Zany Brainy, the 170-store toy specialist, announced yesterday that it plans to stop selling video games by year-end, saying there aren't enough console games appropriate for the chain's target audience, children ages 3 to 10.
The retailer, which has 13 Washington area locations, will start slashing prices by this weekend to get rid of its remaining titles.
"We thought there would be a lot of product developed for our age group, but it just didn't happen," said Jerry R. Welch, chief executive of FAO Inc., which also owns Right Start and FAO Schwarz. "We view it as a small business that, for us, does not have enough growth." The chain will continue selling educational software such as Reader Rabbit.
Only about 2 or 3 percent of Zany Brainy's sales comes from the games, a competitive, low-margin business. The retailer began selling E-rated -- "E" for everyone -- console games nearly two years ago. But they were never a big moneymaker for the company, analysts said.
Many suspect that's Zany Brainy's real reasoning. They say the company's complaints about the scarcity of E-rated products does not mesh with the experiences of other retailers.
Douglas Lowenstein, president of the Interactive Digital Software Association, said Zany Brainy's attempt to point a finger at the industry for not producing enough family-friendly games is "absurd on its face." More than 60 percent of video games on the market are E-rated, he said.
"The truth is they're getting out of the business because they have not sold many games," Lowenstein said.
Michael L. Glazer, chief executive of KB Toys, said: "Of all the complaints I've heard, I've never heard that there are not enough games for youngsters." Glazer said his company's after-Thanksgiving advertisements will feature plenty of E-rated video games, including SpongeBob SquarePants, Yoshi's Island and Tony Hawk.
Toys R Us concurred with Glazer's assessment, adding that it is pushing a variety of E-rated games.
Perhaps Zany Brainy is backing away because its competition can price it out of the market, said Jeffrey Van Sinderen, an analyst at B. Riley & Co., which has had a banking relationship with FAO Inc.
In addition, while there may be plenty of console games for the younger set, that does not mean that youngsters -- or rather their parents -- are buying them.
So says John G. Taylor, a toy industry analyst at Arcadia Investment Corp. Most of the demand for games comes from older players. That's why the major E-rated game releases this year have only barely met expectations, Taylor said. Meantime, games rated for teens or mature audiences are outperforming expectations, he said.
Zany Brainy should have hung on for one more year, Taylor said. The Xbox and GameCube were introduced only 12 months ago, and as the cycle goes, they were adopted first by the committed gamers, he said.
"This year, they can probably penetrate younger households," Taylor said.
Welch, of FAO Inc., dismissed the critics and defended his company's decision.
"I really don't care what they say, in all honesty," Welch said. "These [young] kids are not the focus of the video-gaming world."
With that in mind, FAO Schwarz, which sells video games for kids and teens, may also discontinue those products, Welch said. A decision will come in the new year, he said.