YORK, Pa. (AdAge.com) -- The most recent round of video-game consoles is hitting middle age, and marketers are trying to fend off the proverbial midlife crisis with new products and an increasing focus on the non-gaming functions of their consoles.
As the gaming customer base ages, the $1.83 billion console market, led by Microsoft Xbox 360, Sony PlayStation 3 and Nintendo Wii, fell for two consecutive months for the first time ever, 18% in March and 8% in April vs. the same months last year, according to NPD. While industry insiders and analysts said the economy and a lack of strong software titles in those months played a big role in the sales falloff, they also agreed that marketing and business strategy needs to shift as consoles age. All three brands are reaching the middle points in their life cycles, some three years or more after their debuts. (Xbox 360 launched in fall 2005 and the other two in fall 2006.)
Whereas once early adopters and hard-core gamers could be counted on to fuel the category, that "installed base" is pretty much saturated, said John Koller, director-hardware marketing for Sony Computers and Entertainment of America. That leaves marketers to change strategies and reach out to other potential buyers by flogging features beyond gaming. "It's when the ... hard-core push shifts to a broader one," he said, that "the tipping point happens."
"We're firm believers in the 10-year life cycle of our products," said Mr. Koller, adding that PS2, now in its ninth year, likely will extend even beyond that. "We're in the three- to five-year period (with PS3), and for most publishers and others in the industry, it's the most lucrative time." He said consumer word-of-mouth, more and broader marketing, a more mass-audience base, and more games with broader appeal will all help goose sales. PlayStation's agency is Deutsch, Los Angeles.
Sony's marketing messages focus more on educating consumers about the benefits of the PS3, such as Blu-ray gaming, Blu-ray movies, remote play with the handheld PSP and the PlayStation network, all while keeping the initial marketing tone of the premium nature of the PS3, Mr. Koller said.
Michael Cai, analyst at Interpret, said he expects the console makers to add to their middle-age marketing mixes tactics such as price drops, line extensions along the lines of the PS2 Slim and Xbox 360 special editions, bundled incentives, and exclusive titles. He said those tactics may end up extending the typical 7- to 8-year console life cycle.
"This generation of consoles, along with some extenuating factors, is really different," said Billy Pidgeon, analyst at Game Changer Research. He said that's because marketers need to recoup the cost of creating and marketing games before moving on to the next platform, which is leading the industry to try and stretch the current consoles' lifespans.
And it might just work. Leading up to the seminal industry conference E3, which begins next week, all three consoles are getting a buzz lift from pre-conference media coverage and company announcements ahead of the event. PlayStation 3 ranks highest in buzz among men and women overall, while Xbox is stronger among the 50-plus set and among men 18 to 34, said Ted Marzilli, global managing director of BrandIndex at consumer polling service YouGov.
Pre-E3 rumors and rumblings already fanning the flames include Sony's rumored PS3 motion controller, a new handheld called PSP Go and a possible redesigned PS3 in a slim version. Microsoft Xbox is said to be showing a new motion-sensor camera to control games, integrated Zune video service on Xbox Live and possibly a new Metal Gear game. Wii rumors include a Wii Fit Plus version and a new Zelda or Mario game.
And remember it is just the middle, not the end. "It feels like this cycle is really just starting to take off," said NPD analyst Anita Frazier in an e-mail interview, adding that this is the stage when exclusive and compelling games can drive hardware sales as well as give hardware makers revenue from platform fees paid by developers.
Tips to help your brand navigate 'middle age'
Switch tactics. Keep your message consistent, but point out features, add new ones or create special editions to remind current customers why they love the product as well as attract new ones.
Keep an eye on your target audience. BrandIndex found that video-game-hardware makers' traditional key audience, 18- to 34-year-old males, can be pretty fickle. In four weeks in April and May, they pushed the buzz index for Wii from a record high down to an extreme low and back up to an almost record high.
If you do launch a new platform, think about your existing consumers. Don't leave them behind with "outdated" equipment, said analyst Billy Pidgeon. Try a 1.5 version, and make sure to stress compatibility with the first-generation product.
Use price cuts carefully as an aging-product marketing tactic. Reductions do bring in price-sensitive and mass-market consumers, said analyst Anita Frazier, but compelling content will always be a better driver.