Video games are no longer just an alternative product area. They have arrived as a full-fledged category within video rental departments. The video game category is "the future. It's the second most important area of the video department next to new releases," said Kirk Mueldener, video distribution manager at Hy-Vee Food Stores, Chariton, Iowa. "We recently made a decision to get into games a little bit heavier than we were. So we hope that we will see some gains," said Sharon Stagner, merchandising coordinator at Seaway Food Town, Maumee, Ohio. But the video games category also is a fast-changing one, with many new cartridge-based games coming out monthly, and with technology set to move to compact discs. "The advent of CD is going to be really exciting for retailers. There's no question," said David Pierce, senior vice president of sales at Columbia TriStar Home Video, Burbank, Calif. Here's what participants in SN's video roundtable had to say about video games:
right off the box. Now, when you look at Nintendo's market share vs. Sega's, it was a well-thought-out strategy. Our lifeline is the rental business through retailers like the ones at this table. A title like "Mortal Kombat" is truly accepted at sell-through, and a comparatively small number goes through the video rental channel. But it's on the lesser products that ship 150,000 to 300,000 units where the video (rental) channel starts to play a much more significant role. With our sister division, Sony Electronic Publishing, we made the connection to video distribution because of a marketplace issue: the clutter of video games. The major mass merchants said, "There's too much product, we can't handle it. The demand is not necessarily there and we don't have the space for it." That brought about our program, where we saw the opportunity to create a rental window exclusive to the rental channel. We've now shipped two products and are about to launch a third. We're experimenting with pricing and the type of product. But ultimately, if it can't be placed in the sell-through channels -- if the physical space does not exist and the sell-through demand isn't there -- the video rental channel is a huge opportunity. We're going to continue that program with Sony Electronic Publishing. We have at least four more projects coming this year that will be exclusive to the video channel. It's exclusive as a function of (a higher) price point. But this gets to be a tricky formula. For example, our most recent product, "Skyblazer," is priced lower than our first one. It starts to fall in line with standard video game pricing, so we do have to be careful. We want this to be an exclusive project, but if the price is too low, you're going to have a mass merchant step in and say, "I want to buy that product."
FINCHER: When you introduce a video game, it's not coming out from an originating market, like movies do from the theaters. So it's a very sharp strategy to use the video rental business to develop demand.
PIERCE: "Skyblazer" is the perfect example. When we were selling the product, the mass merchants said that while it was good and they liked the character, it had no marquee value. Mass merchants aren't going to accept this without the marquee. With this strategy, we can create a name for this character in the video rental channel, so that when we come back with another version, perhaps there will be that much more of a call for it. It's going to be exciting when the business transitions from cartridge to CD. You are going to have more exciting product and with production budgets from $1 million to $2 million. It will be like producing a small feature film. Potentially you will have name talent involved in these projects. If you introduce a product into its original channel, you will start to see support from the creative community. They will say, "We want to be involved in the promotion of this product, the same way we were involved in the theatrical promotion of the product." The advent of CD is going to be really exciting for retailers. There's no question.
INGRAM: Sega did a presentation at our sales conference and showed some of their new CD-based products and things they have coming up, and I was amazed.
FINCHER: With full-motion video -- where the full screen is used rather than just a segment of it -- the quality is incredible.
INGRAM: Imagine games with CDs, coupled with high-definition TV. You're going to have virtual reality -- the whole bit. Our kids are going to have a lot of fun.
SN: One of the big issues now is sex and violence in the content of games and game ratings. Will game ratings be helpful in the supermarket video environment? MUELDENER: We will have to wait and see what the game ratings are.
SN: Are supermarkets especially sensitive about the violence issue?
MUELDENER: What it comes back to is, ultimately, you have to educate the consumer that this is their responsibility, too. It's not just the retailer's. Game ratings are not going to solve all the problems.
SEVERINSEN: Game ratings have got to be established. The industry has an obligation to provide ratings so we can inform consumers about the products before they rent the games for their children.
PIERCE: This will become a greater concern as the product goes to CD and you add real production values. Today, it's more of a mechanical victory for an average child to get through a video game -- there's not much of an emotional attachment to that screen. But when you have a CD with production values like a movie, there's going to be more than a mechanical attachment. There will be an emotional attachment to these characters. Just as you sit back and enjoy the film and you like one star or one character vs. another character, that will take hold with the CD format. So from that standpoint, I think there will be greater caution as to what that product is going to represent on the screen.
SN: Are game makers missing out by not targeting females more with their products and marketing? What might that mean to supermarkets with their video game rental programs and their female demographics?
INGRAM: Games came about because of action-adventure. There has to be something going on, and I'm not sure that kind of product is targeted at your typical younger female. The sports and the action-adventure games are a safer bet for a manufacturer than trying to make something softer with a different spin on it. It will be risky to make a product that is targeted to females. But I could see that for supermarkets -- they would like to see more of that type of product.
FINCHER: Products like "Pac-Man" are indifferent to gender. It was the right thing and it just worked. I think everybody's looking for the right thing, and eventually the market will take care of itself. Right now, there is no denying the fact that this is mostly a younger male, action-oriented market. But it will expand. It's just a matter of the right licensed product coming along.
PIERCE: Look at the recent history of the movie business. While it has always produced a broad range of product, there was a tremendous flood of horror titles in the early to mid-1980s. Everybody and their brother was in the garage making a horror film. But that went away. It disappeared. Any glut is eventually going to correct itself.
