuals probably is not.

Douglas A. McIntyre is an editor at 247wallst.com.

Electronic Arts (NASDAQ: ERTS) and other video-game electronics manufacturers rose this morning on news of good retail sales. While retail in general has struggled this holiday season, shopping trends have shown consumers spending more on consumer electronics than segments like apparel and home furnishings. Investors have been cautiously optimistic regarding the video game industry, as high demand and low supply of items like the Nintendo Wii have kept consumers spending. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ERTS.

After hitting a one-year low of $46.27 in May, the stock hit a one-year high of $61.62 in October. ERTS opened this morning at $59.54. So far today the stock has hit a low of $59.54 and a high of $60.35. The chart for ERTS looks bearish but improving, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

Here's a sure sign that a product is a hit: a market develops for call options on it. People actually fork over money for the right to buy something.

According to CNBC, that has happened with the Nintendo Co., Ltd (ADR) (OTC: NTDOY) Wii: "Here's the m.o.: shoppers get wind of when a Wii shipment is due to arrive, either by greasing a store manager, or by watching ads carefully, and begin lining up hours before the store opens. A store employee will then come out, hand out tickets or numbered placeholders to keep things orderly, and then the buying and selling begins."

Those tickets to buy Wii's can, according a Best Buy employee interviewed by CNBC, fetch $300-$1000. The ticket is only good for the first few hours the store is open.

To make it more interesting, some people buy the "options," acquire the Wii's ... and then list them on eBay.

For years to come, the Nintendo Wii will probably be the video game success story by which all other future consoles are measured. Look for other companies to copy Wii in the next few years with more user-friendly, less arcane, games, and also possibly exercise components.

The video game industry appears to be dividing into two groups: casual gamers who enjoy the fun of the Wii, and hardcore gamers who want graphics like Sony Corp. (ADR) (NYSE: SNE)'s PlayStation 3.

As some point, I think companies could actually introduce two systems during each product cycle -- one for each market.

Slot machines have long been among the favorite gambling media for older players. A quick stroll through any casino will bear this out.

But the purveyors of one-armed bandits aren't content with that -- apparently they can't leave well-enough alone sucking money out of the pockets of retirees. So they're working on new ways to make slot machines fun for those under 40 -- the generations that grew up on video games.

Some makers are adding video game elements like hand-eye coordination to what were once games of chance. Soon, slot machines will come with joysticks, and multi-player gaming will be available.

According to the New York Times, casino operators see big opportunity in younger gamers. They tend to have fewer moral qualms about games of chance than their older counterparts but, for now, mostly go to Las Vegas to drink, see shows, and party. They're not spending as much time as casino operators would like on the floor.

Las Vegas has spent a lot of time and a ton of money reinventing itself as a hip destination for younger people. If it can translate that popularity into increased gambling profits, companies like Wynn Resorts (NASDAQ: WYNN) could prosper.