Electronic Arts: LARRY PROBST/Redwood City, Calif.

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e's one way to beat the tech-slump blues: employ a suave secret agent, a teenage wizard and a handful of hobbits. That was the strategy of Larry Probst, CEO of video-games giant Electronic Arts, based in Redwood City, Calif. As each new generation of console hardware makes video games look more like movies, Probst wanted to snap up franchises with repeated success at the multiplex — like James Bond, Harry Potter and The Lord of the Rings — and put them to work in the virtual arena.

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The plan paid off. The Harry Potter games alone have sold more than 20 million units worldwide. After some down years, the video-game industry as a whole is growing, but EA is exploding: its revenues shot up more than 40% last year to $2.5 billion, almost three times the revenue of its nearest rival, Activision. And EA is managing to wring more sales out of fewer games: it produced only 58 in 2002 vs. 68 in 2000. "We do fewer things, and we do them better," says Probst. "We don't just throw something at the wall and hope it sticks."

Of course, Probst has seen his share of duds — such as Sims Online, a multiplayer version of the best-selling PC game of all time. Sims Online garnered a disappointing 82,000 subscribers worldwide. Still, Probst can absorb the blows. At 52, he has seen it all. He is famous for rarely smiling and comes across more like a stern high-school principal than the emperor of electronic fun. But he has been the boss for 12 years and understands how to foster a creative environment. Like Harry Potter's Hogwarts, EA is divided into competitive teams; each works on a separate game, and each wants to outsell the others. But they also share innovations — so the realistic-looking blades of grass from, say, Madden NFL 2003 also find their way onto Harry Potter's Quidditch field. Result: 22 of those teams sold more than 1 million copies last year. That's as close as the video-game business gets to a Hollywood ending.