Who's Buying What? GameStop Talks Hardware Trends

Author: by Christian Nutt, Leigh Alexander

Retailer GameStop says hardware sales are on the rise in its stores across the board. Merchandising SVP Bob McKenzie and merchandising and marketing VP Tony Bartel recently provided an in-depth look at their business in a wide-ranging Gamasutra feature Here, the execs break down hardware performance by platform, providing fascinating insight into the hardware space from the retail trenches. Wii: 'They believe that it's real' The continuing strength of Wii sales, McKenzie says, "points toward the continued growth that [Nintendo] continues to have," and also shows the broadening of the "family genre" of games that's sprung up where Wii consumers gather. "I think at this time last year, people were kind of waiting to see if it was real," says GameStop merchandise and marketing VP Tony Bartel, discussing kid-friendly and family-oriented gaming. "I think people now are firmly behind it, and they believe that it's real, and you've got developers -- and when we look at the numbers, the sheer number of games that are coming out in that genre, it's absolutely amazing." Last year, GameStop added dedicated merchandising sections to its stores specifically to frame kids' titles. "Currently in the kids' section, we have 215 active titles," says McKenzie. "A year ago, we had 80 that were active." With 250 new releases yet to come, he anticipates over 450 titles either rated E or T. DS: Riding The Expansion Wave GameStop says it's worked closely with Nintendo to help the family entertainment wave proliferate in its stores, and much of that effort, McKenzie says, is focused on the DS. Publishers like Ubisoft, who've found huge success on the DS with product lines like their Imagine series, and THQ with Spongebob and other licensed titles, are also part of that effort. In the fall, the titles born out of EA's partnership with Mattel will also play a role in a broadened demographic for DS. Offering the consumer more hands-on time in stores with the DS will be key, Bartel says -- he thinks the availability of in-store units on which consumers could play Guitar Hero on the DS provided good support for sales. "That's the type of thing that, in that genre, really needs to happen," he says. "People need to experience it. We were the only place you could go, and literally get your hands on it, and play it. And you had to physically hand them the DS, but that's something that we worked with the publisher -- to get that into all 4,300 stores." Interesting statistic on broadening DS audiences -- in the week that Gamasutra spoke to GameStop, 53 percent of DS hardware purchasers were women. PS3: Hitting Its Stride After PlayStation 3 "won [the] de facto war" between Blu-ray and HD-DVD, GameStop observed that Grand Theft Auto IV and Metal Gear Solid 4 on the platform "really brought the PlayStation 3 hardware to a new level for us, and it isn't turning down." McKenzie also says that not only did the PlayStation 3 see a bump from major releases, but that stronger sales of Sony's console are a continuing trend thanks to more new releases. And more new releases -- close to 50 percent more over the same time last year, according to McKenzie -- is indicative of a broader install base. "They're finally hitting that install base where the publishers are starting to get that development and really bring it over for that format," he says. Bartel is also looking ahead to "great" exclusives for the PS3, calling LittleBigPlanet and Resistance 2 "system sellers" for the PS3, just as Metal Gear Solid 4 was. Xbox 360: Breaking The Price Wall According to NPD, Wii's install base is now higher than the Xbox 360 -- but "the Xbox 360 platform has continued to grow very well for us," says Mackenzie. Looking back, McKenzie thinks the discounted $299 price Microsoft associated with its discontinuation of the 20 GB Pro SKU might have been the company's way of testing the waters for a lower-priced Xbox 360. "Taking that price move just feels like, now, looking back at it, that was a strategic move to get a little gauge for them on how reactive that was going to be," he says. "Obviously, within the current Xbox 360 cycle now being positioned going into Q3 and Q4 with a $199, $299, $399 price point, it really sets it up well for us, as retailers, to get that messaging across," says McKenzie. "Now they're truly the first next-gen console to make the sub-$200 price point." And although GameStop anticipated "significant increases in sell-through" for the Xbox 360, the company's "very pleased" with the early results. "We're actually surprised. The momentum is coming more on the Arcade model than it was on the Pro. But all three have seen more than a two-fold increase in sell-through," McKenzie says. PlayStation 2: Closing A Decade McKenzie admits that when he first heard SCEA president Jack Tretton's projection at a retailer event two years ago that the PlayStation 2 would have a decade-long lifecycle, he said to himself, "Ahh, they're not going to get there." "But I've got to give them credit -- they're doing a good job," he says. "I had anticipated and I had hoped it would be a $99 retail by now. We're not, but we're seeing good development on PlayStation 2. Not as much as a year ago, but again, you wouldn't anticipate that." One thing McKenzie said that has come as a surprise to him was how challenged developers have been in making the leap from PS2 to PS3. "You'd think, 'it's PlayStation. So you're making a game, make it on PlayStation 3 and PlayStation 2. What's so hard about that?' Now that we've got the games behind us, it's almost a totally different development team [requirement]." He sees the decision to continue selling the PS2 as a big commitment, not just for Sony and GameStop as a retailer, but for publishers to continue making "meaningful content" through the console's twilight seasons -- but the potential's there. "There's definitely plenty of room left in that. The value of it is there. Again, my son, half of the games he's playing, he's playing on PS2." Bartel notes that in June, software sales for PS2 were down only 4.7 percent. "That's amazing for a system that's eight years old, after the year we had last year... It's an amazing statistic." PSP: The Renaissance For a time, popular opinion had the PSP down for the count, but hardware sales are back on the rise. "We had really seen significant movement on PSP hardware last year, again, when they took the hardware markdown last year in August, and really, the momentum hasn't let up since that time," McKenzie says. And the updated PSP-3000, he says, should find a great reception among consumers. "They want something that's newer technology, that's a little bit sleeker, that's got a brighter screen, that's got a built-in microphone." And freshening up the PSP should have a holistic positive effect on Sony. The new features "might not be meaningful to everybody," McKenzie suggests -- "but still, having something new that [Sony] can get behind and [shows] a renewed interest within Sony as well. They've brought in new people to get after their third party publishing ,and there will be [significantly more] releases on PSP in 2009 than there have been in 2008." The PC: 'Not Backing Away From It' Amid all the good news for hardware sales comes word from GameStop that PC software is "down from a year ago." But "we're not backing away from it at all," he adds. Last year, only 350 GameStop stores didn't carry PC merchandise, and that number remains the same today. McKenzie's looking forward to strong sales of Blizzard's Wrath of the Lich King, and Bartel says Spore saw a solid opening in its stores as well. The PC biz has done well enough that GameStop has, in many cases, migrated from the space-saving, second-class "gondola" presentation for PC titles and moved some of them back up onto the wall after realizing "this is too important of a category." "The PC market is definitely still very alive, and a portion of our business that we're hanging onto," McKenzie says. The full Gamasutra feature contains even more insights on this and other topics, from the company's trade-in business to the future of digital distribution and more.