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A regular blog offering insightful analysis of the latest in the business world from a researchers perspective.

  • Nick Bonney

It's All to Play For...

In the flurry of stories that surfaced over the holiday period sounding the death knell for the high street, amongst the saddest news was the announcement that HMV was heading into its second administration.

Like many of my generation, I have fond memories of trips up to the HMV flagship on Oxford Street to try to get hold of a Japanese import or some other rarity I couldn’t get from Woollies or Our Price closer to home. It was interesting therefore to set the demise of HMV against the latest results from the ERA which were published just a few days later. These showed how much the entertainment landscape is shifting.


Entertainment it seems is not dead. Far from it, in fact. Despite what some would have you believe, we are still prepared to pay for great content (the total in home category rose 9.4% year on year) – we are simply looking for different ways to be entertained and consuming content in different ways.


Too often the dynamics in the music industry (Where streaming revenue rose by 37.7% and physical sales fell by nearly 17%) are assumed to be the dynamics for the entertainment industry as a whole but here’s the thing…. Gaming is now worth more than video and music combined. Shake off all those preconceptions you have off spotty teenagers in darkened rooms playing World of Warcraft, gaming is now big business:-

(https://eraltd.org/news-events/press-releases/2019/streaming-drives-entertainment-sales-94-higher-in-2018-to-sixth-consecutive-year-of-growth/)


My Alter Ego Arthur Morgan (much to my wife's annoyance...)

Now I don’t mind admitting that I have recently been living a double life as an outlaw; Arthur Morgan, to be precise. For some of you this may mean absolutely nothing but nearly 1.8m people bought a physical copy of Red Dead Redemption 2 in 2018 in addition to all those who downloaded it straight to console. To set that in context RDR2 sold more copies on physical alone than any movie other than The Greatest Showman and more copies than any of the top 20 selling albums. The ever popular football franchise Fifa 19 from EA Sports went even further amassing nearly 1.9m in physical sales.


I’m no gaming industry expert but it is interesting to look at the consumer drivers which see across a number of categories which undoubtedly help fuel this success.


Immersion


For many TV can be a lean back experience, often distracted by other stimuli around us (according to Thinkbox, 74% of us look at another device whilst watching TV each week, 13% every day) . Gaming on the other hand has become increasingly immersive with bigger more cinematic plots (Eg Uncharted) or increasingly large and open worlds to explore (e.g. Grand Theft Auto). We can see echoes of this in other forms of entertainment too with Netflix experimenting with interactive drama this Christmas with the arrival of Bandersnatch and the top selling movie of 2018, The Greatest Showman, having a new lease of life at the cinema through sing along performances. In a world where we may well have reached peak stuff, gaming it seems is one product which delivers on experience too (https://www.theguardian.com/business/2017/may/13/just-do-it-the-experience-economy-and-how-we-turned-our-backs-on-stuff)


Social


Undoubtedly an area where gaming has been able to tap into the zeitgeist has been the addition of social features. One could argue that gaming has always been a social experience (Right back to the days when we used to fight over Atari controllers) but the ability to compete (both against friends or strangers) has added in a whole new life to games. Streaming services like Twitch now enable gamers to participate in the experience themselves even if they’re not actually playing. Fortnite Twitch celebrity Tyler’ Ninja’ Blevins accumulated some 226.85m hours viewing on his channels demonstrating the sheer scale of the Fortnite phenomenon. Fortnite is perhaps the ultimate example of social gaming – kids aren’t just going online to play, they are hanging out there and bringing the emotes and dance moves back into the real world. I have taken the decision to keep my nine year old off Fortnite but that doesn’t mean he doesn’t know a huge array of dance celebration moves learnt from the playground!


Longevity


Sure games are expensive but the play time can mean their value for money is much higher than a movie for argument’s sake. For premium titles like Fifa , Gfk estimate that some 75% sales are still physical with the ability to lend and share games the top reason (quoted by 17%) that gamers quote for buying physical games. This has also been area where producers have looked to drive additional value either through exclusive editions (Also a key driver of physical purchase) or through in game purchases. The whole area of in game purchases is undoubtedly a controversial one (as EA found out to their detriment with Battlefield II) but it has also proved extremely lucrative for developers. It’s also possible to find a sweetspot - EA is rumoured to make some $800m a year from in game purchases of Fifa Ultimate Team packs without any sign of dwindling engagement from players..... just look at some of these reactions below!


Fifa Fans Gettting a Little Too Emotional Over TOTY Packs?!...


Inevitably, gaming isn’t for everyone but equally it’s an audience that should not be ignored. Its not surprise then that from Ready Player One through to Ralf Breaks the Internet and Bandersnatch, we are seeing more references to gaming culture in the mainstream. It’s always easy in hindsight to raise questions over strategic direction but I can’t help but feel that gaming was a missed opportunity for HMV. Whilst it was a big part of the product mix, it never really felt to me from the outside that they built any sense of experience around it.


Retro Creative for Netflix's Bandersnatch

Hats off then to two bricks and mortar retailers who are having a real crack at this market in very different ways.


Firstly CEX, a business that has latched on to the franchise model as a way of building expansion. Despite the many other digital channels where consumers could buy or trade games, it never ceases to amaze me how CEX seems to always be busy (especially in those crucial after school hours) – it’s one of those places where teens seem to feel comfortable and there the staff and customers just seem to ‘get’ each other’. Their latest filing at Companies House suggests this is working for them with impressive increases in both sales and margin.


CEX: Helping Gamers Get Even More Value from Games (Picture Herald & Post)

Secondly, Game who have just announced a 2% growth in like for like sales in the run up to Christmas. Whilst much of this growth came from Spain and the UK was flat at best, I think it’s impressive to see them try to build a sense of experience and belonging around the gaming community. There are now 20 Belong ‘Gaming Arenas’ across the UK and Ireland which aim both to show case the latest and greatest but also compete against other gamers or simply just hang out with other gamers. I love one of the customer quotes on their website ‘Only intended to meet in the Game shop before grabbing a coffee but ended up playing games for the afternoon at one of the desks… nothing was too much trouble…you can buy drinks and food to have at the desk whilst you’re playing’’ .



Game's Belong Gaming Arena (picture courtesy Retail Gazette)

It remains to be seen whether this strategy works for Game but they have to be applauded for making a bold move to try to transform their physical space into a real destination. If Game can try this in a category which is digital to its very core, surely it cannot be too late for other retailers too?

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