NEW YORK (CNN/Money) – The Securities and Exchange Commission's unannounced, but formal, investigation of certain video game publishers could result in significant accounting changes for the industry. And those changes, in turn, could be another blow to creativity.

Word of the probe came out Friday, when Activision, Acclaim and THQ noted in 8-K filings that they had been contacted by the SEC. So far, no other publisher has acknowledged being investigated.

That hasn't prevented investors from punishing the sector, though. THQ (THQI: Research, Estimates) shares were off nearly 10 percent at midday Monday; Activision (ATVI: Research, Estimates) was down more than 9 percent and Acclaim (AKLM: Research, Estimates) saw its stock fall more than 7 percent. Take Two Interactive Software (TTWO: Research, Estimates), which has been involved in a separate SEC probe for more than a year, fell 5 percent.

The focus of the investigation appears to be on revenue recognition, say analysts. Currently, publishers record revenue once they ship a product to retailers, even though they often don't receive payment for another 60 days. The basis for this is that games shipped to retailers are, technically, not returnable.

Publishers, though, do offer price protection, exchanges and discounts when a title does not meet sales expectations. To account for this in their earnings, the publishers book a reserve against gross sales.

Gary Cooper, analyst with Banc of America Securities, said in a note Monday that the SEC could force gaming companies to recognize revenue only after consumers have bought the games.

"We would not be surprised if over time the SEC mandated a change in the revenue recognition policy for the video game industry," wrote Cooper.

While acknowledging that handicapping the time frame for such a change is tough, he added there "seems a reasonable chance that by the second year of the next cycle (2006) the video game industry may in fact be reporting revenue under new guidelines."

Most gaming companies tend to be very conservative with their reserve levels. As a result, analysts don't believe there would be a significant negative impact should the SEC require accounting changes.

Stewart Halpern, an analyst with RBC Capital Markets, noted that any tightening of rules could force earnings acceleration. Due to the lack of visibility, he has raised his risk rating on the industry to "above average."

"No one is under-reserved in our view, so any tightening of the rules could lead to acceleration of revenue recognition and earnings, although the stocks may become even more volatile without the ability to smooth results by managing allowances," he said.

Analysts say the biggest publishers, such as Activision, Take Two and Electronic Arts (ERTS: Research, Estimates) are the ones best positioned for any accounting changes. THQ, the industry's fourth-largest publisher, is less conservative than these publishers, according to Cooper.

Smaller companies, such as Acclaim and Midway Games (MWY: Research, Estimates), might face the most risk. Both already have volatile earnings streams, which might be further shaken up by an accounting change. (Both companies are already considered takeover targets throughout the industry.)

"The business franchise and intrinsic worth of a business will not be impacted for those companies with strong businesses and conservative accounting," said Cooper. "Indeed, the strong may get stronger."

If that proves true -- and the big companies really do get bigger -- that could have some negative implications for the industry, though more from a creative standpoint, rather than a financial one.

Consolidation hurts creativity in the gaming world. Bigger publishers tend to focus almost exclusively on the bottom line, and as a result are terrified of coloring outside the lines, since it moves them away from guaranteed streams of income.

What the industry seemingly fails to realize, though, is that repetition breeds blandness. And if the SEC does, in fact, change the industry's accounting rules, we're likely to see an even bigger crackdown on innovation.  

Morris is Director of Content Development for CNN/Money. Click here to send him an e-mail.