The Wii Fit game is one of Nintendo’s biggest sellers with 697,000 sold in the U.S. in November. Courtesy of Nintendo

By Yi-Wyn Yen

Nintendo seems to have bucked the recession. The Japanese video game manufacturer has doubled November sales of the Wii in the U.S. from a year ago, according to NPD’s latest release on gaming sales.

The demand for the Wii remains strong since the game console’s debut two years ago. The company sold a record 2 million Wiis last month, higher than the previous 23 months. Nintendo (NTDOY) has significantly increased shipments of the red-hot Wii for this holiday season after dealing with a shortage last year. Last November Nintendo sold 981,000 Wiis.

Analysts were taken by surprise by how well the $249 console has performed in a flagging economy. “Two million? You sure? This is mind-boggling,” said Michael Pachter, a top industry analyst for Wedbush Morgan Securities. Pachter had predicted sales of 1.4 million Wiis. “At least Nintendo is meeting demand.”

That’s something the company didn’t manage to do last year, when it underestimated the craze for its consoles. Nintendo had to offer IOUs for the Wii last December and ran out of the DS, its handheld console, before Christmas. This time around, Nintendo increased its holiday inventory for the Wii by 50% and 10% for the DS for the shopping season. November sales for the touchscreen DS, which launched four years ago, tripled to 1.6 million from October ‘08 sales, according to NPD.

The NPD numbers also looked strong for the Xbox 360 (MSFT). A recent price reduction to $199 for its entry-level version, exclusive titles like Gears of War 2 and Fable 2, and a major software upgrade moved 836,000 Xbox consoles in November. Gears of War 2 was the top seller for games with 1.6 million copies sold.

Sony (SNE) is struggling to pick up steam with the PlayStation 3, which remains the priciest of the three console makers. Sony sold 378,000 units of the PS3. The company released Home, its sophisticated virtual reality world, on Thursday to attract more gamers to the PlayStation platform.

Reports that consumers are drastically cutting back on spending hasn’t stopped nearly 15 million people in the U.S. who have bought a DS or Wii this year. “The consumer is voting with their wallets and pocketbooks,” said Nintendo of America president Reggie Fils-Aime. “That the Wii and DS represent the best entertainment value in the marketplace explains why these strong sales are happening.”

Pachter says it’s because people are now choosing a Wii over a latte. “There’s a solid middle class that’s going to make substitutions to buy games. Now it’s buy a Wii and don’t eat out for a month, or don’t take that ski trip,” he said. “Or cut out Starbucks.”

Xbox 360 gets an image makeover to compete with the Wii. Image: Microsoft

By Yi-Wyn Yen

The Xbox 360 is getting a major software update designed to transform it into a multimedia machine.

Starting Wednesday, all Xbox 360 owners will be required to update their gaming consoles so that they can watch movies in high-definition, stream TV shows and movies from Netflix (NFLX) and navigate categories like games, photos, and videos through a simplified dashboard populated with cutesy avatars.

Microsoft (MSFT) is counting on the Xbox makeover to not only drive console sales during a grim holiday-spending season but to broaden its appeal to casual gamers. In a statement, Microsoft hailed the move as “a new dawn in home entertainment,” going so far as to compare the Xbox Experience to the dawn of color television.

The company has been trying for years to brand the Xbox as the digital entertainment hub for the living room. Microsoft executive Shane Kim bragged that through the improved Xbox, the company is “building the world’s largest social and entertainment network” that connects to televisions. The Xbox is now referred to as the “New Xbox Experience.”

Some analysts argue that a recent price cut, not the Xbox Experience, is the console’s major appeal. Microsoft reduced its entry-level Xbox by $80 in early September to $199 and saw U.S. sales rise 33% in October, according to market researcher NPD. The Xbox Experience “is a marginal improvement,” said Todd Greenwald, a senior gaming analyst with Signal Hill. “I think if people are at Target and see an Xbox on a store shelf, they may see the Xbox Experience as a nice feature, but the price point is a much bigger driver.”

Both Xbox and Sony’s PlayStation 3 (SNE) are trying to make inroads to compete with Nintendo’s top-selling Wii. In October, Microsoft sold 391,000 Xboxes in the U.S. while Sony sold 190,000 PS3s. But Nintendo (NTDOY) outsold both gaming consoles by moving 803,000 Wiis, according to NPD.

Xbox Experience, which will offer more than 12,000 movie titles to rent from MGM, Paramount Pictures and Warner Bros., is part of Microsoft’s ongoing efforts to appeal beyond the hardcore gamer market.

Sony is also taking the multimedia approach. The PS3, which lets consumers play Blu-ray discs, is currently building a sophisticated virtual reality world called Home to make gaming a more social experience. Said Susan Panico, senior director of the PlayStation Network, “Our goal from Day 1 is to be an entertainment network. It’s about original programming and videos, and now we’ll bring Home to the PlayStation network.”

Greenwald says new software features Xbox and PS3 aren’t enough to take down the Wii. “I don’t think the Wii is successful because of the Mii avatars. With the Wii, you just pick up a motion-controlled wand and play. You don’t have to learn a controller and all its functions,” Greenwald said.

Microsoft’s Kim says it’s not trying to out-Wii the Wii, but noted the 360 can compete with Nintendo on price. The low-end version of the Xbox is $50 cheaper than the Wii, a point that Kim stresses. “We feel great about having the lowest price for a console, and that will be a big advantage for the holiday season,” he said. “When consumers are looking to buy a console for their kid this holiday, they will see that we’re at $200. Hey, $200 is $200.”

Spore, the highly-anticipated PC game, will come to the Nintendo DS. Image: Electronic Art

By Yi-Wyn Yen

LOS ANGELES – Turns out the next big thing from Nintendo will be new games for its miniature console, the DS.

Despite all the speculation of what’s in store for the major video game consoles – the Nintendo Wii, Microsoft Xbox 360 (MSFT), and Sony PlayStation 3 (SNE) -  Nintendo (NTDOY) is paying a lot of attention to what they think consumers want: More games for its portable handheld system.

With video game publishers eager to appeal to the DS crowd, Nintendo will release an all-star lineup for the dual-screen console by the end of this year. Electronic Arts (ERTS) will feature its designer-creature game Spore and Take-Two Interactive (TTWO) will release a custom version of Grand Theft Auto for the DS. Activision Blizzard (ATVID) launched a version of its popular Guitar Hero franchise for the DS in June and sold more than 300,000 copies in the United States in its first week.

The DS’s sales growth continues to impress the gaming industry. Thanks to hit games like Pokemon and the new Guitar Hero, analysts expect the DS to have outsold the Wii in June when NPD Research releases its monthly figures later this week. Nintendo executives say lifetime sales of the DS are expected to reach more than 100 million.

“People thought 2007 would be the peak year for the DS,” said Nintendo of America president Reggie Fils-Aime on Tuesday. “We’re running 12% ahead of last year’s record [U.S. sales] of 8.5 million.”

Women and girls have been a growing segment of Nintendo’s success with the DS.  They represented 30% of DS owners in 2005 and shot up to nearly half of all buyers in 2007. Over the past several months, Nintendo has been running TV ads with celebrities such as Carrie Underwood and Liv Tyler playing DS titles like Nintendogs and BrainAge.  Fils-Aime said sales of those titles and the new Super Mario Bros. have at least doubled since the ads started running in May.

Nintendo executives said they are looking at new ways outside of video games to add value to the DS. An executive highlighted scenarios in which a wireless-connected DS can provide travel details at an airport or tell you where the nearest Mexican restaurant is.

Nintendo is also releasing new games this year to complement the Wii balance board, which it began selling in May in North America. Olympic gold medalist Shaun White kicked off  Nintendo’s press conference at E3 by riding the Wii balance board to show off his self-titled snowboard game that game publisher Ubisoft will make exclusively for the Wii. “I lean forward to go faster when I ride [in real life],”  White said. “You can do the same in the game.”

Wii Music, an irreverent musical game that will debut later this year, closed the 1 ½-hour event. Nintendo attempted to create suspense with smoke rising on the stage and bright lights bouncing around the Kodak Theater, but it had a goofy effect. A guy with a faux Mohawk waved the Wii nunchucks and tapped his bare feet on the balance board to simulate drumming while Nintendo’s legendary designer Shigeru Miyamoto strolled out on stage pretending to play a saxophone by holding his Wii controller close to his mouth.

Wii Music is the latest addition to the growing titles that capitalize on the music trend. However, unlike games like Rock Band 2 or Guitar Hero World Tour, Wii Music doesn’t rate your performance or allow you to compete with other players. Wii Music uses the controller and balance board to play more than 50 different instruments and players can record their performances. Said Miyamoto through a translator, “We’ve designed Wii Music to experience the joy of performing music.”

Of course, if making melody isn’t your thing, Fils-Aime notes that you can get the Guitar Hero III for the Wii,  which in May outsold the other Xbox and PlayStation 3.

A new interface and customized avatars gives the Xbox a Wii-like feel. Image: Microsoft

By Yi-Wyn Yen

LOS ANGELES – Microsoft’s Xbox 360 is getting an image makeover. To appeal to the “casual” gaming audience, Microsoft executives on Monday said they are aggressively marketing the hardcore gamer console as a multipurpose entertainment machine to watch movies, TV shows, and listen to music.

The approach appears to be the latest tactic to compete with Nintendo’s Wii, the top-selling video game console. As the E3 video game conference kicked off this week, Microsoft (MSFT) announced several exclusive partnerships with big media companies to deliver more movies and TV shows to watch through the Xbox. Gamers can now download any movie available on Netflix (NFLX) on the Xbox to watch on their TVs. The service is free for Netflix subscribers.

Microsoft has also teamed up with NBC (GE) and Universal Studios to stream hits like “Monk,” “30 Rock,” and “The Bourne Supremacy” in high-definition through the Xbox. “This is how we’re fueling our growth with more entertainment choices,” said Xbox executive John Schappert at a press conference in Los Angeles.

Schappert promises that the Xbox operating system will be easier to use. He unveiled a new Xbox Live dashboard that arranges the different categories in a more simplistic manner. The Xbox also introduced animated characters known as avatars – a feature found on the Wii – that players create to interact with Xbox Live’s online community. Don Mattrick, who leads Microsoft’s entertainment and gaming division, said the new graphical look of the Xbox will “drive console demand.”

But will it drive the mass market to buy the Wii over the Xbox? Gaming analysts say that despite the new games and family-friendly offerings from the Xbox, the console still has a ways to go to convince soccer moms it’s a better value. Microsoft cut the price of its older Xbox versions by $50 to $299 but plans to discontinue that model. It will sell a 60 gigabyte version for $349. The Wii retails for $249. “If Microsoft wants to attack the casual market, they need to get down to $249,” said Todd Greenwald, a gaming analyst with Signal Hill Group.

The Xbox has struggled to crack the broad consumer audience the way the Wii has. Mattrick declared that the Microsoft would sell more Xboxes than Sony’s PlayStation3 (SNE), the other console favored by hardcore gamers. Though he never challenged Nintendo publicly, Mattrick said the Xbox will “transcend to deliver to everyone.”

Microsoft tried a similar strategy at the last E3 gaming conference when it introduced a new movie trivia game called Scene It that used a four-button controller that resembled the Wii controller. Said Greenwald, “[The Xbox] is trying to be too many things to too many people. It’s not succeeding. I don’t think the Xbox is getting the right message across to the Targets and Wal-Marts, where the mass market is.”

The big buzz at the E3 Media & Business Summit is that there’s no big buzz this year.

Gaming analysts say they’re not expecting any big surprises from the big three  companies – Microsoft (MSFT), Nintendo (NTDOY), and Sony (SNE) – at E3, one of the largest events in the $37.5 billion video game industry. The three main drivers of E3, which kicks off Monday,  will not unveil any new game consoles as they are all in mid-cycle. Microsoft’s Xbox 360 gets a $50 price slash. Yawn. And some anticipate Nintendo to unveil – wait for it – different colors of the Wii remote.

Without shiny new hardware, all eyes will be on the gaming titles that will come out within the following year. Even that has investors unexcited. “What we’re struggling with is the new surprise,” says John Taylor, a video game analyst with Arcadia Research. “The big new [game] that we haven’t heard about already.”

Most of the biggest games for 2008 have either been released or unveiled at events earlier this year. Take-Two Interactive (TTWO) took the best-seller slot with Grand Theft Auto IV and Nintendo got the couch potatoes to move with the Wii Fit this summer. Gears of War 2, an exclusive title for the Xbox 360, was unveiled in late February at another gaming conference while other big blockbusters like MTV Games’s Rock Band 2 and Harmonix’s Guitar Hero World Tour (its fourth version) have already been teased.

Gaming analysts say the show, which kicks off Monday in Los Angeles, means they’ll have to focus on incremental news from the big three. “Perhaps Microsoft will introduce a Wii-like controller to attract the casual gamers or Nintendo will introduce a software lineup to appeal to the more hardcore gamers,” says Todd Greenwald, an analyst with Signal Hill Group. Greenwald expects Sony to continue to capitalize on its upcoming lineup like God of War III and LittleBigPlanet that can only be played on the PS3.

Expectations are so low that even minor news from the three consoles will be treated with great significant. “There’s no point in going to a convention where you’ve seen the same stuff before,” says Sam Kennedy, the editorial director of gaming site 1Up.com. “We’re all waiting for the big three to show up and surprise everyone and get folks excited.”

By Yi-Wyn Yen

Perhaps the third time is the charm for Electronic Arts. After its offer expired Friday, the video game publisher extended for another month its $2 billion tender offer to Take-Two Interactive’s shareholders.

Many industry watchers say that EA (ERTS) and Take-Two (TTWO) are working on a friendly deal behind the scenes. Take-Two, the publisher of Grand Theft Auto IV, admitted Monday that it is in “formal discussions” with interested buyers. Analysts expect that EA is likely among the suitors.

“Of course they’re talking. They have to be talking because it’s the right thing to do,” said Wedbush Morgan analyst Michael Pachter before EA’s tender offer expired last Friday.

EA says it extended its offer to give the Federal Trade Commission more time to review the regulatory issues of the merger. EA’s senior vice president of corporate development Owen Mahoney said in a statement that the company has a right to “terminate the offer,” but so far it hasn’t despite the multiple extensions and lukewarm support it’s gotten from Take-Two’s shareholders.

Many analysts have called for EA to raise its bid, but EA maintains its tender offer of $25.74 per share.  6.2 million Take-Two shares, roughly 8%, have been tendered as of last Friday. Take-Two’s shares, however, have been trading slightly higher than EA’s offer since GTA IV was released on April 29, which means selling on the open market would be more profitable for shareholders. Take-Two’s shares opened at $26.79 on Monday after EA announced its month-long extension.

Take-Two rejected EA’s bid because it thinks the Grand Theft Auto franchise and games like BioShock, a sci-fi shooter that Universal Pictures will make into a movie, are worth more. “EA’s highly conditional offer fails to compensate our stockholders for our exceptional portfolio of intellectual property,” said Take-Two CEO Ben Feder in a statement. “The small number of shares tendered into EA’s offer to date demonstrates that our stockholders agree with what our Board has maintained from the beginning: EA’s proposal undervalues our Company.”

Thanks to Grand Theft Auto, PS3 and Xbox 360 are shifting into overdrive to sell more gaming machines. Courtesy of Take-Two

By Yi-Wyn Yen

Wall Street analysts predicts Grand Theft Auto IV will easily break video game sales records this week. But one question remains: Will fans buy the game for Sony’s PlayStation 3 or Microsoft’s Xbox 360?

Both Sony (SNE) and Microsoft (MSFT) are in a heated race to win over undecided gamers who must buy one of the two consoles to play the biggest game to be released this year. The popular franchise, from Take-Two Interactive (TTWO), is expected to surpass first-week sales of $400 million, which would top Halo 3’s record of $300 million, according to Evan Wilson, an analyst with Pacific Crest Securities. “Grand Theft Auto is clearly going to be a blockbuster game,” Wilson says.

GTA IV launches Tuesday, which should result in a big boost in monthly console sales for Sony and Microsoft. Both are a distant second to market leader Nintendo with its family-friendly Wii. Nintendo, which does not offer GTA IV, sold 721,00 Wiis in the United States in March, according to market research firm NPD. The Wii sold more than the PS3 — 257,000 units — and the Xbox — 262,000 console — combined. Analysts anticipate first-week sales of about six million copies for GTA IV, which retails for $60 or $90 for a special edition.

“It’s interesting that both Sony and Microsoft are spending a lot of money to align the game with their console,” says Sam Kennedy, the editorial director for gaming publication, 1 Up Network.

Neither Microsoft nor Sony will disclose how much they have spent to promote the game, though both were quick to promote their gaming machines as the best option for GTA IV fans. The Xbox 360, with a 20 gigabyte hard drive retails for $350 while the PS3, which features Blu-ray and twice the hard drive capacity, retails for $399.

“Grand Theft Auto is a premier brand that was really established on the PlayStation platform,” says Peter Dille, senior vice president for Sony’s PlayStation Network. “Guys who love the game grew up on PlayStation. We think that they’ll vote with their wallets for the PS3.”

The GTA franchise has sold more than 65 million copies worldwide in the last 11 years. Of the previous installments, only one was made available for the Xbox platform while all the games were playable on Playstations.

A Microsoft representative says gamers will side with the Xbox because Rockstar Games, the Take-Two game studio that developed GTA IV, is making exclusive add-ons for the console.

Rockstar will release two additional game plays for those who can’t get enough of the drug trade adventures of GTA hero Niko Bellic. The first will be made availabe this fall for the Xbox. “We absolutely believe having exclusive content will boost sales,” says Xbox spokesman David Dennis. “The Grand Theft Auto franchise may have been home to the PS2, but we believe PlayStation owners will stand up and upgrade to the Xbox for [GTA IV].”

Dennis says major retailers in Europe have informed Microsoft’s sales team that GTA pre-orders favored the Xbox over PS3 by 2 to 1. He argues that this is a “strong indication” that more gamers will purchase the Xbox for the month of April.

Other Xbox perks, like Xbox Live and online rewards for top gamers, will attract console converts, he contends. “The PS2 and PS3 has an online network that’s in the low single digits. Make sure you put that number next to ours,” Dennis says. PlayStation’s online network has 3.7 million users, and Xbox Live has more than 10 million.

PlayStation’s Dille was just as quick to diss the Xbox. “Microsoft had its moment with Halo, and that moment has past,” he says. “Sure they’re touting Grand Theft Auto, but you can play it on our platform too. You want to talk about exclusive content? Sony has a very deep lineup of exclusive games like Metal Gear Solid and Grand Turismo that has the industry buzzing. The PS3 has a more exciting story going on this year.”

The two rivals can continue to throw pot shots at each other until May 15, when NPD will name a console leader for April sales in the U.S. Consumers should be happy either way. GTA IV has received fierce reviews in the gaming community. “It’s quite an amazing experience,” Kennedy says. “I can’t imagine any game being bigger this year.”

By Yi-Wyn Yen

When it comes to this spring’s crop of hostile takeovers, none has become more strange and complicated than Electronic Arts’s attempt to buy smaller, rival game publisher Take-Two for $2 billion.

On Thursday evening, Take-Two (TTWO), which makes the popular Grand Theft Auto series, will hold its annual shareholder meeting at the W Hotel in New York City. One proposal on the table: giving management 1.5 million shares of restricted stock, which would be worth tens of millions of dollars in the event of a buyout. If ZelnickMedia, the firm that has been managing Take-Two since shareholders voted out the previous executives at the last annual meeting, wins approval of that management incentive, the value of Take-Two shares will be diluted by 26 cents, putting in jeopardy EA’s (ERTS) offer of $26 a share.

In a bizarre twist, EA says that the majority of Take-Two’s current shareholders will be excluded from the meeting. Take-Two will only allows those who held the stock prior to Feb. 19 to attend the meeting, which means even those who no longer own shares in the stock can determine the fate of those who do. Analysts estimate that between 50% to 70% of Take-Two’s stock has been sold since EA went public to buy the company in an all-cash deal on Feb. 24.

“The sell-off has created a situation where former shareholders will vote on a management compensation amendment which could significantly impact new shareholders – and the new shareholders are not eligible to vote,” an EA spokesman said in a statement. “It’s like having your last employer give you a million dollar bonus that your new boss is forced to pay.”

Whatever the outcome of the shareholder meeting, EA’s deadline for Take-Two investors to accept the deal ends on Friday at midnight eastern time. EA has no immediate plans to raise its all-cash offer, which Take-Two’s management has rejected as too low. Take-Two’s chairman, Strauss Zelnick has stated that the company will not entertain buyout offers until April 30, the day after the release of Grand Theft Auto IV, which is expected to be one of the biggest hit games this year. “The EA proposal failed to value Take-Two’s extensive portfolio of top-selling brands and our extraordinary creative and human assets,” Zelnick said on last month’s earning call.

Analysts have watched the drama unfold with earnest. “I have been covering M&As for 20 years, and this is by far the weirdest thing I’ve ever seen,” says Michael Pachter, a gaming analyst with Wedbush Morgan Securities. “The timing is odd. The way the events have proceeded has been odd. The fact that so many shareholders have bailed is odd. It’s unusual how belligerent the two managements have become. Take-Two thinks it’s worth more after Grand Theft Auto comes out. EA thinks the company is worth less before it comes out. They’re both wrong. The company is worth the same. So the thinking is a bit odd too.”

Along with a possible change in investor sentiment, EA also faces anti-trust concerns. On Thursday morning, EA received its second request from the Federal Trade Commission to file more details of its proposed deal. Both EA, with its Madden Football series, and Take-Two, with its 2K Sports franchise, offer competing sports video game titles. “Worst case, a combined co. would be forced to divest certain assets/franchises, but we see even that as unlikely,” writes UBS analyst Ben Schachter in a report.

Though much uncertainty remains, many analysts believe an acquisition is at hand. “The news does little to change our view that ERTS will be able to buy TTWO in the $26-$28 range,” Schachter wrote. “We still see ERTS as the best acquirer of TTWO in terms of potential synergies and the most likely to win it, w/price remaining the only issue.”

By Yi-Wyn Yen

Electronic Arts announced Monday that chief financial officer Warren Jenson is resigning as the video game publisher presses a hostile bid to buy rival Take-Two.

Jenson, who has been the CFO since June 2002, will leave the company in September. EA did not specify a reason for Jenson’s departure and said it will name his replacement “shortly.”

Analysts say the shakeup is not surprising. Chief executive John Riccitiello has made a number of key management moves since he joined the video gaming powerhouse last April. Riccitiello’s latest came last week when he hired a new right-hand man in president and chief operating officer John Pleasant.

“Riccitiello was brought in because the stock hadn’t moved in three years,” said Michael Pachter, a gaming analyst with Wedbush Morgan. “Now it’s been four years. To help him, he’s hiring people he’s comfortable with. If you hire a new coach and the team’s not winning, the coach is going to bring in new players.”

Jenson, 50, spent three years as the CFO of Amazon (AMZN) before joining EA (ERTS), and has also held that position at Delta Airlines and NBC Universal.

The timing of Jenson’s resignation indicates that the company’s plans for a new CFO are unrelated to its $1.9 billion bid to acquire Take-Two. A source who has spoken to a high-level EA executive says that the company has already chosen a successor to Jenson.

In a note to clients, UBS analyst Ben Schachter wrote, “We envision little impact to the company’s strategy on the deal going forward. We think CEO John Riccitiello is the driving force behind this deal, though the timing here is unnerving and will likely raise questions with investors.”

Take-Two (TTWO) management has rejected EA’s offer of $26 a share is too low. EA has taken its case directly to Take-Two’s shareholders, and is giving them until April 11, one day after the annual shareholder’s meeting, to aceept the offer. Take-Two’s board has urged shareholders to hold off until it reviews the offer and informs them of its decision by March 27.

By Josh Quittner

I was playing Scrabble at Scrabulous the other day and noticed that my opponent laid down a four-letter word that happens to be a racial slur.

My friend is a very PC kind of guy; I didn’t think he was trying to insult me. I figured that, since we both routinely cheat online, the “Scrabble helper” program my buddy used must not have known that the word was offensive and simply picked it for another, legitimate meaning. Curious, I clicked on the site’s in-line dictionary to see what it meant, and found that there was no legitimate meaning. So I started looking up other racial and sexual slurs. Every one I could think of was in there and allowed.

Clearly, I had too much time on my hands. So I started typing in four-letter swear words, just for the sake of science. Every one was allowed, including the seven banned by the FCC.

I should say here that I am no prude and am a free speech absolutist. Even my children talk like truck drivers. I was mainly curious because, if these words were allowed in Scrabble, I probably know more of them than most of my opponents. All these years I was ignoring them on the false assumption that they’d never stand up to a challenge. I felt like such a fool.

Being thorough-ish, I went to Hasbro’s online Scrabble dictionary, and looked up the words. Sure enough, not a one was allowed! Had Scrabulous had been hacked by a foul-mouthed, racist, sexist prankster?

Nope. Apparently, until four years ago, those words were indeed allowed. But after an uproar at a national tournament, the National Scrabble Association expunged 170 words that were deemed offensive.

I guess the Scrabulous dudes never got the memo. The Agarwallas, two brothers living in India, had put up the unauthorized site two years ago and now have more than 700,000 users. They’ve been making over $25,000 a month and are still trying to work out some kind of deal with Hasbro and Mattel, who are asserting that their companies own the licensing rights to the game. The Agarwallas, meanwhile, are reportedly holding out for more money. Maybe if they get it, they’ll be able to afford the new dictionary.