GAME's Failure | What Went Wrong

GAME is the UK's largest video games retailer. The business grew exponentially through the early 00's, the buy out rival company GameStation in 2007 being their biggest move. Even further back they went on a spree of buying out independent stores and chains like Electronics Boutique (initially a merger until a full takeover in 2004, oddly enough from the company now known as GameStop in the US) to build a games empire of over 670 stores nationwide. But today is a big day for the retail outlet as the administrators are calling time. No one is sure at the time of this blog, but it looks like Game and Gamestation stores nationwide will be closing very soon.

"In April 2010, CEO Lisa Morgan resigned; Looks like she jumped at the right time."

But why did this happen and what does this mean for video games as an industry? The "why" part cannot be answered truly as of yet. I'm sure it will all come out in the wash, but at the moment all the finger pointing is mostly assumptions and educated guesses, most of which I will cover below, plus my own thoughts. In April 2010, CEO Lisa Morgan resigned after a 28% dip in profits in the 2009-10 fiscal year, departing with a promise of reducing stores by at least a 100. Looks like she jumped at the right time.

A thing of the past?

Come January 2012, the then CEO Ian Shepherd issued a profit warning, amid fall stock prices and rumours of the company breaking it's bank loan terms. He remained confident that "the company was in good shape for a recovery" and blamed the poor performance on people only buying the main franchises like FIFA of Call of Duty as opposed to a wider range of titles.

As we now know, recovery was almost impossible. But the point that Mr Shepherd made is what interests me most. While EA's FIFA titles are massively popular and Activision's Call of Duty series continues to break sales and pre-order records, there is the feeling that a lot of people only play those games and nothing else. I personally know a lot of people that see their games console as simply "FIFA Machines" (or Modern Warfare, replace where appropriate). It is seen that, if you really get into such games, then you spend hours upon hours completely engrossed in the action. These titles offer a gaming experience that can, and often does, stretch into hundreds of hours of game time and still continually top the sales charts. The net result could be that a lot of people are less likely to buy anything else, as all their time goes into buying new DLC map packs for COD or packs of Ultimate Team rosters for FIFA, to even further extend the game.

(The same could be true of Wii Fit, Zumba Fitness and Wii Sports - People bought them, but then didn't move on to something new)

While GAME and other retailers have tried to counteract this buy selling vouchers for such downloadable content, there are 2 main problems with that model. First is that your market for such products is limited, as you are appealing to only those who are either too young to have a credit/debit card or those who refuse to input details online. Everyone else can simply buy game add-ons online, through their games console, on the couch, at the touch of a button and be playing it minutes later. Second is that profit margins on such vouchers is virtually non-existent. For instance, after a bit of digging around and talking to someone who owns an independent games shop (apparently one such thing still exists!), the profit on an XBox Live points card (on average) for instance, is around £1.20. To make anything meaningful, you have to sell bucket loads, yet as I have mentioned, you are targeting only a select group of gamers.

"Strong price competition and diminishing margins on new games meant a focus on used games." 

Gamestop in America say that "50%" of their profit comes from the used game market. The same could be true of GAME and Gamestation in the UK. Over the past few years, if you visited one of their stores, they had larger store space for their used game range. Strong price competition and diminishing margins on new games (or any electronic goods, including games consoles) meant a focus on used games. Other companies like Computer Exchange have seen growth over the past 10 years or so, focussing on second hand items. It was perfectly logical for GAME to push this area of the market (something that could not be avoided if you bought something new, with staff trained to tell you about trading in the game once you have finished it). Buoyed by the stronger profits garnered from used games, many other business have also entered the used game market place, which is taken away from GAME's market share. The growth of CEX is a main competition, but now even supermarkets like ASDA Walmart offer second hand games.

This however, had a knock on effect. The publishers and developers of games don't see a penny of a used game sale and with GAME stores selling more and more used games, they decided to act. In an unpredictable global economy, not only have publishers invested heavily on their strong franchises and well established titles like FIFA or COD, but in many cases they have also tried to prevent the used game market. Many games now come with online codes, known as an Online Pass. Buy a game new, and you input the one-use-only code to unlock in-game extras and online multiplayer game modes. Buy it second hand, and you can't play that game online without shelling out £6.99 on a code (through your console only, not through in-store vouchers). Therefore, greater incentive to buy new, less used game sales, more money directly to the publishers and less profit for retailers.

So, by chasing greater return on investment, the publishers of games have been hurting the retail games market. Yet, if the retailers perhaps did not focus on the used game market so heavily, the online pass would not be in existence. For GAME it was the perfect storm. Not only were people only buying the big games, they were extending their gaming experience by buying extra game content online and then not buying used because of online codes. Next, throw into the mix GAME's massive expansion of the last 10 years. They had a declining market, a large number of employed staff and long-term rent leases across hundreds of stores. You have to say it was always going to be a struggle. Then again, hindsight is a wonderful thing.

Sadly, with today's rumoured news it looks like the failure to find a buyer means the end for GAME as we know it. There is a brand name that has a high awareness and some loyalty (those GAME reward cards don't count for nothing). There is also still potential for a high street supplier for the gaming industry. While a lot of people buy games online and despite a shift towards downloading games instead of physical copies, there is still strong demand for a boxed, tangible game, seemingly more so than in other entertainment industries.

"A quick glance in the comments section of any GAME related news article shows that a lot of people where unhappy with their pricing."

One main sticking point with the gaming community seems to be that prices were too high at GAME (a quick glance in the comments section of any GAME related news article shows that a lot of people where unhappy with their pricing). While most new release titles in their stores were selling for £40-£45, a quick look around online would net you the same game, brand new, for up to £10 less. A lot of angry internet people like Bob336 or StarWarsRulez86 are quick to lay the blame at their pricing strategy. But with tighter margins, online passes and lower sales of the number of different games sold then the prices had to increase, especially seen as the cost price is most likely to have remained the same.

You could argue then, why were other places cheaper? Well, online outlets like Play.com (based in Jersey) and Amazon (technically registered Swiss, so not part of several EU trading regulations) are in nice cushy positions whereby they pay less or no tax. The EU regulation that helps internet traders avoid tax is about to change however, with a bill recently passed to change the taxing policy to be based on the delivery destination, as opposed to the location of dispatch. However, this will take another 2 years before the effects are seen and way too late to help GAME. Increasing VAT to 20% couldn't have helped GAME's cause either amidst the competition.

But supermarkets do have to pay tax, yet still they manage to be extremely cut throat and competitive. This is actually relatively simple. By selling games in their stores, they are enticing you to shop there and maybe pick up more profitable items like mushrooms or soup. They can afford to offer lower prices as this is offset by the large range of bananas. This also means they can do the odd loss-leader, such as the crazy Call Of Duty Modern Warfare 2 prices that Sainsbury's and ASDA did upon release. Having said all of that, a quick look at ASDA reveals that their prices have actually risen of late too.

In summary then, combining all of the factors mentioned above (some of which are the games industries fault, some of which are GAME's fault) what we are facing in many store closures which means empty shops across the UK and more importantly, the possibility of 6,000 unemployed people. PricewaterhouseCoopers have been selected as the administrators and in sacked GAME CEO Ian Shepherd's final statement it is said that they will "make big changes both to the store estate and in the office, but will be doing so with a view to creating a trading business that we can attract a buyer for." I other words, cutting the fat, job losses and store closures. The word today is that 2,000 jobs will be lost almost immediately and as I passed by my local GameStation on the way home from work, it was shut. A note was over the door stating that Wakefield would be me closest available outlet (quite far from Leeds).

It is sad to see the probable loss of yet another well-known high street name and the unemployment that follows. Not only that, despite their huge losses, GAME and GameStation stores certainly sold a very healthy number of games. While online only sellers, supermarkets and HMV will do well to fill the gap, this is still sure to affect game sales. The lack of a dedicated, specialised game shop on most high streets has to be detrimental to the industry as a whole. By simply having a presence and a big sign on the high street, that reminded people to play video games and helped gaming reach a larger audience. Of course, there is an opportunity here for either a smaller company to become slightly larger (like Grainger Games) and it may not be a bad thing for the consumer in the long run provided whoever it may be that profits from the demise of GAME doesn't make the same errors.

Certainly, GAME made plenty of mistakes, but the games industry itself is far from innocent and it could well be that they have shot themselves in the foot.

Sources | BBC, MCV UK, GFK Chart Track, The Telegraph, The Guardian, TheSixthAxis.com & Reuters.

The Dark Art Of Ordering A Coffee

I do enjoy a good coffee. In my uni days I went a little feral and drank far too much caffeine. However, after giving it up completely for a good 6 months, I can now go back to enjoying a nice warm, sugar fueled, cafemochachino drink at a trendy hangout, with the only worry being how to pronounce the bloody drink.

Me panicking out of shot...

Upon arrival at any one of the million coffee places in town, I normally have a quick read of the menu board. I will quickly  find something suitable and wonder how to say it properly. There are several people in the queue, 3 or 4 staff members and a bustling environment full of city dwellers. In other words, a large audience in which to make a fool of myself in front of. The monologue in my head usually goes along the lines of: "Right, so, it is not small, medium or large, but Grande, Tall, or regular. Then how on earth do I pronounce Espresso Con Panna. Wait, isn't that a realy small drink, so can I even have a Grande of that? Is Grande even that big?! Right, say it again, slowly. Espresso. Con. Panna. Please." Before I've had sufficient practice time, it is my time to shine. I inevitably end up saying something like "one medium Espressa Can Ponne, per favore", recieve a blank look, repeat it again and get something completely different to what I intended. Blown it.

Putting my awkward moments aside, a coffee shop is the perfect example to explain to someone what marketing is. It is often assumed I like watching adverts, which is true and that marketing is merely creating them, not true. "Oh, so, Marketing, is that Advertising then?" To which I have to duly agree to, or change subject. Explaining target markets to your dentist isn't exactly the most exhilarating conversation he will have all day.

"I know coffee smells wonderful, but it is almost as if they deliberately channel the aroma out onto the street"

mmm, coffee

A quick visit to Caffe Nero shows exactly what my answer would actually be. First, that smell. It is absolutely captivating, right? I know coffee smells wonderful, but it is almost as if they deliberately channel the aroma all around the store and out onto the street (a tactic I am certain Subway do, the smell is so potent outside their outlets and oh so inviting). An immediate hook, like in a really catchy song. The silly names in part also portray something that is far more classy and civilized than it actually is. A warm brown liquid is not cool, neither is "a mug of coffee love" (said in a strong Yorkshire accent). But a Caramelatte certainly is. Next, the mugs themselves. Oversized, which means two things. One, more room for cheap froth (as opposed to relatively expensive coffee, boosting margins) and differing from a roadside cafe, a greasy spoon or your home, therefore more upmarket.

Not only that, but price is a major factor. By making the drink way more expensive than it by rights should be able to get away with, plus some brown leather sofas, it creates this illusion of sophistication. To quote one of the best slogan's ever used, a coffee shop is Reassuringly Expensive. Add all of those factors together and you get a product that costs on average 20p-60p to make, being bought for upwards of £4/£5. You see, my mind doesn't work like a normal person's. They won't realise most of this. Or they will, but they won't realise it's all extremely clever and well thought out to create an expensive air so they can charge more.

So, in summary it is over-priced, I make a fool of myself and we all enjoy spending time there. That is marketing.

Dodging The Bullet

Classy

I was reading an article the other day about the failure of Blackberry. It was suggesting that they focussed too much on the weakness of their devices, instead of backing the advantages. In other words, they were playing catch up instead of pioneering. This in turn reminded me of an episode of Mad Men, whereby Donald Draper and his cronies were forced to re-invent the direction of a lucrative cigarette advertising deal, due to pressure from health groups publishing the fact that smoking can lead to cancer.


What they did, was simply highlight an advantage to smoking. The new Lucky Strike slogan was to be "It's toasted". Instead of trying to push the lifestyle or stating that smoking is healthy, they simply focussed on a different strength of the product. Now, take that approach and apply it to every day products. It is everywhere.

"The king of such a marketing tactic, however, are the golden arches"

When in Greggs the other day, the brown paper bags they put a pasty in proudly boasts that their Steak Bakes only have "prime cuts of beef". This is great news, something to shout about and gives off the image of a higher quality product. Of course, it is a mass produced pastry good, that costs under 10p to produce at most with all the nutritional value of, well, a Greggs pasty. But they have averted your attention away from such facts.

Lettice, must be good for me then

The king of such a marketing tactic, however, are the golden arches. McDonalds is always trying to tell us how "Fresh" their coffee is (despite being full of sugar) or how they sell bags of carrot sticks (that no one buys). The best ploy however is their British Beef campaign. The TV advert features innocent children (awww, so cute) playing around a farm in the countryside (full of green, green grass and fresh air) with the slogan something along the lines of "100% British Beef in our burgers". Well, great, well done McDonalds, by playing on a healthy environment with those who we cherish most, they come across all earthly. It may be British Beef, but that does not mean that a Big Mac is healthy for your children or that the meat is any good. I just meens they are playing on that little bit of jingoism we all have inside us. They even decorate their lorries with the slogan (which is probably just a lorry full of salt) and even the bit of paper on your tray as you carry your calorie filled McFlurry across the restaurant states it to reinforce how caring and sharing they are. Yeh, right.


This may read like a rant about Mcdonalds, but really it is genius and every company that employs similar schemes are the ones that succeed. Those that don't, flounder. Simple really, but with this in mind, it is genuinely surprising how blatant such campaigns are once you realise the workings behind it. Keep your eyes peeled next time you visit the supermarket...

So The PlayStation Vita Is Doomed, Right?

I admit it. I like playing video games. I know, that makes me a smelly, over-weight, single hermit that lives in a dark room and collects figurines from Star Wars. Or that's what you would assume if you lived in 1995. But you don't, you live in 2012 and everyone you know plays games, even yourself. Wether it's your mum playing Wii Fit, younger brother playing Call of Duty or yourself playing Peggle on your iPhone while on the loo (yes, I'm looking at you) games are no longer the reserve of TheKeith-en-ator2000, playing hours upon hours of Second Life.

Some controllers, yo!

One thing that has been interesting to watch over the past 10 years or so is the fall from grace of the PlayStation brand, while at the same time the world now plays on Farm Ville. Surely in a world where more people than ever before play video games, Sony were the ones in the prime position to capitalize. As I mentioned in another post, managing to get your product as the "de facto" in it's field is marketing gold dust. PlayStation used to be the term for playing games. Every week another article (most likely to be featured in the News of the World) would claim how "PlayStation ruins 13 year old child's education" or a TV presenter trying too hard to be down with teh kidz would throw in the term "Playing PlayStation" at every possible juncture. Yet, much like the Murdoch's falling empire, PlayStation isn't exactly in the public's zeitgeist any more.

No, that is XBox. By reading any lifestyle review section in a newspaper or magazine and you won't be able to go 3 paragraphs before reading the word "XBox" or "Kinect". A quick glance at television reveals that every single living room in the UK has factually got a Kinect. While Sony continue to churn out great games on what is undoubtedly a wonderful machine (I use mine everyday), the PS3 just seems a bit, well geeky. Geeky is not cool. No one really wants to be geeky. No, Geek-chic does not exist, that's just a polite way of saying someone has glasses.

Dad clearly had some constipation issues

When you buy an XBox you are not buying a machine to play games. Technically you are, but Microsoft never tell you directly. The wider audience will never get an Xbox with Kinect because it can do this, or that, or that the graphics are crazy or the voice activation a technical marvel (even though the device is, honestly, a bag of balls). Neither are they simply buying a games console with a penchant for displaying red lights. They spend their hard earned cash to buy into the lifestyle created by those cheesy adverts, YouTube videos and those family orientated editorial adverts in glossy publications.

Sony do none of this. A fact that always seems to get the angry video game forum goer (and they are very angry, because that is an entitlement on the internet) never fails to raise. You are endlessly reading articles, comments and posts lambasting Sony for their poor efforts at "marketing". Sony are about to launch the new PlayStation Vita and there are a whole host of articles comparing it to SmartPhones ("where you can get games for only 69p as opposed to £45"), with a general feeling that it will struggle in a market place dominated by apps.

"What never fails to surprise me is the general public's perception of what marketing actually entails."

Well I'm sorry, but of course it will. That is missing the point totally. The Vita does not exist to combat that. Sony phones are designed for that job, a fact that everyone has completely forgotten. The Vita has one of the clearest target markets for a new product for quite some time. While other companies are trying to spread their wings in search of a giant slice of mainstream appeal pie, Sony has switched their focus (for the time being) at the core customer. There is always a danger of trying to appeal to everyone. This simply is not possible without potentially damaging what made the product so great in the first place (do not mention Rare Ltd, I start to cry).

What never fails to surprise me is the general public's perception of what marketing actually entails. An expensive TV advert is only a tiny, tiny part of it. Taking the Vita as a prime example, Sony have really listened to what consumers wanted. They realised that there will always be a market for the gamer. There are features that people complained that the old PSP never had (two analogue sticks). There are the massive PS3 game franchises like Uncharted, LittleBigPlanet etc etc and collosal power even by home console standards. All topped off with a sprinkling of 3G, OLED and Touch Screen. It is all things to all gamers. By targeting a very specific market you can achieve a very strong, hardcore, loyal following. This can provide you with a solid foundation from which to build on down the line. 

2 typical Vita customers, and some men..

By aiming at the informed and technologically minded consumer first, the hope is they are the sort of person that will tweet about it, blog about it, post a video review on YouTube and generally spread the word to people they know who are perhaps less well informed. Ideally this will then snowball and in 2 or 3 years time you will still have a product that is selling well, provided you then start developing games aimed more at the FarmVille crowd.


So there, on paper the Vita is a perfectly executed Marketing Strategy. I just need to wait a while to see if the plan actually works. In the mean time, I'm off to pre-order one.

Sequel-itis

Subway - Also A Franchise

How many sequels does it take to break a series? The answer is perhaps unknown, I would always say a third iteration is more than enough, but one thing is for definite, the endless line of films, TV shows, games and anything entertainment related seemingly has more follow ups, 2s, 3s, 4 and even 5s than ever before.


The reasoning behind such a growth in endless rubbish and watering down of the entertainment industry (Final Destination 5. Really? 2 was bad enough, but 5? Did no one understand the irony of having more than one "Final" destination?) is so. We are in uncertain times. Money is tight and when people's marginal perpencity to consume is down (like in a recession for example) the first things that they tend to cut back on things that are not necessary. In an economy like this, our good friend Maslow shows us that keeping warm, fed and protected form the elements is at a much higher priority than popping down the shops and picking up the latest Fast & Furious (Again, the first was bad, the second worse, ditto 3, 4 and 5. In Five, they laughably think it is a serious film, the writers and actors seemingly oblivious to the over-blown and over-weight blubbering mass the series has become.)


As a result studios are nervous. It is seen as a much greater risk to invest in a new, original and up and coming writer/director than it is an established brand. Yup, brand. I always think that a film should be made because within someone there is a burning desire to create a story worth telling. Yet, money dictates and without money, there is no film. Now we use terms like "franchise". Films shouldn't be a franchise, they shouldn't be made simply because the first made lots of money. They shouldn't be made because there is a gap in the market. They should be made because there is potential for something new, different, touching, hilarious or thought provoking.

Puss In Boots - No Need.

In the past a film had a marketing department that had the sole responsibility of promoting the film to a wide audience. Now the marketing departments, after their research and focus groups, now help to decide if a project is green lit of not. The classic case is Transformers, for more of that visit Kermode's rant here. Having said all of that, if spinning out 97 Shrek movies helps to fund more interesting films then I really don't mind. But the fact remains, there is never, ever, under any possible circumstance for the 4 Scream films or 4 Scary Movies to exist. By plumping for a film that has already been a success, the risk is lower, investment needed lower and the rewards (potentially) larger. I just wish that it wasn't so obviously cynical at times.

I'll Just Do The Hoovering While Listening To My Walkman

In Marketing lectures we were always told that having a range of products is better than having just one. When shopping, research suggests that customers like to have choice. It is part of the fun to choose which flavour, variety, shape or size of a particular product you would like to buy. There are brands that have sub-brands, that have sub-brands, that have a choice of colour, taste or style. If you look at the male deodorant shelf in any supermarket you will see what I mean.

Lynx are the king of spinning off variants, special editions and new smells. First there is deodorant or anti-perspirant. Then there is spray or roller-ball. A million different smells. Even after-shave varieties and "The Final Ever Edition" (which isn't really). The same applies to any UniLever brand really like Head & Shoulders. Or anything made by anyone really.

But the stand out exception to that rule has always been the iPhone. By having one name, one model and by not really advertising the fact you can get different memory capacities, this alone has made it stand out from the crowd. No "X26" version, no different names for each model (a quick glance at the HTC range shows how many different names can be very confusing, the list is endless!), no research needed. It's a nice easy choice, all the adverts have the same name with a product that looks very similar. Yet, now there are 3 models. The older 3GS, the old 4 and the new-ish 4S. There will be four later in the year (around August time seems to be a good guess) with the introduction of the iPhone5. Surely then, by offering a range of goods, Apple are slipping away from what made it stand out so much

Mini Paceman - A 4x4/Coupe. Erm, no?

Another example is the Kindle. By creating one product with one name, it becomes a buzz word. Very simple, very effective. Again though, there are up to 3 Kindles now available. An even better example is Mini. Now there is not just the Cooper or quicker Cooper S. First there was the cheaper One, followed by the First. Then diesel and recently Cooper S quick diesel. Or a 5-door estate come hatchback thingy entitled Clubman, the Convertible, the Roadster (two types of soft-top Mini, really?) the Coupe and of course, the 4x4 Countryman. It will get even worse of the next few years with a Paceman 4x4 Coupe and even a people carrier Mini! By filling every conceivable niche (some that I'm sure that are completely made up) there is also the worry of stretching the brand too far and ruining the allure in the first place.

However, the core appeal of having something with a singular name is still manages to be effective to both Kindles and iPhone's alike. This is nothing new of course. The once proud king of electronics, Sony, knocked every other brand into a cocked hat with the Walkman. Likewise Hover with the, erm Hoover.

But, the Walkman and the Hoover highlight the downside of such an approach. By trying to carve out a brand that epitomises the present, you stand at great risk of not being cool any more. It is very "in" to say you downloaded an app to your iPhone, played a game on your iPad, read a book on your Kindle, all on the way to buy a Jack Wills jumper. But fashion moves on, brands fade and new things become the latest must haves (Jack Wills, becoming a little chavvy already, just saying). There is a risk that they simply become something to remember a by gone era by.

Of course, I'm not saying that these brands and products are doomed and the world is going to end. Many brands pull through by re-inventing themselves. As much as I don't put the latest Coldplay album down as a classic, the band have reinvented themselves yet again to remain current and still oh-so popular. If anyone has the marketing chutzpah to pull it off, Apple does.

Say What?

Look at this harmless bottle of anti-perspirant. It says "96h Non-Stop". But wait, look again, there is an asterisk.

Yet flip the bottle round on the other and it's all in gibberish. Just look at how many terms, condition, warnings, languages and recycling instructions have to be placed on something to stop me sweating. More than that, where the heck are the caveats of the "96h Non-Stop"? It may mean "96h Non-Stop Indigestion" or "Only 96 hours when tested on rabbits" for all I know.

So it is credit to Loreal that the front of the packaging looks clean and cool. As products designers know all to well, it's not enough to simply have a design that catches your eye but you also have to jump through a million hurdles to approve and then hide EU regulation.