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"Koeppel Direct's media buying expertise has played an integral role in making my company successful. Koeppel generated so much business for our company, occasionally we have to limit their media buys, in order to handle all of the new business." | |
| - R. Gregg Marketer of Senior Products |
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MEDIA BUYING DIRECT RESPONSE TELEVISION (DRTV) ARTICLE ...... |
Video and Online Games: A Recession Proof Business?
By: Peter Koeppel
Published: 05/08
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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.
Both video and online gaming continue to grow among all age groups, even seniors. People are spending more time
involved in gaming. A new "Online Gaming 2008" report from the NPD Group finds that 72 percent of the US plays
video games, a dramatic increase from the 63 percent who said they played in the previous year, according to Ben
Kuchera from ars technica. Most online games are played through a PC, followed by games played through a game
console and games played on a cellphone make up only a small share of the marketplace.
I find it interesting to analyze businesses that are thriving during difficult times, since understanding the
dynamics of those businesses can often help spur ideas that might improve your business or lead to new product
ideas that appeal to consumers in a depressed economic environment. Savvy direct marketers with the right
products also have the potential to thrive in this environment, since consumers will be spending more time at
home watching TV and online and more DR inventory should become available as general advertisers cut
back.
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