Peter G (sinetimore) wrote,
Peter G

Rhythm Just Didn't Get You

They killed the goose that lays the golden eggs.

Activision Blizzard and Viacom, parent of MTV, are bitching that their music games didn't bring in the bucks they were supposed to.

We are dealing with the concept of SKU's, or Stock Keeping Units.  This is when something is subdivided.  The easiest example is Windows 7.  Windows 7 has six different versions, depending on what you are after.  So you have one product, Windows 7, but six SKU's (Home, Professional, Media Center, etc.).

Part of what drove Activision to such dizzying heights of profitability was the SKU's for Guitar Hero.  Guitar Hero had several depending on 1) what system you wanted it on and 2) what kind of peripherals were you after.  Because you were paying for more than just the game, it was money in the bank.

So what's wrong with multiple SKU's?  Simply, store hate them because it is that much more to keep track of.  It doesn't help that Guitar Hero and Rock Band have those huge bundles with the instruments.  They take up extra space.  And if they aren't selling well, you could put a display with three or four dozen games by Data Design that suck but sell as opposed to these bundles that are just collecting dust.  And that's just in the store.  The stock room?  You can fit dozens of netbooks, which are selling like gangbusters, in the space of one bundle.  If you run out of netbooks, people will get it somewhere else, costing you multiple sales.  So you are wagering what is going to move.  And with discount stores operating on such a slim profit margin, you better get it right.

So, retailers are getting dozens of SKU's.  Guitar Hero got 5, Van Halen, and other special editions.  Plus Band Hero.  Plus DJ Hero.  DJ Hero, where you don't play an instrument but get a turntable and rock the cans (did ANYONE ELSE notice that Beatmania flopped in this country?!?), is being touted as the most successful new IP of the year.  However, shortly after it went on sale, it was already being discounted.  It was expected to sell a quarter mil over the Christmas season.  It only pulled in half of that.

Today, it became official -- overkill has set in.  Activision pulled in $1.56 bil last year, and reported a LOSS of $286 mil.  Remove the music game SKU's from the equation, and they operated at a profit.  Activision is reducing the SKU's.  One Guitar Hero game and one DJ Hero game this year, that's it.  Development for the PS2 has been killed.  Mobile apps are being looked into.

How are things going on the other side of the aisle with Rock Band?  Better, but not enough.  Although the games sold well enough (one million copies of Beatles Rock Band sold by December 1) and fewer SKU's (only Beatles and Lego Rock Band games this year), Beatles Rock Band did not turn a profit in its first quarter of release and Viacom, the parent company of MTV which handles the Rock Band franchise, saw a 6% drop in revenues.  Not enough to put the company in the red, but they still aren't happy.  Harmonix has already gone through a round of layoffs, so hopefully that stops the bleeding.

Ironically, part of what nailed Viacom's Rock Band profits was Beatles Rock Band.  They put together special SKU's with replicas of the Beatles instruments for $250.  Retailers, realizing there is a recession going on and people aren't spending as freely, put together their own bundles with stock Rock Band controllers and Beatles Rock Band, bringing their prices in for about $160.  Guess which one sold better?

So it's an acknowledgment that maybe they went a little overboard, and the hunt for the next big thing is officially on.
Tags: haven't we suffered enough, important life lessons, video games
  • Post a new comment


    Anonymous comments are disabled in this journal

    default userpic

    Your reply will be screened

    Your IP address will be recorded 

  • 1 comment