Just like Communism, everyone wins when you share the wealth!Rentrak Launches Revenue-Sharing for the Videogame Rental Industry
Groundbreaking Agreements with Four Videogame Publishers Promise Increased Rentals and Sales
Productive Negotiations are Under Way with 15 Other Publishers
PORTLAND, Ore., Nov. 12 /PRNewswire-FirstCall/ -- Rentrak Corp., the pioneer of revenue-sharing in the movie-rental industry, today announced landmark agreements with four videogame publishers to provide titles on revenue-sharing terms to independent retailers. These unprecedented agreements signal the start of a migration to the revenue-sharing model that has proven so successful for movie rentals and offers the potential to spur enormous growth in the videogame industry. "We're extremely excited about the opportunities revenue-sharing opens up for everyone in the videogame industry," said Chris Roberts, vice president of sales for Rentrak. "After analyzing the numbers, publishers recognize that they could generate a significant increase in product placements by making their titles available on revenue-sharing terms. By giving more customers a chance to play their videogames, publishers hope not only to produce incremental revenues from rentals but, more importantly, to drive increased sales. That prospect motivated the first four publishers to sign revenue-sharing agreements with Rentrak and prompted the promising negotiations we're currently conducting with 15 other publishers."
"Revenue-sharing answers an overwhelming demand coming from both independent retailers and larger chains alike," said Paul Rosenbaum, chairman and chief executive officer of Rentrak. "Growth in today's videogame-rental industry is being constrained by factors similar to those that hindered the movie-rental industry in the mid-1990s: the high wholesale cost of the product and the unpredictability of demand. The result is that most independent retailers can't afford to stock enough games to serve their customers, as we learned from a study of videogame-rental transactions in 3,000 North American video stores. Revenue-sharing breaks through the barriers to growth by lowering the initial investment, enabling independent video retailers to bring many more videogames into their stores -- and many more publishers to place products on video-store shelves."
Every year, videogame publishers generate hundreds of new games to capitalize on the growing installed base of Sony PlayStation®2, Microsoft Xbox™, and Nintendo GameCube™ and Game Boy® platforms. But with no way to forecast demand for games that typically carry a wholesale cost of $45 each, the average video retailer manages financial risk by purchasing only one or two copies of six to 10 new videogames each month. Would-be winners may never appear on retail shelves or be stocked in sufficient quantities to fully capitalize on consumer demand.
"Revenue-sharing addresses both the risk for retailers and the lost sales opportunities for publishers," said Roberts. "To provide titles to independent retailers on a revenue-sharing basis, Rentrak negotiates an attractive upfront fee and an equitable split of rental revenues between retailers and videogame publishers. We estimate that revenue-sharing could help the rental market grow from less than $1 billion in 2002 to over $2 billion annually in 3 to 5 years if this model is adopted enthusiastically throughout the videogame industry."
"Currently, 90 percent of the top-selling titles are out-of-stock at my stores on weekends," said Eric Smith, president of Video King, a 13-store chain based in St. Cloud, Fla. "To support all three major formats at current wholesale prices, I can only afford to stock the top 5 or 6 AAA games. With revenue-sharing, I can increase the breadth and depth of videogames I bring in each month, including a variety of secondary titles. That will translate into greater revenues for my stores and for the videogame publishers."
The key to revenue-sharing for videogame rentals is Rentrak's Entertainment Essentials™ software suite, which provides industry-enabling technology to publishers, distributors and rental stores. To ensure publishers and distributors receive their full share of revenues, Rentrak provides comprehensive and timely capture, analysis, auditing and reporting of rental and sales data, along with billing and collection. In addition, the extensive analysis tools available in Entertainment Essentials(TM) can enhance videogame industry executives' ability to make publishing, promotional and buying decisions.
"Revenue-sharing could transform the videogame industry," Rentrak's Rosenbaum concluded. "We anticipate that these four revenue-sharing agreements will be the first of many to tap a latent source of revenues for retailers and publishers. As the only company that can offer existing enabling technology and services to quickly make videogame revenue-sharing a reality, Rentrak is positioned for leadership. We look forward to working with all the members of the videogame rental industry to bring the benefits of revenue-sharing to each of them and their customers."
Topic: Videogame Industry Goes Revenue-Sharing (Read 2107 times)
