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Special Reserve

Thu 20 May 2010 7:00am GMT / 3:00am EDT / 12:00am PDT
Retail

Port Plexus COO Marko Hein explains why Special Editions have a strong future at retail

Earlier this week Port Plexus announced that it had hired former Nintendo, THQ and Bigpoint senior exec Marko Hein to its ranks, as COO, with the aim of expanding its Special Editions business in the games industry.

Here, Marko himself explains more about the company's ideas, why Special Editions could be standard in the future, and how the music and film businesses could be next in line.

Q: You've plenty of experience in the industry - what draws you to a company like Port Plexus?

Marko Hein: Many people have asked me, after Bigpoint - which was completely concentrated on the online business without any physical boxes - what my reason is to move. I've preached that online is the future, and gone to a classical company that's producing boxes...

But that's actually very easy to explain - yes, I see the future as online, and I think online distribution and gaming will become increasingly important. But nobody thinks that physical distribution will go away completely, so this means that you need to provide something of greater value to customers than you're doing now.

I think the Special or Collector's Editions of today could become the standard editions of tomorrow, because you have to differentiate your physical product from the digital download or online game. There's a certain need to provide more additional value to your goods, to stand out against digital distribution in the future.

Q: So you think that the trend towards digital distribution for games will continue?

Marko Hein: Exactly - when you look at the numbers from the latest PriceWaterhouseCooper report for the entertainment industry, you can see that for games, movies and music, physical distribution is declining year-on-year, while the digital distribution of those products is on the rise.

Saying this, the boxed product has a problem, which is that it doesn't necessarily provide additional value to what you get when you download a game. That means that if your company is in the boxed product business, you need to think how you can provide additional value that doesn't exist in the digital download.

Otherwise, when you can download the product for 10 or 20, there's no need for the consumer to pay exactly the same price for the box.

Q: Well, if the publisher can bring a digital game to market more cheaply, while also using the same conduit for ongoing content or support, and also building up communities of its own - is there any need for boxed product at all? What's the draw for them of Special Editions?

Marko Hein: That's a very good point. When we brainstormed last year specifically about the strategy for Special Editions we saw so many different angles that a Special Edition could provide - they can help acquire new consumers who aren't yet into the games, while customer retention could be very important too, in reactivating a certain consumer base.

Then it also gives a certain value to your brand - when you have a big brand such as World of Warcraft and you have a loyal customer base, you can bring added benefits by providing a special boxed version to those customers. A Collector's Edition could, for example, extend the life cycle of a product, starting from pre-sales and the announcement of a special box, to the end of the life cycle - when you can probably pick it up again by providing certain editions with exclusive content, digital or physical.

So coming from different angles, these Special Editions can provide strategic value to the company, and I only see a few publishers really making use of these Editions in a really clever way right now.

Q: You talk about attracting new consumers to games - how would Special Editions do that?

Marko Hein: If you look at the current Special Editions, they're mostly aimed at the core audience - you have your classic game in there, and then probably a figurine, or whatever.

But imagine you have a game like The Sims, which has a certain heritage. Some people who might be new to the brand would never have experienced the game before. Or the German game Anno, which is very complex, and might need a certain type of introduction to the game - so you could provide an Entry Edition, or Beginner's Edition, that explains the game in a completely different way by providing either the previous games in the series, or maybe a book or strategy guide that helps the player coming fresh into the brand.

Therefore, people who might have felt before that a game was too complex, or that it was too far into a series, if they see a boxed set that gives them the heritage, or the help to get into the game - that might be a trigger to getting new players on board who have previously shied away from the franchise.

Q: I got into Europa Universalis III with the Special Edition, thanks to the strategy guide that was included... So who is currently putting Special Editions together - is it publishers internally, and is it expensive?

Marko Hein: Well, that's the point - there's not currently an agency that really provides the full service. Normally it's triggered by the marketing guys who want to do something special from the marketing point of view. They come up with the idea, and have some sense about what they'd like to have in the package - they go to the production guys in their company, and there's a certain overlap between the disciplines within that company.

They might come up with a figurine, or other wilder ideas, and a price range - but the marketing guys, those people that came up with the idea in the first place, often have little idea about the costs of the materials. So they come up with wild ideas that could never be achieved...

We see our role therefore as providing a certain service - the publisher would come to us, because we have the expertise on price of materials and strategy, while they have the product or brand. We would then work on a plan that we think would be valuable for that brand or strategy.

In the best case the publisher would come to us with a strategic goal, and we go back with a briefing of the product, and different ideas on an 'edition strategy' that fits within the price range the publisher would like to invest per product.

We'd throw around some ideas, work on designs and maybe make up a prototype - and then suggest those ideas to the publisher. We've done that already - we went to one of our second meetings with six boxes, which was what their Collector's Edition could look like.

Q: One of the recent games that stood out for extras was Modern Warfare 2, with its night vision goggles... but that was a high price point, although offset by the dedication of the Modern Warfare 2 fanbase. Will that core, dedicated gamer remain the main portion of the Special Edition customer?

Marko Hein: I think it's the most obvious one - but everything is obvious when it's standard. Nintendo used to be about hardcore until Miyamoto came along and made something like Wii Fit - the whole market changed.

I think something similar could happen when it comes to the design of physical product. Currently when you think about Special Editions you immediately think about the hardcore users and how to provide something for them that can go on the shelf.

But the ideas we bounced around for new consumers, like the life cycle extension for example - there are some strategic ideas you can come up with. That's why I don't like the term "Collector's Edition" too much, because it pigeon-holes these products. We think there's a lot more to it than just doing something for collectors.

Q: Some Special Editions are very expensive, and are priced according to a target market - but what do you think the sweet spot prices are? Is there even a maximum price, and if you're looking at an edition strategy, you're looking at multiple price points?

Marko Hein: Yes - we did some research with publishers to find out their business needs, plus we conducted a larger research project looking at what customers were willing to spend on packaged goods. What we found was that the average amount that people are willing to pay extra was up to about 10 - that's the amount people were saying they'd pay for a Collector's Edition.

Nevertheless we see there are certain brands and products that have such a loyal customer base, like World of Warcraft for example where people are so crazy about the game, that it's definitely worth creating something with a much higher price point for a smaller audience.

That's not a mass market product any more, but for a certain type of audience you could get up to 100-200 price points if necessary - but that depends on what a publisher wants to achieve.

Q: Merchandising of games, which has only really been executed well by a small number of companies, is only a small step away from Special Editions, it seems?

Marko Hein: Well, in a way that's what we're doing - although we're not going out and saying that because it's hard for us to explain what our business is in just a few sentences. But at the end of the day we are in merchandising, because everything that goes into the package, like figurines or other items, is merchandising.

Q: Many people point to the future of bricks-and-mortar as being the natural home for Special Editions and merchandising - what's the response from retailers to your plans, and how much support is there?

Marko Hein: Actually the retailers are very interested, because they also see the threat of digital distribution - they're keen to have the classical distribution system developed a bit more. And they also want to have a unique selling point against other retailers, which is why some are doing Special Editions just for themselves.

We had one innovative solution last year - an Individual Edition of Drakensang, which we created for dtp here in Germany. It was the very first worldwide Individual Edition of a videogame - when a customer bought the game from Amazon, you entered your name during the purchase process. The box would arrive with your name tag on it, in the manual and also in the game if I remember correctly - so this game was exclusively created for you, with your name on it.

When you think a little bit further, you see the opportunities for little things - something for clans, or guilds, or other groups. That's something we feel could create real additional value for games.

Q: So how does the future of the Port Plexus business look at this point?

Marko Hein: Well, when you think about the future growth, I always define it as horizontal and vertical growth. By vertical I mean taking what we're doing now, mainly with clients in Germany, to the next level - working with European headquarters in the UK, or global headquarters in the US, and trying to expand the business in the games industry.

By horizontal growth I mean doing the same kind of thing for other entertainment sectors - when you look at the film or music businesses, they have the same type of needs, because digital distribution produces exactly the same issues for them - sometimes more important.

So we'd like to provide the same type of strategic design and production service for other entertainment sectors.

Marko Hein is COO of Port Plexus. Interview by Phil Elliott.

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