Entertainment software posts 28.8% sales increase - discount houses

Mass merchants and software companies are responding to consumer demand for computer applications that go beyond spreadsheet and word processing software to the fun of simulated sports, adventure/role playing software, and a variety of puzzles and games.

In addition to the obvious appeal of playing sophisticated games on home computers, some mass merchants who are newcomers to the hardware side of the category see entertainment software as a good way to introduce shoppers to their new and broader assortments. This software could also prove to be a stepping stone to other purchases of educational or productivity software, which consumers might initially have thought were beyond their grasp.

During 1992, entertainment software racked up a 28.8% sales increase, with $341.8 million, according to the Software Publishers Association (SPA). The range of product choices runs the gamut from flight simulators, golf simulators and entertainment packs with games like TETRIS and TicTactics from Microsoft, to computer strategy games, puzzles, adventure games and programs that allow the user to create individualized game conditions. Another component that spans business applications and pure entertainment is software from Amaze Inc., which includes sophisticated daily planners that incorporate the fun of licenses such as The Far Side, Cathy and Trivial Pursuit.

Several mass merchandisers have already expanded their software assortments to include entertainment titles and others have begun testing customer responses. These chains include Wal-Mart, Kmart, Caldor, Target, ShopKo, Circuit City, Silo, most of the larger warehouse clubs, and office supply specialists such as Office Depot and Staples.

"Mass merchants have made a very strong commitment to the PC products category and whatever will drive consumer sales. We are seeing entertainment software as the first step that these retailers take to attract new customers to that category," said Casey Hughes, vice president of consumer products division for Merisel Inc., an El Sagundo, Calif.-based distributor of computer hardware, software, peripherals and accessories. "Entertainment software offers the lowest learning curve and the lowest fear factor for consumers who want to work their way up to productivity software."

Aside from the actual enjoyment of playing sophisticated computer games, designed for both adults and children, Hughes said mass merchants are using entertainment software as a "shoehorn" to get consumers into the product category. Once these consumers have become comfortable with their computer hardware and have come to view the mass merchant who first sold them entertainment software as a destination store, Hughes predicted these retailers will be able to move them into more sophisticated, productivity software, which he said will be more significant for long-term sales.

Typical chain discount store assortments range from under $20 to as high as $65.99, said Hughes. "For the first six months after entertainment software has been added to the mix, the average ring will be under $50, and a lot of businesses will be at the $19.95 price point, he added. With competitive pricing during the initial six months, margins may be no higher than 18 points, but will grow to the 22% to 25% range with a broader software assortment and increased consumer awareness, he said.

Software companies such as Microsoft and Walt Disney Computer Software draw parallels between entertainment programs and the successful entry of prerecorded video into the mass market retail sector. "As the audience grows, as the penetration grows, and consumers realize how easy this software is to use and enjoy, titles will be selling in the millions," said David Rech, national sales manager for Walt Disney Computer Software.

"People want to use their computers for both entertainment and productivity, and entertainment software is a nice, easy way to learn how to get into Windows and understand how to manipulate a game using drop-down Windows," said Meg Metzger, mass merchant marketing manager for Microsoft. "This software is another medium through which entertainment can be delivered--first there was television, then VCRs, and now entertainment software. It is a medium that will be around for a long time."

The newest entertainment software features sparkling graphics and menu options designed to challenge the user. Microsoft golf for Windows, for example, has photo-realistic and topographically correct simulations of actual PGA championship courses, and allows the player to exercise control over the swing of the club. The flight simulator allows choice of aircraft and options in runways and other terrain. Entertainment packs for Windows, in volumes one through four contain several types of card games, puzzles, simulations and screen savers.

Disney software is divided into three categories with two Disney lines designed for different age groups, and Buena Vista Software with off-beat titles like "Unnatural Selection" and "Dog Eat Dog." At a lower suggested retail of $29.99, Disney has a Roger Rabbit Game and Arachniphobia for children and young adults. In the $49 to $59.95 range, Disney offers "Stunt Island" for the flight simulator buffs, who can create their own playing conditions and special effects. Buena Vista titles carry the same suggested retail prices and have games dealing with office politics, zen-like strategy games and the ability to clone genetically produced creatures, to appeal to a somewhat older, more sophisticated audience.

At Amaze Inc., Derek McLeish, vice president of marketing, describes its software line as a bridge between business and entertainment. "What makes our daily planners different is the marriage of content and application. We make products that are fun as well as functional." The Trivial Pursuit Daily Planner, Sports Edition, presents users with sports trivia when they turn on their computer. The Far Side Daily Planner includes a new collection of 365 Gary Larson cartoons. Each is available for Microsoft Windows, DOS and Macintosh versions.

McLeish said Amaze Inc.'s customer demographics vary according to retail sector. "In traditional computer stores our customer base is primarily male. In office supply superstores there are more women looking at software because they are also looking at stationary. In discount stores there is more of a mix, but about 75% of those who purchase 'Cathy' software are females."

He also credits lower software prices and increased performance features with helping drive more turns and expanded shelf space in the mass market.

At Microsoft, Metzger said, "As a trend, retailers are definitely expanding the space they allocate to software. Most of the titles in discount chains are in the electronics area. Wal-Mart and Kmart have a separate consumer electronics department. Sears office centers have a whole separate office center, including entertainment software. Caldor has just signed on, and ShopKo and Target are also in the business."

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