Changes in Entertainment Consumption may lead to New Sales at Blockbuster
A study released last week by NPD Group stated that 63% of Americans have played a video game in the past six months, higher than the 53% who went to the movies during the same period. (The study notes that 94% of those surveyed listened to music, but does not report what percentage saw a movie either in a theater or at home.) The financial impact is that gaming accounts for one third of the consumer's average monthly spending, according to NPD survey data.
The statistics explain why companies selling video game systems and high-cost premium games are faring somewhat better in the economic downturn. Given Blockbuster's difficulties (see my previous post), the company's recent announcement that it will begin experimenting with the addition of video games to its subscription service should come as no shock.
Blockbuster intends to add the service to its online rental service, initially testing it for existing subscribers. The company has yet to announce the fee structure, but expects to add both an additional charge for the game rentals and count the games against the number of rental items the subscriber has "at home."
GameStop has been one of the more successful companies in the current economy, with its first quarter sales rising 13%. Ironically, the game company did not play the Wall Street game particularly well and lost some value because the sales were below analyst targets. Despite the analysist expectations and the potential of Amazon entering the used game market, GameStop's quasi-rental model of easy resale may be a better model than Blockbuster has in mind.
There are two problems with a game rental service. First, the demongraphics may put the gamers as younger members of the household. Parents will join Netflix for the family, and they will have as much benefit as the children in the household. Parents tend to buy game consoles and games for their children, and tend not to admit to being the primary consumer of these games.
Second, games should have a longer home-life than DVDs, so the idea of churning through 2-4 games per week seems less likely than doing the same with DVDs. Of course, in actuality, many of the DVDs sit in Netflix subscriber homes for weeks or months, but no consumer would buy the service if they intended this result. In other words, the upside of the video game subscription does not have the value that a DVD subscription can have.
If Blockbuster (or Netflix, Amazon or GameStop) changes to a pricing model based on quarterly rentals or a guaranteed return price, then consumers will see the potential to save if they play enough and consider trying the service. Like club discounts, subscription services are built on the differential between what the consumer thinks is possible and what the consumer actually does.
There is more money in gaming than ever before. But Blockbuster still has yet to understand the market.
The statistics explain why companies selling video game systems and high-cost premium games are faring somewhat better in the economic downturn. Given Blockbuster's difficulties (see my previous post), the company's recent announcement that it will begin experimenting with the addition of video games to its subscription service should come as no shock.
Blockbuster intends to add the service to its online rental service, initially testing it for existing subscribers. The company has yet to announce the fee structure, but expects to add both an additional charge for the game rentals and count the games against the number of rental items the subscriber has "at home."
GameStop has been one of the more successful companies in the current economy, with its first quarter sales rising 13%. Ironically, the game company did not play the Wall Street game particularly well and lost some value because the sales were below analyst targets. Despite the analysist expectations and the potential of Amazon entering the used game market, GameStop's quasi-rental model of easy resale may be a better model than Blockbuster has in mind.
There are two problems with a game rental service. First, the demongraphics may put the gamers as younger members of the household. Parents will join Netflix for the family, and they will have as much benefit as the children in the household. Parents tend to buy game consoles and games for their children, and tend not to admit to being the primary consumer of these games.
Second, games should have a longer home-life than DVDs, so the idea of churning through 2-4 games per week seems less likely than doing the same with DVDs. Of course, in actuality, many of the DVDs sit in Netflix subscriber homes for weeks or months, but no consumer would buy the service if they intended this result. In other words, the upside of the video game subscription does not have the value that a DVD subscription can have.
If Blockbuster (or Netflix, Amazon or GameStop) changes to a pricing model based on quarterly rentals or a guaranteed return price, then consumers will see the potential to save if they play enough and consider trying the service. Like club discounts, subscription services are built on the differential between what the consumer thinks is possible and what the consumer actually does.
There is more money in gaming than ever before. But Blockbuster still has yet to understand the market.
