Bob McKenzie, senior vice president of merchandising at specialty videogame retailer GameStop, was on hand for the official launch last week of Capcom’s Resident Evil 5 game that turned San Francisco’s Union Square into a biohazard event. McKenzie took some time away from the party to talk about the Nintendo DSi launch, what impact the recession is having on used game sales, and why it’s good for the industry to see big games launching throughout the year in this exclusive interview.
VB: What impact have you seen the down economy have on gamers’ spending habits?
BM: It really didn’t have much of an impact right away. Fortunately, I think within the videogame business and entertainment business, we’re a little less impacted from it than other industries. We were like a lot of typical retailers in that you could tell that the traffic was down within our stores, but as you know from the announcement that we’ve had on our fourth quarter, we ended up having a great fourth quarter. As people kind of hunkered down and started staying home more, they obviously were looking for entertainment options, and gaming is a good alternative for them.
VB: Has the recession had any impact on used videogame sales at your stores?
BM: We haven’t seen a spike that I would [attribute] directly to the economy. However, I think consumers are definitely much more aware of the tightening of their wallets, and they’re looking at games again. Liked tonight with the Resident Evil 5 launch, we see a good amount of activity around these bigger titles, and it gives the consumer a chance to make that game more affordable, especially in these tight times.
VB: Last year we saw Grand Theft Auto IV ship in April and sell throughout the year. This year we’ve already had big games like Street Fighter IV and now Resident Evil V. Is the industry starting to move away from that Q4 mentality?
BM: I really think they are. When we recently came to Destination PlayStation, Sony’s event, I definitely got the message from several of our publishers there. They saw the need to spread it out from outside the October, November, and December launch. There were so many titles that came out last year in those months that you almost began to compete against your own games. This year we’ve already seen Killzone 2, Halo Wars, Street Fighter IV and Resident Evil 5 launch and do very well at retail. Spreading out the launches more is going to help everybody. It won’t cost them as much to market everything in the fourth quarter, and it will help to spread out the business more.
VB: What’s the situation with Nintendo’s supply of Wiis today? Have they finally caught up to demand, or has demand fallen off?
BM: It definitely has reached a point where it hasn’t been in the three years since the Wii system launched, where we do have inventory on our shelves. We don’t necessarily have a concern about the amount of inventory. It’s still selling very well. It’s just that it’s gone from having consumers chasing down the UPS truck to find them before entering the store. At least now we’ve got the customers coming in and they’re finding the product. It has definitely gotten to the point where there is inventory within the entire retail channel and in my competitor stores. That’s not necessarily a bad thing. There are 170 new Wii titles that shipped last year alone. I’m glad to see that they are catching up and that we are able to get the product on the shelf and really establish a true run rate for this and see where it’s going to take us in the third year.
VB: Just as Nintendo has caught up with Wii, they’re about to ship Nintendo DSi. Do you see that portable being hard to find?
BM: We’ve seen some pretty brisk pre-orders on DSi. It’s probably double where we were on the original DS, as far as reservation activity, so we’re expecting some great things from that. It feels like they’re going to have good quantities to support not only the launch but also some replenishment right behind it. A lot of times with these hardware lines, it’s the shipments right after launch that are really important. You have to have the product to sustain the momentum after you get it on the shelf, so the customer doesn’t just come in and feel like they did initially with the Wii. I think there were customers in the first year that came in and were looking for it, and they kind of turned away because they got tired of walking into the store and always hearing that we didn’t have it in stock. I don’t anticipate that with the DSI, and I think we’re going to have a great launch with that.
VB: Will you be doing a launch event with Nintendo for DSi?
BM: Yes, we’re going to be down in LA at CityWalk the night of April 4 leading into the launch on the 5th. I was part of the launch when we were down there with them for the Wii launch in November three years ago, and again they put on a great party just like this event tonight. So we’re looking forward to that, as well.
VB: Since Nintendo DSi is launching in April versus the traditional November time-frame, do you feel like there will be enough around for Christmas when people are looking for it as a gift?
BM: Yeah, I really do. Look at Grand Theft Auto IV last year. Take-Two really ended up having almost two holidays in one because they got the one at the launch last April and then they also got an increase going into the holiday period in 2008. And I think definitely with the DSI that it could have the same type of trend, where they’re going to obviously have a lot of momentum going into the launch and then hopefully again we’ll be able to get a great rate of sales over the summer months and build that momentum going into the fall. We’ll be able to see what the software activity is on the DSi versus the DS and be prepared to be in stock and maximize the opportunity for fourth quarter.
VB: How long do you see the DS being around once the DSi is out there? Are you anticipating a kind of price drop of the one versus the other?
BM: You know, I think they’ve done a good job of anticipating the demand from the consumer, and the $30 price differential will definitely continue to give some life to the DS system that is out now. At $149 it’s a great value, and one of the key differences for a lot of consumers that have older Game Boy Advance libraries is that they’ll need to hold on to their DS to play those games. The DSi won’t play GBA games, but I don’t see that as being a negative because I think the dual screens and the dual cameras take the handheld category to a new level. I see that there’s a market for both of them. As far as a price drop, I don’t know. I think that at $149, it feels like it’s still a pretty good value.
VB: There are rumors about the PS3 and 360 coming down in price by summer. Do you think the industry needs some price drops, especially with no other systems launching other than the DSi?
BM: We had the price drops on 360 in the fall and we definitely saw some great increases off that when they dropped the Pro originally and then coming into September when they dropped all three of their systems and lined them up in the $199, $299, $399 retail price point. It was a great move, especially at that time of year going into the fourth quarter. It aligned them very well with key titles that were coming not only from them but from the third-party publishers. I think that the under $200 price point was the most important one. It really signified to the consumer that they were getting to the point where it was affordable. Once you get to that under $200 retail price, it really brings in a different type of consumer. As far as other systems go, yeah, I would like to see some additional price moves. I don’t know that anything is planned. I think with the Wii, Nintendo has figured out a very unique opportunity here because they’re still at the original launch price from three years ago.
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