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I've previously written about how the long term trend of media advertising expenditures does not bode well for the profitable sustainability of all players in the legacy and even newer media. With ad expenditure as a percentage of Gross Domestic Product growing only at about the same rate as the economy, the ad pie is being split into ever more smaller pieces. Radio took share from newspapers. Television took share from radio and more from newspapers. Cable television is vacuuming dollars from broadcasters. The Internet is sucking share from everyone else.
So it cannot be good news for many in the media biz to learn that there is yet another player having some success at grabbing for another few billion dollars from the ad budget. This is the video game industry.
Now, there might be some hesitancy to include the $10+ billion video game business as part of the media industry. But that is too short sighted -- director Peter Jackson has invested a reported $30 million to develop a "King Kong" video game as an ancillary to his movie. And it would be beside the point. Folks who use the media for advertising, such as Reebok and Castrol, are already spending $70 million this year to get their name or products into video games. And a recent study catalogs the reasons why this is likely to expand eight fold in the next four years. (Note that the study comes from Nielsen Entertainment and video game publisher Activision, not exactly disinterested parties).
Video game demographics are highly skewed right now with 18-34 year old males. According to the study this group spends more time playing video games than watching prime time television. So while television producers are trying their hand at adding product placement to their largely passive entertainment, video game publishers can offer consumer goods providers a large (20 million) targeted audience of players who are interacting with and deeply involved with what is on he screen. For example, in the "Law & Order: Justice is Served" game a murder victim was about to sign a contract with fashion designer Lacoste. In a forthcoming Atari game called Tycoon City, high end watch maker TAG Heurer and audio purveyor Bang & Olufsun will showcase their stores. Daimler Chrysler's Jeep brand is paying to be part of Activision's "American Wasteland" game.
The Nielsen study claims that in experiments with control groups people who saw certain ads while playing a video game were significantly more likely to rate it favorably than those who saw the same game without the ad. Similar control group experiments with conventional television show product placements did not find any difference between groups in how the advertiser was rated.
How much and how fast advertisers start allocating their ad budgets to video games is less important than the fact that here is another example of how the media universe is changing as a result of the pervasive adoption of digital technologies. In another context, the Kinks (in Lola) sang "It’s a mixed up muddled up shook up world." Just when you think you might have figured it out, another alligator jumps out of the swamp. There are no safe corners in the media jungle.
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