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Video Exec Ports to the Gamers' World

16 Apr, 2004 By: Thomas K. Arnold

For 20 years, he led Paramount Pictures' home entertainment division, steering the studio through the heyday of rental, the rise of sellthrough and the advent of DVD. Last October, Eric Doctorow, the former worldwide president of Paramount Home Entertainment, was tapped to join leading video game maker THQ's executive suite as COO. Video Store Magazine recently sat down with Doctorow to see how he's adjusting to his new role—and to compare his new line of work with his old.

VSM: Eric, you're the latest of several top studio executives—Mitch Koch of Disney is another—to be recruited by a game company. Do you believe you were brought on at THQ to bring a Hollywood perspective to the game business?
Doctorow: Of course, I can only guess at [THQ CEO and chairman] Brian Farrell's thinking. But I would think it went something along the lines, that, home video and video games are both packaged media businesses with similar issues, challenges and customers—and that the skills, experience and relationships I have developed over the years would serve me well in helping to manage THQ.

VSM: How is the corporate environment different?
Doctorow: Unlike the studios, where movie-making is the primary business and home video has to fit into their world, video games are our primary business. Therefore, THQ's operating structure and culture are built around what works for us, our customers and our industry.

VSM: Video and video games may both be home entertainment, but the whole approach to sales and marketing is worlds apart. Studios push as much product as they can into the marketplace, and you see a lot of deep discounting at retail, particularly during the first week. Video games aren't nearly as ubiquitous, nor are they discounted. Why the difference?
Doctorow: Well, first of all most front-line, triple A video game titles are priced for sale at $39.95 or $49.95, so mass market retailers are much more careful and cautious about putting live inventory on the floor. However, this is bound to change as the business moves into the later stages of the current hardware cycle.

We are now entering the mass market phase, which means consumer prices will decline for the hardware platforms, PlayStation 2 and Xbox. We have already seen the reduction for Game Cube. These lower points will help expand the market to a whole new base of consumers. In addition, competition will increase at all levels. Product will inevitably begin to move onto the retail floor, and price competition will become fierce.

VSM: Some video game executives in the past have cautioned that the video game industry shouldn't be so dependent on Hollywood for game concepts, and should work to develop more original concepts. And yet we seem to be seeing more and more games based on movies or TV characters.
Doctorow: Leading video game publishers like THQ need to have a portfolio of both original and licensed properties. In fact, some of the strongest licenses have come from movie and TV-based properties. I spoke earlier about how the business will become more mass market. One of the dynamics here will be the growing importance of franchise properties that have built-in awareness and commercial appeal.

VSM: From time to time, we see the reverse happening—a movie or TV show based on a game. Tomb Raider and Mortal Kombat are two that come to mind. Is this something the game industry would like to see more of?
Doctorow: I think all video game companies would like to have opportunities to take their games into the movie or television space. We have been working with Nickelodeon on creating a show for Tak and The Power of Juju, a property we jointly developed. We also have a number of other projects that suit themselves to film/TV adaptations.

VSM: Is there any conflict in how a game company and studio coordinate the release of cobranded product? What's working, what's not, and why?
Doctorow: In the five months that I have been with THQ I have been very impressed with the extent of our comarketing activities. In today's marketplace, attracting and holding the consumer's attention is more difficult than ever. Therefore, working together on movie and TV properties has simply become the smart thing to do. Not only that, but companies like Nickelodeon, Pixar, Warner Bros. and Disney—all companies we work very closely with—have highly developed understandings of the video game market. So we are working with companies that understand our business intimately.

VSM: What is the optimum release pattern for a game that's based on a big movie?
Doctorow: Generally speaking, we attempt to release our video games just prior to, or with, the theatrical release, and then look to the DVD release as another window to help promote the product—a second bite at the apple, if you will. This is what happened with Finding Nemo and helped us achieve worldwide sales in excess of four million units.

VSM: Now for the $64,000 question: The video game industry has traditionally hated rental, while rental dealers have argued that letting consumers try games (by renting them) before they buy actually helps sales because it lets them sample the merchandise. Is this viewpoint changing?
Doctorow: There is no question that Blockbuster, Hollywood and Movie Gallery, among others, are investing significantly into rental programs. They believe video game rental is a huge untapped opportunity, and are convinced that “try before you buy” is a powerful message.

My personal opinion is that video game rental may very well turn out to be an incremental opportunity for us. However, one critical ingredient is understanding better the complex interplay between rental customers who try and then buy, and rental customers who don't buy. In the latter instance, rental serves to cannibalize our sales business, which is a bad thing. Having said that, yes, we are talking to rental chains about increased support under the right conditions.

VSM: With your experience in home video, what changes would you either suggest or make at game companies such as THQ?
Doctorow: I have only been in the video game business for a short time and I am still learning, so I need to be careful about how I try to port my home video experience into video games. But I know that the video game business is entering a huge mass market phase, a phase that home video entered a number of years ago. Working with mass merchant retailers is distinctly different than working with specialists, and I am very proud that THQ is already known as a great retail partner for all classes of trade. However, as the business continues to grow I predict we will see mass market chains continue to push publishers to try new things. Getting product out from behind cases is going to happen, which means that source-tagging has got to happen. Freestanding floor displays for triple A product will become more common.

On another front I think you will see video games become a more accepted tie-in product for other packaged good manufacturers and even fast-food restaurants. Certainly, as the cost of developing new games goes up, the investment in marketing has got to go up, too. So, consumer advertising budgets will go up. Furthermore, there will be increased focus on all cost lines to keep expenses under control. All of these things were part of the growth in home video, and hopefully my experience can add value as we move into these new growth phases with video games.

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