When he is not working and he is not at school Bob Sheretts, Omaha, Neb., senior, is most likely sitting on his coach holding one of two things in his hand: a Playstation 3 controller or an Xbox 360 controller.
He is the proud owner of both Sony and Microsoft’s next generation video game systems. He spent $1000 to own them both.
Sheretts says he began playing video games a long time ago, and he plans on continuing to play as long as game developers continue to produce fun games.
“I’ve been playing video games since I was a kid and I am proud to be part of a generation that will be able to dominates their kids in video games,” Sheretts said.
He considers himself a committed game player, but not an obsessive one.
“I definitely play video games more than I watch TV. I play about 2-3 hours per day, but if I have something more important or fun to do than I don’t let video games get in the way,” Sheretts said.
At 21, Sheretts represents precisely the target market at which advertisers aim. And now with a generation that plays video games as much as it watches TV, ad agencies are working with game developers in order to help their clients break into the video game market.
The video game industry set a record by generating $12.6 billion in sales in 2006. This number included the sale of hardware, software and accessories. Software sales alone equaled $6.46 billion up 6% from 2005, according to the market research group NPD Group.
Since 1996 the video game software industry grew from a $1.8 billion dollar business into a $6.4 billion business. As total sales soared to new heights the price of software remained the same.
Nintendo released its Nintendo 64 game console in 1996. The games cost $60. In 2006, Sony introduced the Playstation 3 console, and its games costs $60. This proves people are buying a significantly greater number of video games now than 10 years ago.
These staggering numbers grabbed the advertiser’s attention. According to the Entertainment Software Association (ESA) 75% of the game console playing market is under the age of 35.
High demand for video games combined with the fact that young males buy the majority of the games makes in-game advertising incredibly attractive.
So attractive that Microsoft purchased the New York based Massive Inc. in May of 2006 for $200 million. Massive created a world-leading network for video game advertising. The company provides a method for companies to put their ads into the video games worlds in a lifelike manner.
“Our goal is to put our clients’ brand names inside the video game world in a way that will seem realistic to whomever is playing the game,” Ken Simon, Massive sales manger for the central region, said.
For example, in Electronic Arts Sports’ 2006 FIFA World Cup the sidelines of the soccer stadiums are lined with brand names ranging from T-Mobile to Hyundai. The game uses the real sponsors of the World Cup
“We have found that most gamers like the ads because they feel it makes games seem real,” Simon said.
In Project Gotham Racing 3 on Xbox 360 gamers can see McDonalds as they drive cars around Las Vegas and New York City. The game also features billboards with brands names such as Samsung and Bridgestone. This method of advertising does not seem invasive to the gamer, but it does not go with out notice.
“FIFA World Cup is my favorite game and I know the ads in the game are there for a reason. I appreciate how they make the game seem more realistic. Sponsorship is a huge part of soccer, so it should be a huge part of soccer video games,” Sheretts said.
Game developers pay special attention to detail to ensure the ads enhance the realism of the games, and do not make gamers feel as if they are looking through the yellow pages.
Games are so detailed that in NCAA March Madness 2007, also made by EA Sports, the schools sponsored by Adidas have an Adidas insignias on the players’ uniforms, while the schools sponsored by Nike are marked with Nike swooshes.
According to studies conducted by Massive this scheme works. The company boasts a 64% increase in brand familiarity for its clients and 41% increase in purchase consideration.
The study was based on two groups playing the same game. One group saw the ads in the game and the other group did not.
Making games more realistic and complex comes at a price. Next generation games (games made for Playstation 3, Xbox 360, and Nintendo Wii) cost as much as $20 million to produce. That is nearly triple the amount it cost to make games for the last generation of video game consoles (Playstation 2, Xbox, and Nintendo Gamecube).
Higher production cost mean game developers need to find a new source of income to continue making a profit. Selling ad space is one of the best ways to accomplish that goal, which explains the explosion of ad dollars being put into video games.
In 2006 in-game advertising made $77.7 million globally, and that number is expected to double by the end of 2007, according to a study conducted by the Yankee Group.
At Electronic Arts, the console software industry leader, the future depends on making ad sales.
“We will not be able to survive if we do not continue to sell ads in our games. Making games fresh and exciting for consumers is driving up production costs and advertising is the best way to respond,” Scott Gamel, public relations manager at Electronic Arts’ Redwood Shores studio, said.
In fact, EA joined Microsoft in August of 2006 when it signed on with Massive Inc. The contract was signed for two years and gives Massive the responsibility for all in-game advertising for EA titles.
With EA on board two of the industry’s largest software companies bought in to the business of in-game advertising. Research suggests it is the wave of the future. The Yankee group predicts that by 2011 developers will sell $971 million of ad space.