Category Report: Video Games

A generation ago in time -- and several generations ago in video game technology -- makers of consoles and games were thankful to receive any space in-store for P-O-P. Then, as technology raced forward and gaming grew in popularity during the next decade, they came to expect their real estate.But with new games heading to the shelf -- weekly -- and new companies entering the market at an accelerated pace, retailers are overwhelmed. The category once again faces a space crunch, says Scott Lambrecht, director of retail marketing for Sega, San Francisco."There is a lot of competition for very limited space," he says. "There was such an onslaught, [retailers] put a hold on it. Some retailers will not entertain the idea; other retailers are very selective as to what they do bring in. It is becoming more and more of a challenge getting point-of-sale material placed. That said, it is being done."Sega tackles the space crunch by knowing its markets and targeting specific titles to specific retailers, Lambrecht says. "Some retailers are stronger in the [Nintendo] Wii platform," he says. "Some are stronger in the [Sony] PlayStation environment. We basically go to them with specific ideas and designs, so they can envision it in their space."Capcom Entertainment, Sunnyvale, CA, has found that, unsurprisingly, the popularity of titles significantly impacts the amount of delegated in-store space. The company's Lost Planet, exclusive to Microsoft's Xbox 360, received placement in pre-sell boxes in major chains like Best Buy and Wal-Mart, which doesn't happen often in those chains, says Jack Symon, director of brand marketing. "If you have a large title, which Lost Planet turned out to be, as long as you're planning things early enough, you can usually get a decent presence."High-profile titles like The Elder Scrolls for Oblivion find space on shelf at any time of year, says Pete Hines, vice president of public relations and marketing for Bethesda Softworks, Rockville, MD, which released that title. For less widely popular titles, Hines says, it's all in the timing. "You want space on a store shelf in mid- to late-June? You're probably not going to have too much trouble," he says. "Between Thanksgiving and the holidays, you've got an awful lot of competition. Like a lot of things, it's seasonal. The more titles you have coming out, the more premium on space there is in the store."Obviously, the size of the store itself (Best Buy being much larger than a GameStop) and how often they change the department planogram impacts store space, too. "The bigger issue is how frequently each retailer decides to revise the planogram for the video game section," says Mary Jo Bastuba, senior national field manager, Nintendo, Redmond, WA "The norm is once, and occasionally twice, per year and does not frequently vary from that. Gaining additional space in between revisions is not a simple process."Nokia Corp., White Plains, NY, avoids the issue of finding in-store space altogether by releasing its games digitally rather than in physical locations, says Kasey Farrar, who works in media relations. "You start looking at these [PDA] devices, they have gigs of on-board storage," he says. "You don't really need the brick-and-mortar shop. That's a big trend in music right now. You will look to see a trend like that in gaming."Video Game BoomThe release of new console systems by all three major hardware companies -- the Microsoft Xbox 360, Sony PlayStation 3 and Nintendo Wii -- in a space of about a year from late 2005 through late 2006 has made the video game category considerably more crowded -- but also has gained it considerable attention. It's so popular, gaming now rivals major entertainment like movies, DVDs and CDs. In releasing both the DS and Wii systems, Nintendo has a very definitive strategy to broaden the category as a whole, Bastuba says. "We recognize that in order to grow this market, we need to reach beyond the core gamer," she says. Adds Beth Llewelyn, senior director of corporate communications, "They've been doing huge sales numbers and have certainly bolstered the industry as a whole."Symon of Capcom agrees that Wii has helped to expand the video game audience beyond its traditional core of teenage boys and young men. "It is appealing to a different demographic. It's certainly more family-friendly," he says. "It's also a device that lets people, who aren't core gamers, have the opportunity to try."The release of all the new consoles made Microsoft more selective about which games it promoted, says Lindsay Myers, lead visual merchandising manager for Xbox and Games for Windows at Microsoft, Redmond, WA "We knew they weren't going to be able to put up a poster for every game that was coming out, considering all the category launches," she says. "Visually, I'm very happy with where Xbox [360] lives in the category. We've maintained endcaps more than a year from launch."However, it's hard out there for a third-party publisher. The new hardware boom made placing P-O-P more challenging for makers like Sega, Lambrecht says. "In the past, when they just had Xbox or PS2, we had the ability to place more point-of-sale materials. Then, suddenly, the retailers have maintained the same in-line space, [and] some of the slower-moving titles have been removed from the planograms."In some cases, it's hurt what we call our category brands, titles that have been released in the past year or more," he adds. "We continue to drive awareness of those titles while having a very noisy background with the first-parties talking about these new platforms. Retailers favor first-party platform-holders so you can drive awareness of these new hardware systems. As a third-party publisher, you kind of fall into second tier."Hines of Bethesda agrees with that, although he notes that it's the second tier of a more heavily trafficked aisle. "If you thought there was a premium on space within a retailer in any other holiday season, you should try it when major console manufacturers are launching at the same time," he says. "These guys are taking up a lot of space because they're providing the hardware that everybody else is supplying games to."P-O-P space may be tougher to come by, but the good news is that these guys are doing a lot of work to drive traffic to where you're trying to sell games," Hines adds. "They're bringing more sets of eyes down your aisle. The more consoles they sell, the more potential customers I've got." Video game companies work months in advance of a launch to create P-O-P, thanks to the frenetic release schedules, but work even earlier on a launch when adding a preawareness or presell campaign, which help prevent titles from getting completely lost in the shuffle.For Microsoft, a run-of-the-mill launch without a presell or preorder campaign generally starts 24 weeks out and hits stores four to six weeks ahead of the launch date, Myers says. "To hold space, a lot of times we'll have a call-to-action about when it's coming," she says, such as a tearpad counting down the days. "We definitely want to create awareness so that people come back in and get it on launch day."For Nintendo, a pre-campaign often will contain a "coming soon" snipe with a launch date sticker that can be removed to reveal a new message that says "available now," Bustuba adds. "We do not typically include price points on our P-O-P. This allows us to create P-O-P for multiple retailers and extend the life of it."Sega begins the process of creating P-O-P about 10 months before the ship date, working with specific retailers throughout and placing in stores at least two months prior to launch, Lambrecht says. Frequently it begins with "coming soon" signs and presell boxes, then ramps up to signage and posters about a month out, he says. "We keep introducing new product assets so they always have something fresh to put in front of their customer," he says. "By the time the launch comes, we make sure, for our larger titles, that we have in-store displays with half-pallets or shippers."Capcom usually starts placing P-O-P 30 to 60 days out, but it can be as long as four to six months, Symon says. "Generally speaking, you're going to do a preorder campaign, hopefully signage and boxes to call out what your program is and to make people aware of that," he says. "In the case of Lost Planet, we did a retailer-specific road show six months prior to the release of the game."That's because the title was scheduled to ship in January, Symon says, and Capcom wanted to create a buzz before holiday titles drowned it out. "We wanted to make sure we had made it in advance of all the people who were preparing for the holidays, getting things to the retailers' distribution centers as early as possible," he says.Bethesda's salespeople keepin constant contact with accounts and put together programs within and across retailers to make sure they're well coordinated. It takes all forms," Hines says. "You may start three months before, preorder mock-boxes, let folks know it's coming. Within a month, you ramp things up with posters, standees, shelf-talkers, counter cards. We don't have the luxury of waiting until the product is out."Channel M, Los Angeles, which provides in-store television programming onvideo games, times its segments as closely with launches as possible, says Eric Hebel, president and COO. "Our content is generally timed so it's going to help drive the sale of the game," he explains. "We know pretty much for the next 12 months what's coming out."The downer of getting P-O-P up quickly for constant launches is it has to come down quickly. Sega shoots to have a presence in-store for at least 60 days after a launch, although heading into the holiday time frame, that becomes tricky, Lambrecht says. Beyond 60 days, "It's really dependent on the title itself and whether it's sustaining its sell-through," he says. "In many cases, we do targeted online marketing using the database of each specific retailer. Of course, we always like to drive them back in-store."Capcom figures its signage will remain in place for 30 days and other pieces like standees and window clings perhaps 60 days, according to Symon. "My local Game Crazy has a Lost Planet window cling up three months after launch," he says.Demo WorldAward-winning, the toast of the industry -- such was the case for the Xbox 360 interactive kiosk, which won the 2006 Best of the Times Award in the Design of the Times competition and a Display of the Year award at the OMAs. More than getting kudos from industry brethren though, kiosks are flat out vital for consoles to compete. Microsoft, Nintendo and Sony all built slick, powerful interactives that fill stores with kids lining up to get a crack at them. But key to console market-ers is constantly refreshing the content on demo displays, and key to software marketers is finding a way to get aboard.For Wii, Nintendo had trouble launching too many interactives because the controller is wireless and "active," settling, successfully, with video loops on kiosks in many locations. However, Nintendo does provide interactive displays where customers can sample new titles before making a purchase, which can be updated regularly along with attached P-O-P that provides information about the game, Bastuba says. She recalls an anecdote about a 14-year-old boy who wanted to sample a game but did not have the required photo ID to hand over as collateral for use of the controller. "He said, 'What about my shoes?' " Bastuba says with a laugh. "They took his shoes, and he was able to stay and play. You wouldn't take off without your shoes."Nintendo also offers "DS Download Stations" to which customers can bring their own DS and download portions of games to take with them. "We have found this to be a very successful way of providing our customers the opportunity to experience new titles prior to making a purchase," Bastuba says.Microsoft places kiosks that are updated about once every couple of months, Myers says. "We have a rolling schedule throughout the year to update the demo disk with the latest content for first-party games [and] whatever we can get for third-party games," she says. "As we have new products in the lineup, we'll add those."Bethesda works to provide trailers, or, occasionally, full demos for use in the kiosks, Hines says. "A trailer is much easier to provide further out," he says. "A fully interactive demo, that's a drain on the developers. A demo is usually a self-contained thing. You have to make sure it works and provide special instructions because they don't have the benefit of a manual. Things like that tend to come out closer to a launch."Rated M for MatureThroughout the lifecycle of P-O-P, video game makers must be certain that their in-store content is both exciting and fresh for hard-core gamers, but, also, not too edgy for parents who might be bringing younger children into the store with them."There's definitely a balance," Microsoft's Myers says. "There are some games that are family-friendly. They're appealing to all ages -- little kids, parents and in between. That is the easy slam dunk. We can talk about the key why-to-buys. We do run into more of a challenge when it's an M-rated title."That's due both to the possibility that families might be offended by the wrong imagery, or that hard-core gamers might already know what's being communicated, she says. "We never have guns pointing at people. You may see a gun pointing down. You may see it covered up by a sales message. We definitely are very cautious in that area."Microsoft's P-O-P focuses only on the essential, Myers says. "True gamers will go online and find out every bit of information they want," she says. But for others, "We always push to have at least three bullet points about the game. Why should you buy the game, especially for gift-buyers? We definitely want to say what's different from this racing game as opposed to any other racing game."Sega trusts retailers' judgment as to what messages or images might be too racy, Lambrecht says. "If they feel it's not appropriate or not within their guidelines, they will automatically police it," he says. "It's not unusual to come up with three or four different product communications primarily because each of the retailers has their own niche, and they are marketing to that niche. We are sensitive to that. We also police ourselves."Providing unique content to retailers is increasingly difficult, Lambrecht says. "We work with our developers early on to bring that exclusive content so we can go to our top accounts and say, 'These are exclusives that only you will have,'" he says, adding that exclusivity is not always necessary. "We try to reinforce some of the positive messages as well, so the consumer will go, 'Oh yeah, I remember reading that article.'"Channel M needs to balancethe needs of various audiences in creating its in-store programming, Hebel says. "We want to make our program relevant to gamers," he says. "We can't have grandma call up GameStop or write a letter to Congress about how video games are ruining the world. The program is edgy. It's targeted to this gaming audience."But at the same time, it's retail-friendly," Hebel says. "We're not going to show content that is extremely violent or sexually explicit. That's something video game retailers are constantly faced with. The retailers have to be careful. They're the ones people are going to complain to. But there's enough compelling content out there about video games that it doesn't affect the process that much."

Category Report: Video Games

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