Video games get boost from brand power - Brief Article

DSN Retailing Today, June 5, 2000 by Robert Scally

In the entertainment software business, linking a game to a licensed property is becoming the price of entry into this lucrative and rapidly growing market.

"I feel more and more that the industry needs licensees," said Michael Hayes, director of sales and marketing for the United Kingdom-based Codemasters.

Codemasters has been successful developing and selling video games in Europe and is now setting its sights on the U.S. market.

For Codemasters, two key licensed games, "Mike Tyson Boxing" for the Sony PlayStation and the "MTV Music Generator" music creator for the PlayStation and PC CD-ROM, Will be used to help break in to the U.S. market.

"It's kind of a required admission to a shot at the market," Hayes said of licensed video games.

There's good reason for Codemasters to want a chance at the U.S. domestic video game and entertainment software market.

Video games for set-top game systems such Sony's PlayStation and personal computers generated $6.1 billion in revenue during 1999, which was also the fourth consecutive year of double-digit revenue growth, according to the NPD Group, a market research firm that tracks software sales.

Licensed software titles, especially those tied to popular films or highly recognizable brands, help drive traffic at retail.

"Licensed products such as Pokemon, Toy Story 2 and Tarzan have had a positive impact on our video game business over the last year," said Lisa Hancock, senior buyer, video game software, for the Best Buy chain.

Licenses have particular impact in the marketing and merchandising of software titles for children.

"We have especially seen an increase in the importance of kid's movie licensed products such as Toy Story and Rugrats over the past 6 months," Hancock said.

In the future licensing will be more important to both software developers and retailers.

Licenses are becoming a key selling point for video game and PC software retailers who are trying to capture the traditional gamer as well as families, said Jerry Madaio, vp of merchandising, personal computer software and toys, at software and video game retailer Electronics Boutique.

Sci-fi properties like "Star Wars" are particularly successful in Electronics Boutique's 628 stores, located almost exclusively in shopping malls.

In recent years, Electronics Boutique has added more toys, particularly action figures, to its merchandising line-up, Madaio said.

Gamers often identify heavily With characters created in games or with those transferred from movies or television shows to video games, Madaio said.

The idea to add more toys germinated when Electronics Boutique officials visited game development companies and noticed that the workstations of the twenty something programmers working on new games were often festooned with action figures and other toys.

"We knew this was our market," Madaio said.

But Electronics Boutique realized that another market segment--families and young children--would also buy toys and software.

The Electronics Boutique chain is now developing an entire retail concept, EBKids, which is designed to capitalize on the growing demand for non-violent and family friendly video games and electronic toys.

Licenses play a particularly important role in the merchandising mix at the EBKids store, which is now being tested at a single location in the Garden State Plaza shopping center in Paramus, N.J., Madaio said.

A well-known brand or license can help zero in on a specific segment of consumers such as kids and families, Madaio said.

"If you want to create an entertaimnent section for girls, Barbie can help you make a big statement," Madaio said.

A license alone will not make a video game successful, but it does help.

"There are good licenses and some that don't really affect sales one way or the other," said Matt Gravett, senior video game analyst with PC Data, a market research firm that tracks personal computer software and video game sales trends.

Licensing and branding in the video game business goes deeper than just Game Boy Color and Pokemon.

The Pokemon phenomenon is an aberration in video games-a game that makes the jump into other media such as television shows, films, trading cards and toys," Gravett said.

"Nintendo was able to successfully branch out into the cards, the television shows, the movies, the [action] figures and whatever else."

Usually, movie- or television-related licenses such as Lucas Arts' "Star Wars" and Viacom's "Star Trek," which have become franchises, have been the most successful as video games.

A license can help sell a video game, but the success of any title ultimately depends on the quality of the game and the richness of the playing experience, PC Data's Gravett said.

Gravett cites the James Bond license and the "GoldenEye" title for the N64 by Electronic Arts. "GoldenEye," based on the MGM Bond film, not only is it one of N64 game system's all-time best sellers, but gamers also consider it a superior game, Gravett said.