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Though March revenues for video games dropped 17% to $1.43 billion from a year ago, the gaming industry still is performing better than such other forms of entertainment as movies and music, according to industry observers.
Prepaid card providers have recognized the trend and are targeting their sights on the gaming industry.
Blackhawk Network and InComm Inc., two leading marketers and distributors of prepaid cards, have a significant share of the gaming market through partnerships with such industry giants as gaming-console manufacturer Microsoft Inc. and game-developer and publisher Electronic Arts Inc.
Their partnerships with online virtual gaming worlds, such as Habbo, also are a significant part of their offerings.
Online gaming via a personal computer or video game console accounts for about 7% of the $24 billion consumers spend on gaming worldwide, according to Wedbush Morgan Securities research analyst Michael Patrick.
It is not known what percentage of that is paid for with prepaid cards. Consumers use most video game prepaid cards to pay the monthly fees associated with online gaming. For example, a gamer can purchase a card for $7.99 to pay for one month of service to Xbox Live, the online gaming service for Mircosoft's Xbox 360 console. The service is redeemed when a gamer enters a code found on the back of the card into a subscription box on an Xbox Live screen.
Blackhawk displays its offerings in its Gift Card Mall, an in-store card display many large supermarkets and retailers across the country offer. 7-Eleven Inc. stores offer most of InComm's offerings. Most products are single-use cards.
Brian Parlotto, InComm senior vice president of products and international, says prepaid cards are a great way for parents to pay for online gaming without revealing credit card information to their children. "When [parents] have a credit card associated with [online gaming], then kids have unlimited access to everything that is available online," he tells ATM&Debit News.
Such so-called microtransactions have taken on a life of their own in the gaming industry. For example, a gamer can purchase alternate uniforms for a team in a sports video game or clothing for video game characters.
The option for parents to pay for online gaming services with alternate methods is increasing as more teenagers get involved with online gaming. According to a recent report from Port Washington, N.Y.-based The NPD Group Inc., 22% of online gamers are between the ages of 13 and 17, up from 17% in 2008. The company based the findings on a online survey of 20,000 consumers conducted in January.
The increase is significant because of the way various companies, including the payments space, now advertise to consumers ages 13 to 17, Parlotto says.
"Whether it's young adults, 'tweens' or kids, they are not watching TV any more," he says. "If you're spending 12 hours a week in a virtual world, what better place to advertise? That's why you see a significant amount of money going into this space."
Gift and prepaid card providers tend to align themselves with growing areas like big-box retailers, and music and gaming is no different, says Teri Llach, Blackhawk group vice president. Though the company has been involved with gaming for just 18 months, it has seen a significant boost in this area because of its growing number of partnerships, she says.
Though neither Blackhawk nor InComm would provide specific information about their business models regarding the gaming space, most prepaid card companies make a commission on the amount of cards they sell, according to Brian Riley, research director of bankcards at Needham, Mass.-based TowerGroup, an independent research firm owned by MasterCard Advisors.
"The commission is usually 5%, and then the retailer will get a certain percentage," Riley says.
The gaming industry will continue to be an attractive niche for prepaid card providers because of the type of consumers it attracts, says Riley. "When you get into things that people have a passion for, and gamers really have that passion, it's different [from other gift card areas]," he says. ATM
