Retail Strategy Tailored to Video Game 'Newbies' Serious Players No Longer Drive Growth

Seth Schiesel - International Herald Tribune

The $13 billion video game industry is counting on "the noobs" this Christmas.

"Noob," short for newbie, is the online vernacular for someone who is new to gaming or just does not know where to start. In the video game industry, those are known as new customers.

Daniel DeMatteo, vice chairman and chief operating officer of GameStop, the largest specialty game retailer and second-largest game-seller, after Wal-Mart, said he expected that a new audience for video games would continue to affect console makers, game producers and retailers this coming holiday shopping season.

By far the most important trend in gaming over the last two years has been the explosive growth outside its traditional demographic base of young men. Hard-core young male players are still the bedrock of gaming, but growth in the industry is coming largely from everyone else.

GameStop executives, who rarely discuss the industry publicly, were to have talked about that topic Tuesday at an annual gathering in Las Vegas with game publishers like Electronic Arts and Ubisoft and console manufacturers like Sony and Nintendo, who get a vital last chance to persuade GameStop executives to promote their wares and give them prominent display this Christmas season. (Game publishers and retailers have generated as much as half their annual revenue and profit during the last three months of the year.)

In interviews last week, DeMatteo and Bob McKenzie, the senior vice president for merchandising at GameStop, said they saw new customers as playing a more important role in their nearly 5,000 stores worldwide. "There is a real breadth of properties now appealing to a much broader audience than we've seen before," DeMatteo said.

"Honestly, we are having to retool the way we think of things in our stores in terms of merchandising, layout and also customer service because it is no longer only the hard-core gamer walking in who knows exactly what he wants."

Because the casual gamer and the gift-giver do not always know what they want, he said, GameStop is setting up two new sections in each of its stores this holiday season to appeal to new customers. One will focus on music games, anchored by the dueling rock 'n' roll games "Guitar Hero III" from Activision and "Rock Band" from MTV Games. McKenzie said he also expected the new "SingStar" game from Sony to appeal especially to girls and for the "High School Musical" game from Disney to appeal to children of both sexes.

In the same vein, GameStop is also establishing special sections dedicated to titles for children and families. "This is for the gift- giver who is not coming into our stores on a regular basis," McKenzie said. "This section is anything from 'Mario Kart' to 'Zoo Tycoon' to 'Nintendogs.' The 'Cars' game has been a big seller, 'Lego Star Wars,' 'Hannah Montana' and so on."

DeMatteo also said the demand for the Nintendo Wii game console would continue to outstrip supply. "The audience is extremely broad these days and don't be surprised if your grandmother wants a Wii for herself."

Ever since its introduction last year, the Wii console has outsold both the Microsoft Xbox 360 and the Sony PlayStation 3, largely because the Wii is far easier to use than the competition and appeals to many people who have not considered themselves gamers. At the same time, the Nintendo DS handheld has become a hit, also by appealing to both children and middle-aged players.

DeMatteo also said the older PlayStation 2, which costs only $129, should continue to sell strongly. "There's only one real value video game machine out there now and it's the PS2, especially since Microsoft gave up on the original Xbox and Nintendo gave up on the GameCube," he said. "And if and when Sony lowers the price to $99, I expect we will still be selling PlayStation 2's in 2010."

The GameStop executives said they had noticed that sales of the Xbox 360 had not been hurt by the widely reported design defects in the machines, which cause the consoles to fail. "All I can say is that we have not seen anything negative from that," McKenzie said. "We track our returns, and returns have actually gone down since they made that announcement, and we haven't seen any effect on enthusiasm for the 360."

"Halo 3" is a big part of the buzz around the 360. The executives would not say how many pre-orders they had taken for the Microsoft game, but, McKenzie said, " 'Halo 3' is on track probably to be the largest release that we have had in the history of the company."

The GameStop executives said they expected strong sales from other games as well, including "Call of Duty 4" from Activision; "Assassin's Creed" from Ubisoft; "WWE Smackdown vs. Raw" from THQ; "Mass Effect" from Microsoft; "BioShock" from Take-Two; "Lair" from Sony; and "Heavenly Sword" from Sony.

Copyright 2012 by International Herald Tribune