Marketing in Video Games

Marketing in Video Games: The Expanding Market of Video Game Users Has Created a New Vehicle for Marketers Professor Carey - New Media and Mass Communications Spring 2005 By Travis Tucker As little as five years ago, the concept of corporations spending major revenue dollars on advertisements in video games may have sounded ridiculous. However, the size and demographic span of the video game market has grown so significantly in recent years that the thought of a major corporation not considering the idea of marketing their products through video games today may sound just as ridiculous. Case in point: the marketing budget for ads in video games at DaimlerChrysler AG's Chrysler Group was zero four years ago. Now it represents more than 10 percent of the division's overall marketing budget. Chryslers have been placed in more than a dozen video games, while spending on television and print ads have dropped.1 Clearly, videogames are emerging as a new opportunity to reach consumers with product promotions. Growing Video Game Market Video game usage has evolved remarkably in recent years. In the past, video games were mainly pastimes for young children. Popular adventure games such as Mario Brothers, Zelda, and Sonic the Hedgehog dominated the market. However, as technology improved and created more life-like images on the TV screen, the video game market expanded. Older teenagers and young adults became increasingly involved in video games. Sports games and more violent adventure games became prevalent. Games that simulated real life adventures such as Grand Theft Auto and Need for Speed became the market leaders, instead of the child based fantasy games of the nineteen eighties and early nineties. The last installment of Grand Theft Auto: Vice City, sold 12 million copies. 1 The Associated Press, October 15, 2004, „Advertisements get more play in video games‟ Video game analysts expect the latest Grand Theft Auto installment to sell as many as 15 million copies. At $50 per copy, that would generate $750 million in sales.2 Sports games have significantly reached out to older consumers in recent years, as technology improved and allowed for better graphics that produce life-like images and movements on the TV screen. Today the average age of a player of Electronic Arts' Madden football game is in his late thirties.3 Corporations are becoming aware of this emerging opportunity to target key consumers, and are beginning to take advantage of it. Advertisers spent $10 million to reach 18-34 year old males through video games in 2003. This still, however, lags far behind the $12 billion spent in 2003 on TV ads targeting the same demographic.4 Today, you can regularly find blatant product placement on video games covers and in the games. For instance, the car that graces the cover of the “Need for Speed Underground” video game has a bright red Brembo sign on the wheel of the car (see attachment 1). Brembo is a brand of break pads. In the NBA Live 2005 video game, Gatorade banners can be seen circling the basketball court. Product placement such as this in a video game was unheard of in years past. As the market of video game consumers has expanded to include larger demographics, the consumer buying power of this market has also increased drastically. Attachments 2 2 3 The Toronto Star, „Games People Play‟. November 7, 2004 „Playing the Video Game Consumer‟ - November 03, 2004. http://www.imediaconnection.com/content/4525.asp 4 PR Newswire US - October 18, 2004 – „Massive Incorporated Launches World's First Video Game Advertising Network‟ and 3 provide a statistical description of the change in demographics of video game users from 1995 to 2001. There are 2 key points shown in these charts: 1. The largest % increase in video game usage came amongst households with no children. 2. The growth in purchases of Nintendo‟s game systems has increased with older consumers, but not as significantly as for other manufacturers. This trend has continued since 2001, as Nintendo has lost market share to Sony and Microsoft as it continues to maintain its focus on the development of games for young children. Today the average age of video gamers is 29, and 17 percent of gamers are older than 50. The $10 billion that U.S. consumers spend each year on video game cartridges, software, consoles, and accessories is greater than the annual take at movie theater box offices. In 2003 more than 239 million computer and video games were sold, or almost two games for every household in America according to the ESA (Entertainment Software Association).5 The demographics of video game users has begun to look more like the general public, with more and more women, minorities, and older age brackets becoming involved in gaming. 6 As a result of the broadening appeal of video games, entertainment companies are increasing efforts to reach out to what would have been unlikely video game users in the past. Vancouver's Radical Entertainment Ltd. is weeks away from releasing its third video game based on CBS's popular crime drama CSI: Crime Scene Investigation. 5 6 The Boston Globe. „What are Video Games Turning Us Into?‟ February 20, 2005 http://www.alexassoc.com/games/GDmemo.shtml Alexander & Associates Inc., New York, NY – June 2001 Women represented 57% of those who bought the first two titles. "It's not a twitch, shooting game," said Danielle Michael, Radical's vice president of business development. "There's not a lot of blowing things up. It's more problem solving with the same sexy characters as the TV show."7 The Advertising Dilemma The effectiveness of the 30 second TV commercial has been put into question as a result of numerous factors. With the mass adoption of cable and satellite TV by the public, consumers have more and more television channels to browse through at their convenience. This has resulted in many viewers channel surfing during commercial breaks. To further the advertising dilemma, the advent of personal video recorders has given viewers the convenience of recording any TV show prior to viewing, and skipping all commercials as they watch a particular TV show or event from start to finish without interruption. Television On-Demand also enables commercial-free TV viewing. To compound the problem for advertisers, the increased use of the internet and video games is reducing television viewing time amongst consumers, especially younger consumers. According to Nielsen Media Research, TV viewing among men aged 18 to 34 declined by about 12 percent last year while that group spent 20 percent more time on games.8 7 8 The Toronto Star, „Games People Play‟. November 7, 2004 The Associated Press, „Advertisements get more play in video games‟. October 15, 2004, 9 Business Wire. „Video Games Will Generate Nearly $260 Million in Advertising Revenue by 2008, Says Yankee Group; $92 Million Will Come from In-Game Advertisements and $168 Million from Advergaming‟. October 18, 2004. www.businesswire.com Advertisers seem to have been slow to shift their attention from TV to other forms of media however, preferring to maintain the status quo and use traditional advertising channels. "Surprisingly, given the size of this market, video games have largely been ignored as a platform for advertising," says Michael Goodman, Media & Entertainment Strategies senior analyst. "In 2003, marketers spent a paltry $79 million on in-game ads and advergaming. Even if we add in the $450 million to $550 million spent advertising on game-related web sites, this pales in comparison to $42.4 billion [spent] on broadcast TV advertising." 9 With more than 108 million U.S. gamers 13 years and older, video games represent a significant opportunity to reach consumers. In the United States, sales are expected to reach nearly $16.9 billion in 2008, according to market research firm DFC Intelligence. 10 The main reason for advertisers‟ hesitation to utilize video games as a marketing tool is the lack of ability to track usage of video games. There is no rating system in place to provide advertisers with any statistical data describing the size and characteristics of the audience that actually views their in game advertisements. When companies place ads on TV, or in magazines or newspapers, they already know the general number of viewers that are going to see the ad and the general demographic make-up of that audience. With 10 Business Wire. „Video Games Will Generate Nearly $260 Million in Advertising Revenue by 2008, Says Yankee Group; $92 Million Will Come from In-Game Advertisements and $168 Million from Advergaming‟. October 18, 2004. www.businesswire.com video games, the size of the consumer audience that will both purchase and frequently use the game is unpredictable. In addition to this, there is the added disadvantage of having to invest ad money during the developmental stages of the game. This means an extremely long delay, which could be as much as 12 months, before consumers will actually view the game ads.11 Therefore, any video game advertisement must be completely separate from other company promotions being carried out. Recently the tides have begun turning, as more advertisers are focusing attention towards the video game market. “In-game advertising has gained momentum in the past two years because traditional television and print ads are becoming less effective,” said Wim Stocks, executive vice president of sales and marketing at Atari Inc., a game company that recently doubled its staff to four to handle product placements.12 The Jeep Company is a good example of corporations testing the advertising water in video games. The automaker invested six figures a few years ago so players of Tony Hawk's Pro Skater 2 game would have to do stunts over a Jeep to get points, or go through game levels decorated with Jeep billboards. Judging the amount of ad viewing time Jeep got from that investment was just a rough calculation. Jeep has taken additional steps to gauge the success of their advertising for the upcoming Tony Hawk's Underground 2 game: players who want game upgrades will have to go to Jeep's web site to download them.13 11 PR Newswire US. „Massive Incorporated Launches World's First Video Game Advertising Network‟. October 18, 2004. http://www.prnewswire.com 12 The Associated Press. „Advertisements get more play in video games‟. October 15, 2004. 13 The Associated Press. „Advertisements get more play in video games‟. October 15, 2004. Music companies are also catching on to the value of promoting a product in a video game. Just a few years ago, video game executives had to coax record labels into licensing songs for video games. But this year, in creating the 21-song lineup for Madden NFL 2005, one of Electronic Arts' most popular titles, record labels sent EA 2,500 songs for its consideration. 14 “It wasn't that long ago that companies like Coca Cola Co. and Levi Strauss & Co. would demand money from video game makers for including their logos in games. The companies argued it added realism to have a real Coke banner at the racetrack," said Nathon Gunn, president of Bitcasters Inc., a Toronto company that creates online games for Walt Disney Co. and others. The relationship between game-maker and advertiser, however, has done a complete reversal in recent months. At the heart of this is the fact that game play continues to increase steadily, rising 26 percent a year for the last five years among men between the ages of 18 and 34, according to Nielsen Interactive Entertainment.15 Levi Strauss recently signed an agreement to be featured in a new Nascar racing game where users can create a Levi's-branded stock car racetrack. McDonald's Corp., cell phone maker Nokia, and automaker Pontiac have signed similar deals, with prices 14 15 The New York Times. „Hey, Cool Music. And There's a Video Game, Too?‟ November 15, 2004. The New York Times. „Hey, Cool Music. And There's a Video Game, Too?‟ November 15, 2004. starting at about $200,000. Overall, video game makers generated as much as $50 million from in-game advertising last year.16 Online Gaming Growth Online gaming has become tremendously appealing to women and older consumers. According to Nielsen//NetRatings, 41 percent of people who frequent online game sites like GameSpot, Candystand, and Pogo are women, and 43 percent are ages 25 to 49. ScoreNetworks, a firm that measures online game use, states that about 35 percent of players on those sites earn $50,000 to $100,000 annually, while 16.2 percent take home more than $100,000. Online game sites are currently maintaining huge membership numbers. Sony Online Entertainment's gaming web site, The Station (www.station.com), has more than 12 million registered users, while Microsoft's Gaming Zone (www.zone.com) has a membership of 29 million.17 It has been proposed by analysts and researchers that the reason for the appeal of online gaming to women is that they have more of a quest for community as opposed to men‟s drive to compete. Online gaming websites present an online community where gamers can communicate and interact with each other regularly. According to Laura Groppe, president of Venice, California based Girls Intelligence Agency, a marketing and research firm focused on young women, “The opportunities lie in really playing with 16 „Advertisers Take Aim at Gamers‟. BusinessWeek Online. June 22, 2004 http://www.businessweek.com/technology/content/jun2004/tc20040622_2673_tc150.htm 17 „Gaming Gets Serious‟. American Demographics. May 1, 2002 http://www.findarticles.com/p/articles/mi_m4021/is_2002_May_1/ai_88679445 communications tools that women regularly use, like Instant Messaging and e-mail. At the end of the day, women want to connect with each other."18 As a result of the explosion in popularity of online gaming, the biggest opportunity may lie in advergaming. This is a new form of online gaming that has been created exclusively to supplement corporations‟ marketing efforts. Advergaming is the combination of online games with interactive advertisements, which are much of the time a part of the actual game. Advergaming provides amazing opportunities to target specific consumers with product promotions. This is because companies can segment audiences with pinpoint accuracy. Kent Mar, founder and CEO of San Francisco-based advergame developer Virtual Giveaway, for example, targets gamers based on four variables19: 1. The content of the game itself is tailored to suit the desired customer - games of strategy can be directed to more upscale, educated users, while action games can be geared toward younger users. 2. By the location through which the game is promoted - 78 percent of ESPN‟s game users are male, with 60 percent under age 34. On the other hand, Lycos Gamesville users are 60 percent female, and 65 percent are over age 35. 3. The third method of tailoring content is the “contest” structure of the game - how users win. For example, Virtual Giveaway created an advergame for Sega Dreamcast, targeting males under 25. Since young males tend to be highly 18 „Gaming Gets Serious‟. American Demographics. May 1, 2002 http://www.findarticles.com/p/articles/mi_m4021/is_2002_May_1/ai_88679445 19 „Gaming Gets Serious‟. American Demographics. May 1, 2002 http://www.findarticles.com/p/articles/mi_m4021/is_2002_May_1/ai_88679445 competitive and action oriented, the company created a game that players would master before entering into a series of tiebreakers after a certain number of plays. Core users spent upwards of 60 hours a week playing. 4. Geography - demographic information is used to point gamers towards promotions at local retailers or dealers. Another key benefit and opportunity provided by advergaming is the dual purpose of promoting products to consumers while at the same time retrieving valuable market research. Data is collected through sign up requirements, sweepstakes entries, and opt-in programs. Even more information can be prodded out of users who wish to post high scores, for example. Companies can also track the number of times a game is downloaded and played, and by whom it was played by. This provides a relatively inexpensive, yet very effective method for carrying out market research. The biggest benefit of advergaming may lie in its ability to simply raise brand awareness. In 1999, Toyota launched Tundra Madness, a digital racing game. After attracting 8,000 consumers who spent an average of 28 minutes on the site daily over six months, the company's research showed that the campaign raised brand awareness by 28 percent and intent to purchase by 5 percent. The automaker has since launched additional advergames, for a wide range of targets.20 One may wonder why banner ads cannot do the same thing as advergames. A key difference between advergaming and online banner ads is the level of interactivity. „Gaming Gets Serious‟. American Demographics. May 1, 2002 http://www.findarticles.com/p/articles/mi_m4021/is_2002_May_1/ai_88679445 20 While a banner ad at the top of a website may get the attention of the viewer for a matter of seconds, the gamer is subjected to the product placement of advergaming indefinitely. An online gamer playing the various games on a website is continuously interacting with and viewing the brand logos. Online gaming technology isn't nearly as sophisticated as console video games, because most developers outfit advergames to accommodate slow modems. "As broadband adoption increases, we'll have the ability to improve advergaming tremendously and offer really meaningful, quality entertainment," says Scott McDaniel, vice president of marketing for Sony Online.21 Fortunately for marketers, broadband adoption is increasing steadily, providing many more opportunities for advergaming (see attachment 4). Future Prospects of Video Game Advertising There are developments on the horizon that can potentially explode the use of marketing in video games. Within the next 12 months, marketing service Nielsen Entertainment, backed by Activision, will start a gaming-ratings service similar to its existing TV-ratings service. “Consumers within sample households will carry pager-like devices on their belts that will alert a special personal digital assistant (PDA) of their presence at home. Then special tracking gear will provide the PDA with real-time information of what they're playing, which level of the game they're on, and which ads they're seeing”, says 21 „Gaming Gets Serious‟. American Demographics. May 1, 2002 http://www.findarticles.com/p/articles/mi_m4021/is_2002_May_1/ai_88679445 Michael Dowling, general manager of Nielsen Interactive Entertainment. 22 That means in-game advertisers will receive more detailed information than TV advertising currently offers. To make the in-game advertising prospects even more enticing, advertisers will have the ability to integrate ads into the game when and where they want, thanks to new software created by Massive Inc. Massive Inc.‟s network system will link console and pc games to their main server through the internet, allowing advertisements to be downloaded into the games in real time, whenever advertisers desire, while never disrupting the game play for the player. Nielsen has agreed to provide third-party accountability for the accuracy of the audience data that will be available through this service23. Real Networks has already signed on with Massive Inc. to distribute advertisements through their network. Game publisher relationships already in place will allow Massive to serve ads into more than 15 titles and reach a weekly audience of close to two million consumers, equivalent to other media buys reaching this audience. Massive has already signed exclusive ingame advertising agreements with Vivendi Universal Games, Ubisoft, and Legacy Interactive.24 By delivering ads in real-time across a large network of top-selling titles, the Massive Video Game Advertising Network provides advertisers not only with broad reach ability, but also, with extremely accurate segmentation capabilities. 22 „Advertisers Take Aim at Gamers‟. BusinessWeek Online. June 22, 2004. http://www.businessweek.com/technology/content/jun2004/tc20040622_2673_tc150.htm 23 PR Newswire US. “Massive Incorporated and Nielsen Entertainment Team to Deliver Household Measurement Reports for Video Game Advertising”. December 15, 2004. http://www.prnewswire.com 24 PR Newswire US .“Massive Incorporated Launches World's First Video Game Advertising Network” October 18, 2004. http://www.prnewswire.com Double Fusion, a firm based in Jerusalem, has developed its own software and offers a very similar advertising network system and capabilities to Massive Inc.25 The fact that Massive Inc. has teamed with Nielsen certainly provides Massive with the distinct advantage, however, and they are likely to be the company that emerges quite successfully with this technology in years to come. Yet regardless of what company provides the best advertising system for video games, it can almost be guaranteed that marketing in video games will continue to grow steadily. The video game console systems themselves are becoming more of a multi-media entertainment system. The current consoles provide the user with the ability to play DVD‟s, and additionally the ability to play and store music. This will only help to increase the market penetration of video game systems in the coming years, while also ensuring the growth of video game advertising. 25 The Jerusalem Report. “The New Ad Game”. March 21, 2005. Pg. 32. Attachment 1 – Need for Speed Underground game cover Attachment 2 – Alexander & Associates video game market study *Sony Playstation was released in 1995, and had not yet gained a significant penetration level by the time of the initial study (under 1 million units). The following chart compares demographic data for users of Nintendo‟s SNES video game console system in 1995 to users of the N64 system in 2001. Metro = Non Rural Source: Alexander & Associates (http://www.alexassoc.com/games/GDmemo.shtml) Attachment 3 – Alexander & Associates video game market study The following chat is a demographic comparison of all systems in 2001 to those in use in 1995. Source: Alexander & Associates (http://www.alexassoc.com/games/GDmemo.shtml) Attachment 4 Percentage of Users Accessing the Web via Narrowband and Broadband Narrowband 62% Broadband 55% Broadband 38% Narrowband 45% Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun03 03 03 03 03 03 04 04 04 04 04 04 Jul04 Aug- Sep- Oct- Nov- Dec04 04 04 04 04 Source: Nielsen/Net Ratings (http://www.bnet.fordham.edu/Carey1/) Bibliography Wong, May. “Advertisements get more play in video games”. The Associated Press. October 15, 2004. Business News. San Jose, California. “Games People Play”. The Toronto Star. November 7, 2004 Friedler, Mark. “Playing the Video Game Consumer”. Wednesday, November 03, 2004. iMedia Connection. http://www.imediaconnection.com/content/4525.asp “Massive Incorporated Launches World's First Video Game Advertising Network”. PR Newswire US. October 18, 2004. New York. http://www.prnewswire.com Mayor, Tracy. “What are Video Games Turning Us Into?”. The Boston Globe. 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