Why Gaming could be the “Gateway Drug” of Choice for Retailers and CPG

In This Edition:

• Video Gaming = $217B annually with a +13% CAGR

• There are approximately 3.09 billion active video gamers worldwide. That figure has risen by over 1 billion in just seven years (that's a 32% increase). And the number of gamers is expected to hit 3.32 billion by 2024 (explodingtopics.com)

• $200MM (est.) Starfield Launched Today

• The future for Starfield is multi-player

• Gaming is a “Gateway Drug” to Omnichannel’s future for CPG and Retailers

There are 3.09 Billion Active Video Game Players Globally…

If you’ve never heard of “Starfield”’, never fear you are not alone and probably can count yourself as one of the 5 billion earthlings that do not play or have any interest in video games. Notwithstanding the remaining 3.09 billion who ARE gamers while many may be casual gamers themselves and still have yet to have heard of “Starfield”, one of the most highly anticipated video games in a generation. The reason it is so important to the Consumer Packaged Goods (CPG) and Retail industry is that video gaming is like a gateway drug to the future of omnichannel with its massive digitally enabled 3 billion global participants.

Starfield Slaps Hard…So Far

I nearly had my head blown off by a gang of pirates in the first 15 minutes of gameplay on Bethesda Softworks’ new next-gen role-playing game (RPG), Starfield. Fortunately, my “dusty”, as the nickname local miners are called on the moon Vectera, survived after I took out four of the pirates following some quick heads-up play in snatching up one of the dead pirates' blasters and blasting my way to survival hood. Following over 25 years in development, Starfield was released today as one of the most highly anticipated and expensive developed video games of all time and there is a good chance some of you have already played it and you may have co-workers or direct reports who were dipping out of work today to soak in some Starfield.

"Welcome to Argos Extractors. We're a mining company that's been operating on Vectera for over 20 years. We're looking for a new recruit to help us explore a recently discovered deposit of Beryllium", says your Starfield character’s initial boss, Supervisor Lin. I played over an hour of Starfield today and could have easily played more if writing this blog was not calling.

The Good News

The good news is twofold for gamers: the wait and anticipation is over and part of that anticipation concerned whether the game would deliver, whether there would be bugs, etc. I can categorically say I experienced zero bugs and so far the game looks and plays fantastic!

What Makes Starfield Special?

What makes Starfield so intriguing is its potential broad impact across the retail and CPG industries. Starfield’s exact cost of development is not known, but in 2022, David Reitman, a credible industry person who has worked with Accenture, revealed that Starfield's budget was around $200 million. Bethesda Softworks is known for its role-playing games, which are known for their open-world gameplay, their deep stories, and their complex characters. Bethesda is not new to building and releasing critically acclaimed and award-winning video games as they’ve been the developer behind other well-known RPGs: The Elder Scrolls fantasy RPG and the post-apocalyptic Fallout RPG series. Starfield is also the first new gaming universe created by Bethesda Game Studios in seventeen years, which provides some semblance to how big an endeavor this is. Unlike a motion picture where the studio carefully produces and directs the viewer's attention to its own precision-made sets and CGI, a video game of Starfield’s magnitude is completely immersive to the user and an attention to detail to every corner of Starfield’s 1000 unique planets has to be produced and directed like its own individual movie set.

The Microsoft Advantage

In 2021, Microsoft acquired ZeniMax Media, the parent company of Bethesda Softworks. This acquisition made Bethesda Softworks a wholly-owned subsidiary of Microsoft. The acquisition also enabled Microsoft to launch Starfield as an exclusive, meaning it is not available on non-Windows or Xbox platforms. This provides Microsoft’s next-gen Xbox gaming platform, a competitive advantage versus its closest competitor Sony’s PlayStation 5. Microsoft also did something unique in building out their Xbox online service to have a cloud gaming beta service. What this means is that to those mortal souls who do not have an Xbox or PC with the latest generation of video graphics cards and RAM memory, you can go online now and pick up a $16 per month subscription to Xbox Ultimate Game Pass and get access to play Starfield online in the cloud on Xbox’s servers. Net, you can play Starfield on an Apple Mac, PlayStation 5, or your mobile phone given they meet some less rigorous requirements to access the cloud and you have a good internet connection. The Game Pass is a game changer and has the potential to make Starfield a great test market for the implications of the future of video gaming on the CPG and retail industries.

Gaming’s Impact On CPG

The video game industry has already had a major impact on the CPG industry. In recent years, there has been a growing trend of CPG companies partnering with video game developers to create promotional tie-ins. This is because video games offer a unique opportunity to reach a large and digitally engaged omnichannel audience.

For example, in 2022, Coca-Cola partnered with Epic Games to create a limited-edition Fortnite beverage called the Zero Sugar Byte. The beverage was inspired by the game's in-game energy drink, and it was available for purchase in select markets. The partnership was a huge success, and it helped to boost sales of both the beverage and the game. I am guessing by the way my Starfield character was offered a new sporty in-game Chronomark watch after disposing of the pirates in the first half hour of the game that not surprisingly a replica of that watch is already a part of a $300 Starfield Constellation Edition.

Higher Expectations = Higher Growth

Expectations are even higher for Starfield having a major impact on the CPG industry. The game is being marketed to a wide audience, and it has generated a lot of excitement among gamers. One way that retailers have adapted is by offering a wider selection of video games. In the past, video games were only available at specialized stores, such as GameStop. However, today, many major retailers, such as Walmart, Target, and Best Buy, carry a wide selection of video games.

Gaming’s Impact on Retail

In addition to selling video games, retailers are also getting involved in the gaming industry in other ways that take advantage of the omnichannel nature of the sale. For example, Kroger developed the "Points-Rewards-Plus" gamer loyalty platform. This platform allows Kroger customers to earn gamer points via purchasing participating products, brands, and Kroger fuel, which can then be redeemed for video games and video game gift cards. Here’s a gamer tip: You can buy a digital Xbox Ultimate Game Pass gift card for $2 off the regular price online at Kroger and you get the benefit of additional bonus multiples of fuel points that can be used to reduce your fuel bill at participating Kroger and Kroger owned convenience fuel stations.

Retailers have also started to offer exclusive deals and promotions for video games. For example, Amazon Prime members often get early access to new games. Prime has its own gamer website dedicated to providing in-game content and bonuses, and Target sometimes offers discounts on pre-orders.

According to nichegamer.com, 94.2% of video game sales in 2022 were done digitally online versus physical or boxed sales in-store. Despite the changing purchase dynamics, there will be numerous options for retailers to cash in similar ways to a big-budget blockbuster movie through the sales of after-release physical merchandise in the form of everything from action figures to Starfield branded merchandise and in-game content.

The Size of the Prize

According to Grand View Research, the global video game market size was estimated at USD 217.06 billion in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 13.4% from 2023 to 2030. According to Expanding Topics, the 3.09 billion active gamers are expected to grow to 3.32 billion by 2024. Also, 55% of males are gamers and 52% of gamers subscribe to at least one gaming service.

The Future for CPG and Retailers

The future for CPG and retailers in gaming is where multi-player gaming and omnichannel collide. Gaming is like a gateway drug to omnichannel’s future because its audience is already so digitally engaged and growing. Multi-player gaming is one of the fastest-growing gaming segments led by games like Fortnite, Call of Duty, and Grand Theft Auto. The appeal of these games is the “social” aspect. Growing up in the ‘80s, we would occasionally get together with enough friends physically at the one person’s home in the neighborhood who was fortunate to have an Atari or Commodore 64 AND enough game controllers to allow more than two people to play. This was a rare occasion that required a great deal of planning and patience. Now with multi-player games, gamers can play with family and friends anywhere at any time across an internet connection and if there are no family and friends available there is always a ready-made market of “pickup” games with random players. Plus most of these games allow cross-play, enabling gamers to play with other gamers on different platforms and thus literally making gameplay platform agnostic and ubiquitous.

We also can't overlook the exploding growth in eSports. It presents itself as a viable platform, particularly as almost every university now has multiple eSports teams and many celebrities and athletes are involved in ownership of eSports teams.

How to Win

The key to CPG and retailers winning in gaming is brand authenticity. Fortunately, the gaming industry has mastered this to some degree, learning through trial and error over the years the importance of not presenting gratuitous branding opportunities that only serve to alienate and anger their core gamers. Net, the omnichannel gaming brand occasion needs to have a good alignment in brand and gaming purpose.

For example, motorsports multi-player game, Rocket League incorporates new “drops” of in-game prizes and game add-ons with each new season. This type of refreshing of the merchandise helps to drive retention and keep gamers engaged. “Seasons” are a multi-player gaming mainstay allowing for a reset period where either a new storyline or set of events is introduced to refresh the game base storyline or purpose and Rocket League will tie-in drops with cars themed to movies like they did for the Back to the Future anniversary, calendar seasonal ideas like Halloween decor for your car and popular “walk-up” songs for when you score.

The same won’t hold true with a space RPG multiplayer game like Destiny because it is set in a futuristic universe where none of our brands exists. As a result Amazon and Destiny partner each month to provide free in-game content via Amazon Prime’s gaming page that includes in-game content like decorative armor for your player and exotic emote bundles that allow gamers to virtually greet each other in-game in unique ways. The win for Amazon is the gaming package is included as a benefit to being a Prime member. Plus they are able to build a relationship with gamers who in some cases are children in Prime households who someday could be potential Prime members themselves.

Below is a chart showing some of the retailers and the specific gaming platforms they are associated with. Net, there are a variety of ways that retailers are getting involved in the gaming industry. This is a trend that is likely to continue, as the video game industry continues to grow.

The video game industry is massive and expanding at stratospheric rates, and retailers and CPGs are taking notice. By adapting their businesses to meet the needs of gamers, the industry can tap into this growing market and not only attract new customers but also build deeper relationships that will move potential buyers further through the purchase funnel from being aware to being outright brand evangelists.

#videogaming #CPG #starfield #Microsoft #xbox #playstation #bethesdasoftworks