Amid an avalanche of bad economic news, including the subprime mortgage meltdown, the loss of 80,000 jobs in March and record home foreclosure rates, I set out to find a business that is thriving despite the economic turmoil. That business is video games and the major player in that marketplace is GameStop.
GameStop’s sales grew from $5.3 billion in 2006 to $7.1 billion in 2007 and their profit rose to $288 million from $158 million the prior year, according to an article in the Dallas Morning News (DMN) on April 8, 2008. GameStop plans to open 600 stores in 2008 and sales are expected to increase at about 20% (DMN). That’s a significant level of growth compared to many other stores that are issuing earnings warnings. And there are several big name releases that are planned for 2008 that should continue to propel the growth of the industry.
During the last recession in 2001, overall video game sales went from $8 billion in 2000 to $10.3 billion in 2001 and to $11.7 billion in 2002. At $50 to $60 a game, it’s a relatively cheap form of entertainment, since people play the average video game for 20 to 40 hours (DMN). And during difficult times people tend to spend more time at home consuming media such as video and online games, TV and movies.
Like every business, GameStop will face some challenges in the coming year, since there are no major hardware launches planned and the popular Wii console will be more readily available at stores like Target and Wal-Mart, which could cut into GameStop’s sales. However, business among GameStop’s core customers, the hard-core gamers, should remain strong even if the soccer moms migrate to the big box retailers for their game purchases, according to Michael Pachter of Wedbush Morgan Securities.
Peter Koeppel is Founder and President of Koeppel Direct, a leader in DRTV direct response television, online, print and radio media buying, marketing and campaign management. With a Wharton MBA and over 25 years of marketing and advertising experience, Peter has helped Fortune 500 companies, small businesses and entrepreneurs develop direct marketing campaigns to increase profits.
Peter started Koeppel Direct in 1995 and has built it into one of the leading infomercial direct response media buying firms in the U.S.
Minnesota’s Star Tribune reported on March 2 that despite this year’s intense presidential election, some, like Brown University Professor Darrel West, still say that TV commercials are playing a reduced role in the election.
According to Brown, who wrote a book on presidential political advertising titled “Air Wars,” the 2008 election is based on critical issues such as the war in Iraq and the U.S. economy. Brown argues that these are two messages that are not easily spun in political commercials. Instead, Brown believes candidates are using debates and rhetoric to draw voters to the polls.
That said, no one disputes that TV advertising remains the bedrock of political advertising, and specifically of presidential campaign and election advertising.
One thing is for certain, the nature of the 2008 campaign is different from anything we as a country have ever known before. While TV is still king, we now also have the inclusion and prominence of You Tube, online social networks like Facebook and My Space, the presidential candidates’ own websites and web forums and all sorts of other means of online political and campaign advertising.
Everyone agrees that political ads that may have ‘cut the mustard” in, say, the 2004 presidential campaign just won’t work today. That’s a function of our ever-changing online political advertising climate plus the fact we do not have an incumbent or “shoe-in” running in this up-for-grabs presidential election year.
The BIA Financial Network Inc. has announced its prediction for the 2008 television industry. In its quarterly Investing in Television Market Report, BIA estimates the revenues for television advertising, direct response television (DRTV) campaigns, and infomercials will post an 11 percent growth this year.
Political candidates attribute to the jump in revenue, with an unusually high use of television advertising. If the prediction turns out to be true, this would translate to a 10-year revenue high for the industry.
Furthermore, political campaign spending has the potential to boost television revenues up to 12 percent in critical election states including Pennsylvania, Ohio, Florida, Virginia, South Carolina, Iowa, Maine, Colorado, Wisconsin, Nevada, and California.
Despite the constant buzz of new media alternatives television will prove itself to be a hot medium in 2008,” explained Mark R. Fratrik, Ph.D., BIAfn’s Vice President. “Not only because it’s fail-safe but because it delivers viewers in a very targeted, local way. The national and statewide elections will reinforce the strength of the local television market, which is the only media that can provide mass audiences in an increasingly fragmented marketplace.”
Devices that bring together television and the Internet aren’t new, and the new ways for DRTV to use infomercial advertising with them are plentiful.
For instance, Apple, Inc. offers Apple TV, which copies video, music and photos from a user’s iTunes collection and then plays them on the TV. Then, there’s TiVo, which allows users who have their machines connected through broadband Internet access to watch Internet video.
The Xbox 360 also offers movies and episodes of television shows for download through its Xbox Live online service. These devices are fairly simple to set up and users already have the machine connected to their televisions and in most cases, to the Internet. Gamers love communicating with one another while playing, and this capability has become a major selling point to this technology-savvy group.
Akimbo offers the Akimbo Player which provides access to its company’s broadband service and offers a video-on-demand subscription service. The box sits atop the TV and connects to both the television and the Internet either through an Ethernet cable or wirelessly.
There’s also been a lot of coverage of Apple’s decision to get in on the DVD business, joining “king of the mailbox” Netflix in offering movies through the Internet. Apple recently announced that it plans to offer first-run movies on iTunes just one month after they are released on DVD (with a HD option, no less).
So, if there is a demand (or at least a desire) for combining TV and Internet to create a veritable living room paradise, and most will agree that there is, why aren’t these solutions flying off the shelves?
A Few Kinks.
Just like all mergers, partnerships and technological advances, the television/Internet hybrid solution is not without issues. The main problems seem to be:
The gadgets are too complicated (at least for most people) to set up. Many of these devices need to be hooked up to both the TV and the Internet. Additionally, some consumers feel they need another gadget like they need another remote control: they aren’t interested in adding another gadget to their home entertainment center unless it’s giving them a truly unique service, something they can’t get anywhere else.
Neither a one-stop-shop nor a plug-and-play. Sure, consumers can watch downloaded videos on their television with these gadgets, but what does it take to get to that point? In some cases, the download times can take as long as the actual shows and in other cases, they have to use their computers to place the order before it can be accessed on the television.
Pricing? Sure, technology doesn’t come cheap (though prices are always coming down while the gadgets and services continue to get better). People are still getting used to paying for services and options that simply didn’t exist just a few years ago. So while they may be questioning price or delaying a purchase or choice based on money, in the end, these options become integral and “must-have” parts of home and office life. (Remember the beginning days of the “facsimile?” Now no business can afford to be without a fax machine.)
Not enough choices. People love to watch videos on the Internet because of the wide variety. From streaming television shows to unique YouTube videos, there’s something for everyone. Unfortunately, most of the new solutions don’t offer comprehensive choices.
Even with the questions and hiccups along the way, Internet Television is still expected to be one of the fastest growing trends for 2008. Once advertisers, movie studios and television producers get on board, there’s no telling what the future could hold for this developing technology. Stay tuned!
With all of the buzz surrounding the drive to web sales from DRTV advertisements, let’s take a moment to look at the other side of this coin. Advertisers that are using a more multi-channeled approach, including online media, need to make sure they utilize the immense amount of data that goes along with this medium across their other advertising channels. Web analytics has come a long way in the past 10 years and now more than ever the enterprise is driven by these analytics.
Web analytics can gather all the basic information that you would get from a traditional telemarketer, but it also allows the customer to leave a more valuable trail of information that if utilized correctly can change an advertiser’s message on all platforms. For example, page view information allows marketers to see at exactly what stage they are losing potential customers in the purchasing cycle. This enables them to make adjustments to those pages to increase the push to final purchase. They can then implement some of these changes that apply to TV, print, and radio as needed. To take it a step further, advertisers can play a heavy hand in gathering even more voluntary information from customers. Incentive options like free upgrades, options, or shipping if you answer a few questions about the product or transaction can go long way to improving a marketers brand, pitch, price, and even product development.
To make sure you are getting all you can from your web analytics you have to work with a media buying team that can not only understand the importance of the online data, but also see how to make it influence your offline media at just the right moments. As we continue towards a more all-around, direct response driven, marketing environment, advertisers need to manage the flow of data from online to offline in order maximize their ROI
In today’s world of bit sized media bits it can be daunting to try and navigate through the multi-layered media map that has unfolded in recent years. Advertisers that are wanting to target the younger millennium generation have to look beyond the traditional advertising vehicles. With digital TV, mobile phones, text messaging, social networking, I-Pods, and blogging all coming of age, advertisers need to not only have access to all of this new media, but to also have the right mix. Finding the right media buying team is more crucial than ever.
Millennials create as much media as they consume. Innovation and creativity are at the center of this media renaissance. Therefore overarching is the only way for advertisers to stay relevant to the millennial crowd. Thankfully almost all the new and emerging media has some sort of direct response component that can be tracked down to the smallest of details. The days of uncertainty about whether or not your ad budget is being spent wisely are long gone. Advertisers can now get up to the minute results for just about all of these new media platforms.
By keeping ahead of the new media curve, and utilizing the strong analytics that come with most of these media channels, savvy advertisers can captain the ship instead of just trying to tread water in the sea of new media.
Peter Koeppel (President) and Loren Wayne (Vice President of Buisness Development) at Koeppel Direct sat down for an exclusive interview with Richard Gant at the Response Magazine EXPO.
In the past, advertisers have focused on reaching consumers in the 18-49 age range. Today, that may be changing. As more and more companies are realizing the buying power that the Baby Boomer generation possesses, infomercial marketers are shifting their ad dollars and campaigns to reach this powerful market segment.
The Baby Boomers-those born between 1946 and 1964-comprise a market of 76 million people. And unlike the younger generations who are saving to buy houses and cars and struggling to raise a family, Boomers have a fat wallet of disposable income (some experts have approximated that Boomers have nearly a trillion dollars of spending power). Knowing this, no media buying company can ignore the sheer size of the market, nor the wealth or voice that they have. That’s why smart marketers are rethinking their ad campaigns and targeting this profitable niche.
So what’s the best way to reach this market? TV and Internet, for sure. While television is still the most effective medium for reaching Boomers, the online options are growing fast.
