RESEARCH POINTS TO GAME POTENTIAL IN SUPERMARKETS

Dan Alaimo

NEW YORK -- New research may bode well for the potential of video games in supermarkets.

Jupiter Research here issued a report this month that identified opportunities for more games selling at lower price points, as well as games that better serve females, especially teenage girls. If either trend developed, it would benefit supermarkets, industry observers said.

"If the retail is lower, customers will go ahead and purchase a game," said Brenda Vanover, director of video operations, K-VA-T Food Stores, Abingdon, Va. "With the higher retails, most parents/customers would rather rent first to make sure it is a game worth the retail price."

If more games for girls or women became available, "I would definitely purchase them for our customers. We have requests for them daily," Vanover said.

The lower prices are starting to happen, said analyst Jay Horwitz of Jupiter Research, although the game industry has far to go in addressing the female demographic. "The female market is underserved. The fundamental assumption is that there really isn't a difference between men and women when it comes to their interest in games. The problem is that the content out there is really geared toward the male audience much more than the female audience," Horwitz said.

Supermarkets, he noted, "would obviously be a great place to reach this audience. But before you can set up distribution like that, you need to have the content available." The report noted that 67% of female teens play video games compared to 95% of male teens.

"Video games are a mainstream form of entertainment, and they should be appealing in a very broad way, like movies are. But right now, the female

market is vastly underserved by the content that is out there," said Horwitz.

The Jupiter study supported its contention that there is a need for more lower-priced games by showing that "teens from low-income households are more intensive video game players than their high-income counterparts," he said. Teens from low-income households play games an average of 9.7 hours per week, while higher-income kids play 6.5 hours.

Regardless of demographics, supermarkets could play a key role in selling the lower-priced product, he said.

"When you look at how retail distribution works for video games, there is a heck of a lot of competition for shelf space. Value-based titles will be challenged to find placement in the highly competitive retail channels like the traditional video game retail channels. So the supermarket presents an opportunity in terms of potentially new shelf space, but also in reaching this audience, getting to the people that are looking for this value-based product," Horwitz said.

Additionally, he pointed out that the margins on game software are relatively high. "It could be a very logical fit," he said.

"The price points have to be low for supermarket distribution, but we are already seeing this in the retail distribution of games. We are seeing the emergence of a significant value segment," Horwitz said.

While game rentals are about 5% of K-VA-T's rental business, "I have purchased some games at a lower retail for our customers, and they are selling well," Vanover said.

A second research report on the video game market showed that the worldwide market for interactive software and hardware will grow to between $28.4 billion and $30.1 billion by 2007, according to DFC Intelligence, San Diego. This does not include spending on accessories, game rentals and used games, noted David Cole, president.

"If supermarkets are looking at DVD sales, the game market is fairly similar to that, both in terms of size and the price point," Cole said.

"I think game rental and sell-through will be a part of our overall business in the future," Vanover said. "I do not see games going away."

The console-based video game business is now bigger than the theatrical movie business, said Bob Geistman, senior vice president of interactive media for Ingram Entertainment, La Vergne, Tenn. "It is huge. It is part of mainstream America now, and the number of households with one or more console units is very, very big. At lower prices, grocers can get more aggressive in their purchasing and marketing," he said.

Game makers are also very promotion-oriented, and that fits well with the supermarket environment, Geistman said. "If they are involved in video, there are lots of natural tie-ins between video and DVD and games and other things in the store that are all being co-branded and targeted at the same audience. There are lots of opportunities to do cross promotions," he said.