FEATURE: Have we lost the kids games market?

It was September 2003 when THQ released Finding Nemo.

The Traveller’s Tales-developed adventure based on the hit Disney/Pixar movie was a phenomenon. It shifted millions worldwide. In the UK alone it sold over 500,000 units on just PS2 and Game Boy Advance.

Fast forward to February 2011 and THQ CEO Brian Farrell told investors: We are in the process of exiting the kids video games business. Kids have been a declining market for years.”

WHAT HAPPENED?

It’s not an easy question to answer.

Following the PlayStation 2 boom era, kids moved onto DS, but since then they have gone elsewhere. They are now online with Club Penguin and Moshi Monsters, they are playing on their smartphones, and they are on Facebook.

What’s more, the economy has had a major impact on the family budget. Nintendo’s pioneering platforms are in decline, and Kinect and Move have, by and large, failed to attract the younger audience.

There’s also an issue of market saturation.

During the PS2 era – the Nemo days – you probably had five or six kids film tie-ins a year. Nowadays, you are looking at double that,” said one notable kids’ publisher boss.

Part of the blame lies with retail as well. The supermarkets tend to just stock the Top 40 charts, which are usually mature, core video games. They are not introducing families to the gaming space and they are not getting that impulse buy.

Retail space for kids games is not merchandised or laid out well.”

NEW KIDS ON THE BLOCK

That’s it then. The traditional games market has a lost generation. Kids today are not interested in console gaming. They’ve moved on. And so has THQ.

But then why has Activision – the most successful games publisher in the world – spent millions entering the category with Skylanders?

That game has been a phenomenon since its launch last year. Already Activision are describing it as its next $1bn franchise. Move over Call of Duty.

Could it be that THQ has got it all wrong?

When retail supports a kid property, and gives it the attention it deserves, it can be successful. Moshi Monster was the most successful single kids SKU, and that had a lot of retail support,” adds our kids expert.

I looked at your article from July where you predicted the Top 20 titles of Christmas. That piece showed what the perception was in the market at the time. Retailers were telling you what was going to be big. And they got most of them right.

But amongst the biggest sellers that were missed were Mario Kart 7, Moshi Monsters, Skylanders, Professor Layton and Sonic Generations. That tells me there’s a perception that kids products can’t make a difference at Christmas. And yes they can.”

Indeed, the lack of support for kids games from retail is something that John Lewis wants to capitalise on.

Retail hasn’t really supported kids games,” says John Lewis games buyer Robert Hennessy. A John Lewis gaming shopper is more likely to be buying gaming for children or for the family. Our highest gaming market shares over the last 12 years have been on family orientated gaming propositions.”

WON’TSOMEBODY PLEASETHINKOFTHECHILDREN?

According to GameVision, almost 20 per cent of gamers today are between six and 11. So, if it’s not THQ’s line-up, what are they playing?

Well they’re playing FIFA. They’re playing Halo. Maybe even Call of Duty. Today’s children are growing up faster and playing some of the finest ‘mature’ games on the market. It’s no wonder they don’t want shit SpongeBob platformers.

The days of building a $2m kids property is over. Publishers have to develop good quality games if they want to crack the kids market. It’s what Activision has done with Skylanders, it’s what Nintendo does year-in year-out, and Traveller’s Tales does consistently with its LEGO titles. Great games that can compete with the best core games.

In the words of our publishing exec: Quite frankly, a lot of kids games are just not good enough.”

UDRAW DISASTER

What killed THQ’s kids business for good was uDraw. The drawing tablet started life on Wii and was a moderate hit. THQ then re-launched it last Christmas, complete with 360 and PS3 versions. But it flopped. THQ is now sitting on millions of unsold games and accessories.

But this is not indicative of the kids games market. For starters, uDraw wasn’t a product marketed directly at children. It was sold to parents as a form of edutainment. This put it head-to-head with established devices from V-Tech and Leapfrog. It was also an expensive piece of kit.

But perhaps the biggest fault with uDraw was over ambition. Xbox 360 and PS3 have yet to truly attract the kids, while Wii is a platform that’s slowing down. The market was never that big for uDraw and THQ should have perhaps built half the units it did.

Upon saying that, pulling out of kids is probably the right move for THQ. Game development budgets are rising, the market is saturated and THQ have to give some of its profits to the licence holders.

That’s the lesson for publishers. Kids games may still be a vibrant sector, but it isn’t as profitable as it used to be. It’s no longer a low-risk category. That’s why only the biggest players – Activision, Electronic Arts, Nintendo, Disney and Warner Bros – can afford to do it.

But there’s a lesson here for retail, too. Shops backed Moshi Monsters and Skylanders and the results spoke for themselves. Now, as we approach a new generation of consoles, retail needs to ensure that these children also become the next generation of console buyers. Or we risk losing them to smartphones, social networks and online browser games.

After all, children are the future.