(Business 2.0) – When Jakks Pacific, the nation's fourth-largest toymaker, bought Long Island-based Toymax in 2002, it picked up the rights to some pool toys, a karaoke machine, and a laser-tag system. But it wasn't until after the deal closed that Jakks president Stephen Berman got excited about the real gem of the portfolio: a battery-operated control pad that housed a low-tech videogame and plugged into a TV--eliminating the need for a pricey console like the Xbox. Berman, a former executive at videogame maker THQ, took one look and epiphany struck: "This seemed like the perfect way to open up a whole new market for games."

Make that a whole new market for old games. In the 18 months since Berman launched Jakks's new line, TV Games, the company has edged its way into the cutthroat videogame business by dusting off coin-operated classics like Ms. Pac-Man and Galaga, and packaging as many as 13 of them inside a $20 device. TV Games generates about $66 million per year--roughly 15 percent of Jakks's revenue--and sales have more than doubled in the past 12 months. "It's a brilliant idea," says Michael Pachter, an analyst with Wedbush Morgan Securities. "It expands gaming to a new, very price-sensitive audience." Here's how Berman cashed in. -- GEOFF KEIGHLEY

1 Cheap Content Berman bought the rights to more than 20 dormant titles from Activision, Atari, and Namco, and licensed Electronic Arts's Madden Football '95 and NHL '95. He then snagged Spiderman, SpongeBob SquarePants, and assorted Disney characters to appear in new games--which Jakks can develop for between $100,000 and $500,000.

2 Cheap Hardware The older titles run on just a few megabytes of onboard memory--ensuring dirt-cheap electronics, which come from foundries in Taiwan. Jakks then assembles the consoles in China.

3 Retro Packaging Berman asked Jakks's 70 in-house designers to make the Atari TV Game just like the original Atari 2600 joystick, and craft a Namco console that would evoke Pac-Man nostalgia. The unique designs lure buyers into getting more than one.

4 Mass Appeal The low retail price and retro cachet helped Jakks break into mainstream stores like Bed Bath & Beyond, Saks Fifth Avenue, and Urban Outfitters. At Best Buy, hard-core gamers are snapping up TV Games to reexperience video antiques. According to the Toy Book, it was the top-selling toy from April through June.