VIDEO GAME REVENUES ARE PLAYING CATCH-UP

Retailers are optimistic about the future of video game rentals, but wonder how long it will take for revenues to get back to where they were in the heyday of 16-bit systems.Some are investing in rental product for new platforms like Sony PlayStation, Sega Saturn and CD-ROM for personal computers, but others are just waiting to see how the market will develop. They will be following very closely the

Retailers are optimistic about the future of video game rentals, but wonder how long it will take for revenues to get back to where they were in the heyday of 16-bit systems.

Some are investing in rental product for new platforms like Sony PlayStation, Sega Saturn and CD-ROM for personal computers, but others are just waiting to see how the market will develop. They will be following very closely the fall release of the Nintendo 64 system and sales results from price cuts to under $200 on the Sony and Sega systems. "With the technology changing so quickly, everybody is looking ahead," said Tom Hembree, vice president of operations at K-VA-T Food Stores, Grundy, Va. K-VA-T is renting software for the Sony PlayStation, he noted.

"We will keep buying games as long as the rentals hold up," he said.

Games are still renting for Nash Finch Co., Minneapolis. "But it is not anywhere near the levels we had a year or two ago," said Clifford Feiock, video coordinator.

"We are certainly in the process of rethinking our options there," he said. One option could be CD-ROM games for rental. Nash Finch also is carrying Sony PlayStation games, he noted.

The new platforms will help rebuild the game business, he said. "But it's a slow process. It is not going to get back to what we had previously overnight. It is going to take some more time." Like many other retailers, Feiock wonders how the game industry let all the business they had with 16-bit systems get away so quickly. "You have got to question their marketing strategies. It makes no sense whatsoever to anyone I have talked to," he said. "Everyone in the game industry is putting all of this energy into the new formats because they are there," said Randy Weddington, video specialist at Harps Food Stores, Springdale, Ark. "While they are excited about them, I'm not sure how much the general public will get excited about them." Weddington would like to see more good 16-bit games come on the market. "I would like to see a re-evaluation of what they are doing, but I don't think they are going to be willing to do that."

So far, Harps has not put in software for the new systems, he said. "But it's still a good viable market for us, even without carrying the new formats. I'm looking forward to CD-ROM, especially in some of our more upscale market areas. That's where the real growth potential is," he said. Because of all the noncompatible systems that have been introduced in the last two years, "the game industry has lost a lot of its credibility with the consumers, and certainly with the retailers," said a video executive with a southwestern chain, who asked not to be identified. The chain is still only carrying games for the two 16-bit systems, Sega Genesis and Super Nintendo, said the executive. The Boogaart Retail Division of Fleming, in Concordia, Kan., is renting both hardware and software for the Sony PlayStation system, said Matt Dillon, video director. "It is going great guns. It has been excellent for us," he said. While the numbers aren't what they used to be for 16 bit, "we are probably getting close. It's really doing well for us," he said. But even with PlayStation doing well, the future of the game business is very difficult to project. "PlayStation is headed in the right direction. I think you are going to see more computer and CD-ROM games. We're getting real close to getting involved with those products, too."

"Games will remain an important and strong part of our video department," said Jeff Olson, video coordinator at The Copps Corp., Stevens Point, Wis. Copps will start bringing in software for the new Sega and Sony systems, he said. Olson also is watching the release plans of the Nintendo 64 system very closely. "I think that will be a big one," he said. But Nintendo may have waited too long to introduce its new system, said Rick Ang, buyer at Video Mart, Sacramento, Calif., which racks video departments in 17 Bel Air supermarkets in the Sacramento area. Many consumers who were looking to move up from 16 bit have already committed to the new Sega and Sony systems, he said. Bel Air has brought in the Sony and Sega products for rental, but with "mediocre" results so far, said Ang. He is hoping for a better outcome when results of the lower hardware prices kick in. Meanwhile, Ang continues to investigate CD-ROM for rental, but is concerned about damage to the disks. "Since it is relatively inexpensive to make them, there should be some sort of no-fault exchange policy on defectives. We see that as our biggest concern," he said. Rentals of games for the new systems and sales of low-priced CD-ROM product is helping retailers replace lost 16-bit revenues, said David Balfour, multimedia marketing manager at Ingram Entertainment, La Vergne, Tenn. "The Sony PlayStation and Sega Saturn have done quite well for us and for our customers," he said. The new Nintendo 64 system also will be a hit, said Balfour. "Nintendo has a tremendous marketing vehicle in place and should generate a lot of consumer demand. We are very excited about Nintendo 64," he said.