Sunday, October 17, 2004

SAN JOSE, Calif. - Roar down city streets in the upcoming “Need for Speed Underground” racing game and you’ll see a Best Buy store amid the skyscrapers along with bright billboards hawking Cingular Wireless, Old Spice and Burger King.

The fictional landscapes of video games are increasingly being dotted with product placements, pitching everything from athletic shoes to movies. Advertisers soon will be able to update the ads over the Internet whenever they want, long after the games are sold.

The plugs reflect a growing business reality: Video games are stealing eyeballs from movies and television, where product placement long has been a staple.

TV viewership among men ages 18 to 34 declined by about 12 percent last year while that group spent 20 percent more time on games, Nielsen Media Research reports.

Video games attract not just hard-core gamers, but people of all ages and more women than ever. In the United States, overall sales reached $10.7 billion last year — more than movie box-office receipts — and is expected to reach nearly $16.9 billion in 2008, said market research firm DFC Intelligence.

Revenues from game advertising worldwide are following the migration from remote control to joystick, expected to grow from $200 million a year today to $1 billion in 2008, predicted DFC President David Cole.

“If the audience is there, the advertiser will be there,” said Anthony Noto, a media entertainment and Internet analyst at Goldman Sachs.

Case in point: The marketing budget for ads in video games at DaimlerChrysler AG’s Chrysler Group was zero four years ago. Now it is more than 10 percent of the division’s overall marketing budget, planting Chryslers, Jeeps and Dodge cars in more than a dozen video games while spending on television and print ads has dropped.

“When I was a kid, I used to run downstairs to watch Saturday-morning cartoons, but my sons wake up and run downstairs to play video games,” said Jeff Bell, a Chrysler Group vice president.

In its first experiment, the automaker invested six figures a few years ago so players of Tony Hawk’s “Pro Skater 2” game would have to do rail stunts over a Jeep to get points, or go through game levels decorated with Jeep billboards.

Judging the amount of eyeball time Jeep got from that investment was just a rough calculation. In the upcoming Tony Hawk’s “Underground 2” game, Jeep hopes to get a better measurement: Players who want game upgrades will have to go to Jeep’s Web site to download them.

Today, Massive Inc. will start what is believed to be a first-of-its-kind video game advertising network, allowing marketers to deliver new ads into console and PC games via an online connection.

Billboards in a subway scene could feature a new movie trailer one day and the hottest new energy drink the next. Promotions could be tailored to geography, so that players in New York and California might see different versions of a car ad.

Massive’s service also can track the viewing time each ad gets — a key measurement advertisers traditionally use when paying for television spots.

In the past, the value of product placements in video games was difficult to gauge, based on predictions of how many units would sell and how often the ads would be viewed by players. Deals were cut somewhat randomly between game publishers and advertisers, many ending in cross-promotional, no-cash transactions while others would cost advertisers anywhere from three-digit to seven-digit figures.

“It’s been like the wild Wild West up until this point,” said Jay Cohen, a vice president at game publisher Ubisoft Entertainment Inc. “But now it’s coming to a critical mass — advertisers keep coming to us saying, ‘We want in. How much is it going to cost?’ Without those [advertising] metrics, we can’t go about it successfully or fairly.”

That’s why Ubisoft plans to use Massive’s technology in the next sequel of the popular Tom Clancy “Splinter Cell” series, due out in March.

Capitalizing on the same advertising trend, Nielsen Entertainment is working with game publisher Activision Inc. to start a game-rating service similar to its existing TV-ratings system.

“It’s a natural progression for the gaming industry to create standardized metrics to help everybody know the value of ads in games,” said Matt Tatham, a Nielsen Entertainment spokesman.

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