IN THE early 1980s Robert Kotick could be found huddled over his Apple II computer, lost in Mystery House. Trapped inside with a murderer, players of the computer game had to solve the crimes before they became the next victim. Compared with today’s games, Mystery House looks, literally, flat. Its pictures were in two dimensions, there was no sound and no colour. Today’s video games come with graphics that are not far off Hollywood standard and endless features – guitars, guns, paddles that can act as tennis bats. Kotick has access to them all. He just has no time to play them.

Last week Kotick became boss of the world’s biggest video-games company when Activision, the company he has run for 17 years, joined forces with the games division of Vivendi. The combined company, to be called Activision Blizzard, will have sales of more than $3.8 billion (£1.9 billion), just ahead of the industry leader, Electronic Arts, and is the biggest-ever deal in the video-games sector.

For Kotick and other observers it is another sign that video games have finally gone mainstream.

The video-games industry has long boasted that its sales are larger than Hollywood’s, but that claim does not hold up under close inspection. Some games may take more in their first week of sales than some blockbuster movies, but at $50-plus for a game instead of $10 a cinema ticket, it is not a fair comparison. Nor are there yet any game franchises as globally famous as Star Wars or Superman. But the industry is getting there.

By 2010, the worldwide market should grow to $46.5 billion, according to the global consul-tancy Price Waterhouse Coopers. But the filmed-entertainment business – box-office receipts plus DVD sales and TV showings of movies – will be a $104 billion market by then.

“When I got into this business, it was with the expectation that a broad audience would emerge. It has been 17 years but I think we are now at that stage,” said Kotick.

A new generation of gamers has been tempted in to video gaming by recent technological developments such as Nintendo’s Wii games console. The Wii has proved a huge success despite being less technologically advanced than its rival consoles, Microsoft’s Xbox 360 and Sony’s PlayStation 3. Nintendo’s success has come down to good games and a system that allows players to control characters on screen by waving a remote control, using it as a tennis bat, a sword or a gun.

Activision has been attracting new gamers with its Guitar Hero. The smash-hit game comes with its own guitar, allowing players to “rock out” with legendary axe-men such as Guns N’ Roses’ Slash. Guitar Hero III took $115m in sales in the US in its first week alone.

But gaming is “no longer about 16 to 24-year-old males who can’t get a date on Saturday night,” said Kotick.

The success of games such as Brain Age, aimed at sharpening mental skills, shows that the age profile of gamers is changing.

In 2007, 24% of Americans over the age of 50 played video games, an increase from 9% in 1999. “Family entertainment” accounted for 9.3% of video-game sales last year, not far behind “shooter” games at 10.6%, according to NPD Group. The biggest categories were “action” at 27.5% and “sports” at 17%.

Just as the games have got wider in their appeal, so the cost of making them has spiralled. Electronic Arts and Activision have snapped up smaller rivals in a drive to gain market share.

Last month John Riccitiello, chief executive of Electronic Arts, said he believed the era of consolidation in the games industry was coming to an end.

“Is the industry ripe for mergers, or has it already been picked? I would argue that it has largely been picked,” he told Reuters. “That doesn’t mean it’s done. I think there’ll be more consolidation to come.”

His timing may be a bit off but Riccitiello could be right. Kotick said future growth in the industry would come from owning the best franchises and developing new sources of income – hence his courting of Vivendi.

As well as Guitar Hero, Activision has the Spiderman franchise and makes a number of Tony Hawk skateboard games. Last year it won the rights for a series of James Bond games from the Hollywood studio MGM.

Vivendi’s games division has been less successful, except in one area – World of Warcraft.

The aptly acronymed WoW is an online video game where dwarves, wizards, orcs and so on battle it out in a never-ending series of quests. The game now has more than 9m subscribers across the world, many paying a monthly fee to play online.

Other games have attracted large online followings, like Microsofts’s Halo, but WoW is a phenomenon and one that Kotick hopes will prove instructive.

He said the idea of adding monthly fees to the company’s revenues was “very appealing. It could certainly smooth out some of the bumps”.

Vivendi has also spent heavily developing games for mobile devices and, with Apple and now Google driving sales of internet-ready mobiles, online portable gaming looks set to bea new growth area for the video-games companies.

“There’s a lot of low-hanging fruit out there,” said Kotick. The Vivendi deal also plugs Activision into another division of the French conglomerate Universal Music.

A lot of media deals have failed to produce the promised synergies, but Kotick is hopeful that the links between music and games will benefit from the merger.

Since its beginnings Activision had been “platform agnostic”, said Kotick. When he took over in 1991, Activision was making games for Atari, a now-defunct games system, and had developed the first CD-Rom computer game, The Manhole. Sega had Sonic the Hedgehog and Nintendo Super Mario Bros, but both systems were eventually eclipsed by Sony’s PlayStation. Now Nintendo is back off the ropes with its Wii, Microsoft is pouring billions in to Xbox, and Sony looks the weaker player.

And it’s not just the competition between console makers that has increased. Big media companies, including Disney and Viacom, are developing games, both offline and online. Last year Time Warner took a 10% stake in SCi Entertainment Group, the video-games company behind the Tomb Raider series, and last month it added TT Games, the British firm behind the Lego Star Wars games.

Once an industry dominated by techie teens making games to amuse their similarly geeky friends, video gaming is finally coming of age, providing what Kotick describes as “an enormous opportunity”.

“The good news is that we have a long way to go,” he said.

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