The search giant is set to invest in Machinima, one of the most popular networks on YouTube, via a funding round that should close within a month. Machinima focuses almost exclusively on YouTube videos for and about videogame players, and generates more than a billion views a month.

People familiar with the round tell me it should end up raising more than $30 million, and will value the company at around $190 million, post-funding. No comment from Google or Machinima.

Google will be one of several investors backing Machinima in this round. And even if it put in the entire amount itself, it wouldn’t be material for a company that did $8.1 billion last quarter.

But the move has significant symbolism, because it’s the first time Google has openly backed a content company by taking an equity stake. YouTube is spending more than $100 million on its much-publicized channel program, but it is writing those checks as loans to content makers, and it recoups the money via ad sales.

The deal may ruffle some feathers among other video makers, some of whom already complain that YouTube favors Machinima and a handful of prominent content partners. And people familiar with the funding round tell me that at one point Google considered routing the investment through its Google Ventures arm to try to allay those concerns.

The counter to that argument: Why shouldn’t Google back content producers who make stuff for its properties? After all, YouTube is trying to become more like TV. And most of the big TV networks own their own studios outright.

Vox Media, the Washington, D.C., online media start-up that launched a new tech site called The Verge last fall, is debuting an early version of its expected videogames offering later today.

The site, temporarily called Vox Games, will begin daily publishing today as a section on The Verge, to be followed later by a standalone site under a new brand name.

The company said that “our goal here is to create the premier destination and media outlet for video games news, reviews, video and entertainment.”

As with The Verge, the Vox Games staff is made up of well-known editorial personnel from other prominent sites. It is headed up by former Joystiq Editor in Chief Chris Grant.

Other staffers are former editors in chief of top videogames sites, including Brian Crecente (Kotaku) and Russ Pitts (Escapist).

The practically complete absence of rules or sanctions is nevertheless astonishing: civilians or protected objects such as churches or mosques can be attacked with impunity, in scenes portraying interrogations it is possible to torture, degrade or treat the prisoner inhumanely without being sanctioned for it and extrajudicial executions are simulated.

— From a 2007 study of war violence in video games by TRIAL, a Geneva-based organization that assists in cases involving international crimes such as genocide, crimes against humanity and war crimes. The topic of whether the trivialization of war crimes as depicted in videogames warrants regulation is being revisited this week during the 31st International Conference of the Red Cross and Red Crescent in Switzerland.

The sharp earnings downturn is the latest problem facing the Japanese videogame maker, which is struggling to keep pace with a technological sea change that threatens to alter how consumers play video games, while grappling with the twin cocktail of a soft global economy and a strong yen that is hammering Japanese exporters.

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One area of apps involves gaming. I’m not just referring to the single player, heads-down games that consume a person for hours until she beats her own best score, or the scores of strangers around the Internet—though plenty of those exist for the tablet. I’m talking about old-fashioned board games, the kind that involve sitting around with friends or family and actually having fun together. Some of these apps are purely digital. But one company is bringing real board-like elements to tablet games.

This week, I tested a game that successfully marries digital and analog games by using the first physical device to digitally interact with the Apple iPad screen. The $40 Duo by Discovery Bay Games (yoomigame.com) doesn’t plug into the iPad, nor does it connect to the iPad via Bluetooth or other means. It sits on the iPad screen in a specific spot and uses a built-in light sensor on its underbelly to interpret light signals displayed on the iPad screen during a game.

To play the Yoomi game with Discovery Bay Games’ Duo, players drop jewel-like tokens onto the top of the device to vote on possible answers to questions.

The first accompanying game app to use the Duo, called Yoomi, is free from the Apple App Store and can be played by kids as young as 3 years old. It simply asks players to guess what one person would choose between two possible answers, or options, both of which are displayed as digital cards with text and images on the iPad screen. Cards include options like, “dig a hole to China” or “find buried treasure.” Up to six people or teams can play, and each receives a set of jewel-toned tokens that they’ll try to get rid of before the other players by guessing each person’s choice. Playful music and sound effects accompany each game.

Players cast their votes by placing tokens on one of two spaces atop the Duo, a plastic hollow device with clear sides and a tiny black switch. Each space represents an answer, and the person about whom everyone else guesses privately chooses one answer by reaching into the Duo and touching the iPad screen to select the answer.

After the other players cast their votes, a Reveal button on the iPad screen uncovers the chosen answer. Suddenly, the space at the top of the Duo representing the correct chosen answer drops like a trap door, collecting all tokens that were there. The iPad is passed to the next person and play continues, with each person selecting an answer for others to guess until one person or team is out of tokens.

At first, I was skeptical that the Duo and the Yoomi game could replicate playing with traditional board games. Since so few aspects of my life aren’t touched by digital technology, putting down my laptop, iPad or BlackBerry to play a board game always feels like a treat. But I found that while playing Yoomi, the iPad becomes the game board, stationed in the center of a table or circle of friends and passed around for each person to cast a vote.

Since the iPad has plenty of additional functions, playing a game on it may invite distractions from the outside world. Other apps continued to work in the background on my iPad, like my Facebook and Entertainment Weekly apps, which send occasional pop-up notifications onto the screen. The thought of personal Facebook messages popping up would be enough to embarrass any teen into not wanting to use his or her iPad to play with family members. On a good note, the chime indicating I received a new email on the iPad was automatically silenced during game play.

And of course, the iPad costs at least $500, so even though the $40 Duo is relatively affordable, the whole set won’t fit most family budgets.

Still, several advantages come from using a digital game that incorporates physical components, like tokens and a device that collects those tokens. Instead of holding a controller and staring at a TV, like with video games, players need to look up at one another to see how many tokens each person has and who’s winning. And the Yoomi game questions are provocative enough that people will want to ask one another why they chose their answers or voted a certain way.

One of the most exciting things about this technology is its ability to use a light sensor for communication between the iPad screen and another object. Discovery Bay Games CEO Craig Olson said the company might consider using this technology for other products such as a health-related device that, when placed on the iPad screen, allows data to be automatically recognized and recorded.

Like other digital apps, Yoomi can be updated with new content to replenish the 150 pairs of digital cards that come loaded with this free game; another 150 pairs will be sent in an update later this year. Mr. Olson said people tend to burn through digital games much faster than traditional board games, and the ability to send new game material without manufacturing and delivering physical parts is a real boon.

The people working at Discovery Bay Games know a thing or two about traditional board games: Numerous Discovery Bay Games employees worked at Cranium, the charades-esque game that gets people humming, whistling, drawing with closed eyes and miming. Duo is likewise deliberately designed to encourage interaction with others.

In the next nine months, some 12 to 15 other iPad app games will be released for use with Duo, including a $2.99 Smithsonian Fact or Fiction game and a $2.99 Discovery for Kids–Astonishing Comparisons game.

This summer, Discovery Bay Games will start releasing other physical devices that will work with the iPad and range in price from $30 to $60. Some will use the light-sensor technology while others will use different signaling methods to communicate with the iPad. These will launch in conjunction with lead titles, like a Highlights for Children game and a Saturday Night Live game. Mr. Olson said the company is developing for the Android platform as well as for Windows 7 devices.

For now, the Duo and Yoomi are a fun way to add technology into family game night, with continuously updated content keeping game material fresh. As games improve to take full advantage of the other tablet functions, they’ll become even more enjoyable and interactive.

Write to Katherine Boehret at katie.boehret@wsj.com

Notice to Readers

Starting today, The Mossberg Solution column becomes The Digital Solution. It will still be written by Katherine Boehret and edited by Walter S. Mossberg.

Because despite the pop star’s domination of both YouTube and Facebook’s charts this year, his popularity did not translate into dollars spent on Amazon or eBay.

The leading picks for eBay’s top-shopped and pop-culture obsessions of 2010 were: The iPhone 4, Barbie, military jackets, Hot Wheels and the iPad.

EBay said that in the U.S. there were 1.63 million items sold related to the iPhone 4, and 631,399 iPad-related items sold.

We also asked Amazon to cull its list of bestsellers to see what was trending among consumers in 2010.

It found that while the top-selling electronic gadget on Amazon was clearly the Kindle (the Wi-Fi model, to be exact), the top computer sold was the 13.3-inch MacBook Pro. The top-selling phone was AT&T’s Samsung Captivate (yes, Android!).

Finally, the other standout result was that not everyone got what they wished for.

In other words, the top-selling items did not always synch up with the most-wished-for items stored on Amazon’s Wish List. For instance, the top computer wished for was Apple’s iPad. (Still, when Amazon announced earlier this week that the third-generation Kindle is now the best-selling product in history, CEO Jeff Bezos insisted that the Kindle and iPad serve different niches, and therefore don’t compete. Maybe it helps when the Kindle is considered an electronic, and the iPad a computer).

Most-Wished-for Items of 2010:

Top-Selling Items of 2010:

The cable programming giant has sold its Harmonix unit, which published the game, to investment fund Columbus Nova LLC. It hasn’t disclosed a price, and if it’s not material it won’t have to. And my guess is that it won’t: Viacom bought the games business for $175 million in 2006, when the games were on the upswing, and if I had to bet, I’d say it will end up selling it for less.

Let’s take a minute here to point out something obvious, but which we always seem to forget–media consumption trends move very, very fast. You only have to go back two years to find Warner Music Group’s Edgar Bronfman Jr. demanding that the music labels get their fair share of the “enormous opportunity” the games were creating.

And just a year ago, (some) people were convinced that a special Beatles version of Rock Band was going to be a very, very big deal.

Now gamers are on to something new: Microsoft’s Kinect, for instance, seems to be selling very well this month. But I wouldn’t bet on it staying hot a couple of years from now.

Market research firm NPD Group said overall revenue from videogame hardware and software fell 7.6 percent in November to $2.7 billion compared with the same month in 2008. Game software sales fell 3 percent to $1.41 billion.

Monthly sales for the industry have been down since March, except for a slight uptick in September. Results would have been even weaker in November were it not for Activision Blizzard Inc.’s (ATVI) “Call of Duty: Modern Warfare 2” shooter game, which had the best first-month sales ever, selling more than all of the other games in NPD’s top ten list combined.

The last three months of the year are traditionally the most important period for the industry, but analysts said sales of mass-market games and casual games for families were particularly weak.

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This holiday season, more games than ever are being geared toward female players. Electronic Arts Inc. (ERTS) is releasing the latest installment of its “Littlest Pet Shop” game for young girls and introducing a series of fashion-themed games called “Charm Girls Club” for older girls later this month. Sony Corp. (SNE) in August packaged a lilac version of its PlayStation Portable device with a “Hannah Montana” game, based on the popular television show about a girl and her secret pop career.

Publishers also will target women with workout games. Ubisoft Entertainment SA is introducing “Your Shape,” a personal-training game, and “Just Dance,” a dancing game, in November. Nintendo Co. hit the market with “Wii Fit Plus,” a sequel to its popular fitness game, in September.

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Hardware sales were hit the worse, down 30 percent. Software sales were off 17 percent, while accessories were down 25 percent. For the year to date, sales overall are down 7 percent, with hardware off 6 percent, software 8 percent and accessories 5 percent.

Among the consoles, the Nintendo Wii sold 289,500 units, down from 340,000 in April and 601,000 in March. That was followed by the Microsoft (MSFT) Xbox 360 at 175,000, flat with April.

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Though Wii manufacturer Nintendo posted a 21 percent gain in quarterly operating profit on brisk demand for the videogame console, it slashed its forecast for full-year sales of the device (it slashed its full-year profit forecasts as well–by 33 percent). Nintendo had expected to sell 27.5 million units during its fiscal year, which runs from April until March. Now it expects to sell only 26.5 million. “Wii sales in Japan during the year-end shopping season didn’t meet our forecast,” Nintendo President and CEO Satoru Iwata said during an earnings briefing. “Still, I don’t think demand for the Wii has run out.”

No, of course not. But clearly the Wii isn’t as recession-proof as was once thought. And, despite its appeal to budget-conscious consumers, Nintendo doesn’t feel it’s immune to the general slowdown in consumer spending. Said KBC Financial Products analyst Hiroshi Kamide: “Today’s revision suggests that the roaring pace of Wii growth that we’ve seen until now may be over.”

For FY Q4 ended Oct. 31, the publisher of Grand Theft Auto and other videogames posted revenue of $323.4 million and a non-GAAP profit of two cents a share; the Street had been looking for $325.8 million and five cents.

That’s not good, but the real trouble is the guidance.

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Still unclear about the company’s prospects? CEO Brad Anderson tries to spell it out: “We believe that there has been a dramatic and potentially long-lasting change in consumer behavior as people adjust to the new realities of the marketplace.”

But! There is at least one glimmer of not-terrible news buried in the retail giant’s report this morning: Same-store sales for November–that is, year-to-year comparisons for stores that have been open for at least 14 months–were “essentially flat.”

That’s once you factor out a weird calendar anomaly between this year and last year. If you don’t account for that, same-store sales were down 8.7 percent. But whatever. Flat is the new up, and we need good news, so we’re taking what we can. The company says that while store traffic was down, people were buying bigger ticket items like notebook computers and mobile phones.

Why are you reading about a retail giant’s performance in a media column? Because the performance of Best Buy (BBY) and other retailers during November and December is going to have a big impact on ad budgets for 2009.

Alas, not all of the media news coming out of Best Buy is as good (or at least not bad). The company reports “double-digit declines” in movie and music sales (thanks for nothing, Guns ‘N Roses fans) and single-digit declines in videogames.

In October, Mahalo.com founder Jason Calacanis laid off staff at his human-powered search engine. Then he announced he was hiring engineers for a mysterious new “Project A.”

Today he’s unveiling it: An “answers” service designed to compete with one of Yahoo’s most successful sites.

Like Yahoo Answers, Mahalo’s new product relies on users to answer other users’ questions. Unlike Yahoo’s (YHOO) site, Calacanis promises to give his most prolific answer-givers a chance to make money, via a virtual currency they can earn by answering questions.

The proposition: Users can ask questions for free. But they can also buy “Mahalo Dollars” using real money and reward people who answer their queries. Users can eventually cash out the Mahalo currency they earn for real dollars, with Calacanis taking a 25 percent cut.

This aligns him with a growing number of Internet execs who think they can make money via virtual goods and currencies. That’s worked well for Asian companies and a handful of Western videogames, like Activision Blizzard’s (ATVI) World of Warcraft. But the market for virtual stuff has yet to appear at most U.S.-based Web sites.

Still, Calacanis thinks he’s got a better shot of making it work next year than his original plan for 2009: Selling ads on his site besides the ones he runs from Google’s (GOOG) AdSense. “I think it’s going to be very hard to make money selling ads,” he said. “The market needs this more than it needs us out there trying to sell inventory.”

All of this supposes that people are actually willing to pay for advice they get over the Internet. I’m dubious, but then again I had no idea Yahoo Answers was as successful as it was until Calacanis walked me through the user stats in his demo*: 24 million unique users in the U.S., according to Quantcast.

I did try it out myself, and found that Calacanis’s beta users (who are presumably incented to answer as many questions as they can) did a decent job of answering my query about moving my Palm data to my BlackBerry via my MacBook–and much better than the people at Yahoo Answers and Answers.com, who didn’t even try.

But it’s still not good enough. Looks like if I want to get this done I’m going to have to pay someone real cash.

*A note for anyone who ever has to demo a product: Find some way to watch Calacanis go through his paces live if you can. You can get a sense of the experience by reading his tutorial, or by watching video of him in action. But it’s another thing to get it in real time, and watch him simultaneously hype and soft-sell. Really effective stuff.

[Image Credit: Joi Ito]

A remarkable metric, given the economic downturn. How is it that gaming is thriving at a time when the global financial crisis is squeezing wallets? “There are a couple of reasons,” Ron Meiners, director of community for the Hollywood Interactive Group, recently told News.com. “One is the traditional value of entertainment during tough economic times. Like the great fantastic musicals in the 30s. Movies did great, because they took people’s mind off of the troubles they were facing. [And] videogames have great value as entertainment. The number of hours of solid entertainment that comes from a videogame purchase is much greater than a movie, for example, for very comparable cost.”

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The Wall Street Journal reports that Redstone’s National Amusements holding company has sold its 87 percent stake in Midway (MWY) for $100,000, plus the assumption of $70 million in debt, to Thomas. On Friday, that stake was worth something like $30 million.

The real upside for Redstone, the paper says, will be a tax loss of some $800 million, though it’s unclear how he will be able to use that to help restructure his debt. Over the years, Redstone invested an estimated $500 million in the game maker. Redstone still has a few other assets that aren’t CBS (CBS) or Viacom (VIA), but those are by far his most valuable properties.

What does Thomas get out of this? It’s not entirely clear. Midway is best known for its “Mortal Kombat” franchise, which was once considered controversial because it allowed players to rip out the still-beating hearts of their opponents. But that’s old hat these days, and even new iterations like “Mortal Kombat vs. DC Universe” haven’t been able to sustain the company, which has lost $494 million in the last five years and has been under constant threat of losing its NYSE listing in recent months.

But the stocks are coming under pressure, due at least in part to cautious comments on the prospects for the industry in the unfolding economic downturn by Merrill Lynch analyst Justin Post. The Merrill analyst cut his ratings on both Electronic Arts (ERTS) and Activision Blizzard (ATVI) to Neutral from Buy. He maintains his Underperform rating on THQ (THQI).

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This one is about the recent hookup between Vivendi and Activision, in a big deal that has shaken up the scene:

And this one is an interview with Electronic Arts’ John Riccitiello by WSJ’s Nick Wingfield: