Play Stations
Blockbuster, Inc. has a lot on its plate this summer. The chain is already busy reformatting stores to move more towards DVDs and pumping up its Rewards paid loyalty program. But this month, it will launch a major offensive into videogames that goes beyond rental into full-blown retailing activity.
Until recently, the only items for sale in Blockbuster outlets have been movies, candy, and limited supplies of DVD players and VCRs. Now, game sections in more than 4,300 stores will get a major face-lift, with the overall footprint expanded and reorganized into four “boutiques” corresponding with the four primary game systems: Nintendo GameCube and GameBoy Advance, Sony PlayStation 2, and Microsoft Xbox.
The sections will house not only games for rent but also a multitude of new and used titles for sale, along with peripherals and accessories (such as memory cards, controls, and game magazines) and the consoles themselves.
“Gaming is expected to grow from a $9.4 billion business into a $21 billion business by 2003,” says Steve Lundeen, Blockbuster’s vp-interactive merchandising. “We looked at the industry and made a decision: We want to play in that growth platform.”
The plan has two goals, and one interesting twist: The goals are to build on the chain’s 50-percent share of the U.S. videogame rental business, and to open a new revenue stream through the new-merchandise sales. The twist? Using the former to spark the latter.
Getting into games is a pretty safe bet these days. Despite the recession, the videogame industry thrived last year, with total hardware, software, and accessory sales jumping 43 percent, according to Port Washington, NY-based research firm NPD Group. (The launches of Xbox, GameCube, and GameCube advance were the main reason for the upswing.)
A little perspective: That figure tops the $8.4 billion in box-office receipts generated by Hollywood generated last year.
Blockbuster has more than 52 million registered “members” in the U.S. and Canada; 64 percent of the U.S. population lives within a 10-minute drive of a store. With three million customers visiting a Blockbuster each day, that gives the chain some strong market-cornering potential.
Lundeen is betting that the rentals will fuel the merchandise sales: Rent the game first, then buy a copy when you come back to return the rental.
Games of Chance
Despite the potential benefits, allocating that much store space for non-rental merchandise is uncharted territory for Dallas-based Blockbuster, which is why the chain will support with an array of marketing activity.
The initial summer effort targets males 18 to 26 with a Games Freedom Pass, which offers 30 days of unlimited game rentals for $19.99. Users can return the titles anytime during the 30 days without accruing late charges. Anyone who buys a game system receives the Pass free.
To guide renters into buying, a Rent It! Like It! Buy It! offer will distribute $5-off coupons with rentals. “We’re tying rental into retail,” says Mark Hagen, director of marketing-games. “We’re trying to offer a turn-key package for consumers no other retailer can offer.”
To make sure games are stocked, Blockbuster is expanding its successful Guaranteed In program, which dramatically increases inventory on popular titles and promises free rentals if a title isn’t available. (Costs of the excess inventory are recouped when the used titles are later sold.)
Accompanying P-O-P materials are hitting stores now. The 1,000 stores that rent the most games will get taller shelf units to hold additional titles. Media advertising breaks July 4 from Chicago-based J. Walter Thompson. TV spots will have heavy rotations, as will print ads in a variety of publications. Radio spots and online ads will support, as will direct mail to Blockbuster Rewards members.
“Research confirmed that hardcore gamers don’t believe Blockbuster is dedicated to gaming,” says Jill Rhiner, JWT Chicago’s senior partner-management director. “We’re increasing Blockbuster’s credibility with them.”
A second wave of marketing breaks this fall targeting families, and will ramp up in intensity as the holidays draw near. (Current offers will continue through the end of 2002.)
It won’t be a surprise if marketing partner Coca-Cola Co. gets involved at some point. Atlanta-based Coke ratcheted up its seven-year-old relationship with the chain in March by signing a five-year pact that will put the soda maker into direct mail, in-store TV, and Blockbuster’s point-of-sale coupon system (May PROMO).
Hey, nobody likes to play by himself.
Fun Never Ends
Even in a poor economy, gaming is booming.
| Merchandise | Q1 2001 | Q1 2002 | % Change |
|---|---|---|---|
| Consoles | $467 mm | $548 mm | 17% |
| Software | $716 mm | $895 mm | 25% |
| Accessories | $190 mm | $205 mm | 8% |
| Portable Consoles | $67 mm | $81 mm | 21% |
| Portable Software | $138 mm | $179 mm | 30% |
| Portable Accessories | $36 mm | $32 mm | -13% |
| Total | $1.6 billion | $1.9 billion | 20% |
| Source: NPD Group | |||
The Big Picture
Total U.S. videogame industry sales
| YEAR | SALES |
|---|---|
| 2001 | $9.4 billion |
| 2000 | $6.6 billion |
| 1999 | $6.9 billion |
| 1998 | $6.2 billion |
| 1997 | $5.1 billion |
| Source: NPD Group | |
Tube Tied
Los Angeles-based TiVo is hoping Best Buy Co.’s new ad campaign will show marketers the future of TV advertising.
The Eden Prairie, MN-based consumer electronics chain broke TV spots touting its annual Go Mobile summer sales that carry an on-screen electronic tag for TiVo’s 400,000 subscribers.
Selecting the tag sends viewers into a “video showcase” with entertainment features (such as music videos and movie clips) along with product information and offers — the latter including a pitch for an exclusive video from singer Sheryl Crow. A sweeps overlay dangles copies of Crow’s latest CD. Best Buy handles in-house.
Last fall, Torrance, CA-based Lexus worked with the real-time digital recording service to help launch the Lexus ES 300 with a direct-response sweepstakes (May PROMO). More than 80,000 of TiVo’s then-300,000 subscribers interacted with the ad.
