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TOP 100: Video Games

10 Apr, 2003 By: Kurt Indvik

Video games are a segment of growing importance to rentailers' as they continue to build the category into a major revenue stream.

At Blockbuster, chairman and CEO John Antioco has stated publicly in the past that the chain's goal is to have video games grow to 20 percent of total chain revenue in the next several years.

While domestic games revenue (shown below) for Blockbuster eclipsed the nearest competitor, the company also reported worldwide game revenue of $529.3 million for 2002, a 15.6 percent growth, according to its most recent 10-K SEC filing. Worldwide, game sales alone for the chain grew to $164.7 million, quadrupling in size from 2001's $31 million.

The company invested in growing its video game inventory in 2002, and by year's end, games comprised almost 13 percent of the typical store's product mix.

“We believe our investment in additional product in this category, although it did cost us margins [in 2002], positions us well to be a leader in the game sales and rental market,” said Larry Zine, Blockbuster's EVP and CFO, earlier this year.

Video Store Magazine market research estimates Hollywood Entertainment brought in $211.1 million in video game revenue in 2002, totaling 14.4 percent of its total revenue.

In the fourth quarter of 2002 alone, Hollywood rolled out 104 new Game Crazy store-within-a-store video game departments in its stores and opened 33 new Hollywood video outlets, four of which had Game Crazy departments. By year's end, Hollywood had 273 Game Crazys, with a plan to open at least 300 more departments this year.

According to Mark Wattles, Hollywood's CEO, a Game Crazy in its first full year of operation generates about $400,000 in revenue and $48,000 in profit. In its second year, the average department takes in about $500,000 and $63,000 in profit.

Hollywood's same-store video game revenue increase of about 20 percent in fourth-quarter 2002 was “driven by our focus on software, instead of hardware, with a strong emphasis on the higher-margin used-game business,” Wattles said during an analysts' call.

Meanwhile, over at Movie Gallery, Video Store Magazine market research shows the chain rang up $63.4 million in game rental and sales revenue in 2002, for 12.9 percent of its total revenue. Late last year, the company reported it had expanded its game facings by 15 percent during 2002 and was planning an additional $2 million investment in video game inventory going into 2003.

Rentrak has confirmed revenue-sharing deals with 13 video game suppliers to date. Unconfirmed reports in March stated that Rentrak had solidified a deal with Infogrames to offer its titles beginning in May, including the much anticipated Enter the Matrix game.

To read about the Supermarkets, click here.

To read about the Top Video Game Dealers, click here.

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