Game Products Help Carry Retailers

For music and video retailers, Christmas 2001 was a break-out season for sales of video-game products.

Industry projections indicate game sales have been exceptionally strong through the first 11 months of 2001, aided by the recent launches of a pair of new systems: the Microsoft Xbox and the Nintendo GameCube (GC), which launched, respectively, Nov. 15 and Nov. 18.

Music and video retailers are also benefiting. Such chains as the Musicland Group and parent Best Buy, Circuit City, Hastings Entertainment, and Blockbuster Entertainment, as well as independent J&R Music & Computer World, all report that games were a sales bright spot during the holidays.

The improving gaming results reflect a bigger commitment to video and computer games by traditional music and video retailers.

"In the absence of any hot toys, the hot gifts for kids [were] video games," says Scott Burtness, VP of video games and PC software for the Musicland Group. "We had terrific launches for both new systems [GC and Xbox]."

Indeed, Best Buy reports that the chain's 600-plus stores sold through the majority of both systems on the first day they became available, and sales have been brisk ever since. The same was true at Musicland, which had consoles, games, and accessories available at its 420-plus Sam Goody, 200 On Cue, and 76 Media Play outlets.

A popular seller has been an Xbox bundle package for $490 that features an extra controller, three games of the buyer's choice, a free Replay frequent shopper club membership, and a $50 coupon book for discounts on games, DVD-Video, and audio CDs.

Burtness notes the new systems also helped power sales of Sony's PlayStation 2 (PS2) systems and products and titles from Nintendo's Game Boy Advance. PS2 console sales were particularly strong. He expects that substantial game sales "should continue into next year, as the industry is on a roll now."

Best Buy has not yet announced the results of its December 2001 sales. It will do so Jan. 9.

The report for Circuit City's 632 outlets, including several dozen smaller mall stores, was also good. The company says Xbox sales during the holiday season were strong out of the gates and that results for GC, PS2, and PlayStation have also been solid.

"Consumers will focus on home-related products and are looking for value for their dollar, which should bode well for the game business," Circuit City spokesman Jim Babb says. "We're expecting next year to have a lot of growth potential, as more hardware and new games will continue to fill the pipeline."

At Hastings Entertainment, Sean Ferrin, game buyer for the 143-unit chain, notes that "the Friday after Thanksgiving was our biggest single day for game sales and kicked off our biggest week ever."

The chain held back sales of both Xbox and GC by launching them in the chain Nov. 23. This was in order to focus on a major promotion that included three free months of video-game rentals to all new system purchasers and $15 in coupons for $5 discounts on any two games and one accessory. The stores have been renting games for some time at $4.99 for five days, with PS2, Xbox and GC consoles now available for $19.99. The hardware and software sales push began in earnest earlier in 2001.

"We've seen a huge impact from our weekly ads for expanded product offerings," Ferrin observes. "We've been discussing ways to expose more video games in all the stores for next year, seeing that if we put it out there, it does sell."

At Blockbuster, participating U.S. stores are offering one free five-day game rental to customers who have purchased a new game console between Dec. 1, 2001 and Jan. 31 of this year. Blockbuster director of video-game purchasing Brian Woodrick says, "Few people can afford to build an extensive library of games. At Blockbuster stores, we offer an ever-changing selection of titles that allow gaming consumers to try out the latest games before they buy." He also claims that Blockbuster outlets have been greatly increasing their inventory of games during the fourth quarter and into the new year to include the new Xbox and GC formats.

Game sales have also been steady at Manhattan's J&R Music & Computer World.

"Everything we get [for the new systems] blows out instantly, and the attachment ratio for games and accessories is excellent," says Steve Giblin, merchandising manager at the multimedia megastore, which now includes video-game and computer hardware, software, and accessories.

Xbox was available only as a bundle package at $524.99, including the console, a second controller, and NFL Fever 2002, Oddworld Munch's Oddysee, and Halo games.

"We came up with the actual retail price of each component to assure our customers a fair value," Giblin says. "Pulling console product into the computer software area has produced a lot of cross-selling, as they're all gamers."

Strong sales by music and video retailers reflect a larger boom in overall game sales, which are on pace for a benchmark year. While final figures have not yet been tallied, NPDFunworld, a research group that tracks sales at retail outlets and projects totals, reports the U.S. video-game industry generated more than $6.4 billion in revenue in the first 11 months of 2001—a substantial 36% gain over $4.7 billion for the year-ago period. In fact, that 11-month figure almost matches total 2000 sales, which were $6.6 billion. And it sets a pace that promises to rival the 1999 industry sales record of $6.9 billion.

NPDFunworld senior account executive Richard Ow says, "Adding the launch of two new console hardware systems to the fact that [the fourth quarter] typically produces 50% of annual video-game sales dollars [creates the likelihood that] a new record will be set."