E3, the interactive entertainment industry's annual confab May 11-13 in Los Angeles, marks a new phase for marketers. Microsoft Corp. will enter the console fray in 2001 with its code-named "X-Box," and Sony Computer Entertainment of America is poised to hype its PlayStation 2. This version of the popular PlayStation platform will include a DVD-ROM drive that will help position the console as a digital entertainment hub. While Sony did not announce a launch date for Play-Station 2 by press time, a software industry insider said it will be after September.
That's later than expected. Technical and supply issues arising from the system's recent Japanese rollout are said to have delayed the U.S. launch slightly.
Nintendo of America will extend its wildly successful Pokemon franchise as it hurtles toward next year's U.S. launch of its Dolphin platform, which will be unveiled in Japan in August. Nintendo executives said they're formulating an interactive strategy for Dolphin which could involve a data exchange capability.
"We know sharing data is a key success of Pokemon," said George Harrison, Nintendo's VP-marketing. In Japan later this year, advanced Gameboy units will exchange data over cell phones.
Meanwhile, Nintendo in the U.S. is looking to make Joanna Dark, the heroine of its Perfect Dark title, a brand icon. The character was the centerpiece of a $10 million, so-called "experiential" marketing campaign orchestrated by Nintendo and Leo Burnett USA, Chicago, its ad agency. The game hits retail May 22.
Sega of America, the gaming world's "comeback kid" (due to the success of Dreamcast), now seeks to lead the online gaming trend. Last month, it created Sega.com, a company dedicated to online gaming.
At least one analyst was skeptical: "I think it's going to be very difficult to convince a lot of households to change their Internet service," said Schelley Olhava, research analyst, International Data Corp. "Kids will convince their parents? I'm not necessarily convinced."
"Sega's grasping at any lifeline it has," said Nintendo's Mr. Harrison. "Giving away hardware for free is a strategy, but I'm not sure it will work," he added, citing Sega's decision last month to offer rebates on the Dreamcast hardware when consumers sign up for SegaNet, its Internet service.
Yet, he concedes: "Nintendo's share was impacted by the Dreamcast's success."
X-BOX WILD CARD
According to tech researcher PC Data, Nintendo's Game Boy Color unit was the market share leader in the first quarter, commanding 45% of the videogame system market. Sony's PlayStation was No. 2 with 27.1%, followed by the Nintendo 64 with 18% and Dreamcast with 8.4%.
The wild card is Microsoft's enigmatic X-Box, likely to roil the market by fourth quarter 2001. This will result in four key players willing to cough up marketing budgets of nearly $150 million each.
Nintendo's marketing priorities include extending its powerful Pokemon franchise, supporting Pokemon Stadium for the Nintendo 64 and pushing the July 21 release of "Pokemon: The Movie 2000," including promotional tie-ins with Burger King Corp. and Kellogg Co. In October, new gold and silver versions of Pokemon arrive for Gameboy.
Gameboy, which is expected to constitute 40% of Nintendo's business over the next year, will continue to receive major support, Mr. Harrison said. From May 22 through July 16, Nintendo will run a Gameboy campaign that includes three TV spots running on youth-skewed networks such as the WB and Nickolodeon, as well as print and out-of-home in the top 20 markets. Print runs in SI for Kids, Sunday kid-oriented newspaper inserts and teen magazines.
Nintendo's Excitebike 64, (a motocross racing bike software title), Kirby 64, Banjo-Tooie and the forthcoming Legend of Zelda sequel each will receive support from the company's $100 million-plus marketing budget.
Rival Microsoft has said it will spend more than $100 million to market its videogame console. McCann-Erickson Worldwide, New York, handles. "Microsoft is a competitor you don't want to underestimate," Mr. Harrison said.
Analysts say the software giant's entry into the market may pose more of a threat for Sony, however.
Overall, the challenge for hardware and software marketers this year is to maintain strong retail sales until new platforms are introduced.
The industry is entering a hardware transition period and a shift to online gaming that will impact the consumer base.
"You have the largest installed base that we've ever had, both in the U.S. and the world, and the videogame software market has gone a lot more mass," said Kathy Vrabeck, exec VP-global brand management at Activision, a videogame publisher. "Quite honestly, it's a very exciting time to be in the industry."
Activision works with hardware developers to launch software titles across multiple platforms, including PlayStation, Gameboy and Dreamcast. The company also localizes Japanese titles for the U.S. market.
Casual gamers prefer well-known brands.
"What you will see is a bigger emphasis on licensed brand names and sequels to existing big videogame franchises," Ms. Vrabeck said. Those titles include Star Trek, along with X-Men and Spider-Man, both based on Marvel Comics characters. "For consumers who are less involved in the category, big well-known brand names carry a lot of weight," she said.
Activision will heavily promote Disney titles such as Buzz Lightyear of Star Command (based on a character from the movie "Toy Story"), Spider-Man, Star Trek and titles in its action sports line. The company will spend roughly $40 million on marketing in the U.S., the bulk of it in the fourth quarter. D'Arcy Masius Benton & Bowles, Los Angeles, handles advertising across a mix of gamer and consumer publications and TV. Ignited Minds, Marina Del Rey, Calif., handles online media.
Entertainment licensor Saban Consumer Products will emphasize popular kids' properties such as THQ's Power Rangers and Bandai Interactive's Digimon, as well as other action/adventure brands. Saban supports Power Rangers, one of the best-selling action brands at retail, with a variety of programs, including a Happy Meals tie-in with McDonald's Corp.
Saban joins with Bandai Interactive and Fox Kids Media to support the October launch of Deluxe Interactive Omega Megazord. This high-tech action figure, co-marketed by Bandai and Microsoft, is designed for kids to use while they watch "Power Rangers" TV episodes on Fox Broadcasting Co. The Microsoft-developed technology encodes a data stream into the TV broadcast; as a child watches the episode, the toy receives a download of new data so that the action figure becomes a different toy during each episode. Bandai plans advertising via J. Walter Thompson USA, Los Angeles, which will include TV on Fox, print and point-of-purchase support.
"We're finding that kids in age groups 4 to 7 and 6 to 11 are becoming much more sophisticated in what appeals to them in toys, and that's a result of a whole generation growing up with DVD, videogames, computers and the Internet," said Elie Dekel, president of Saban Consumer Products. "That sophistication puts pressure on videogame companies, and the interactivity of the product becomes very important. Kids are expecting a much more cinematic experience and a very deep, rich story," he said.