Mortal combat for video game retailers

The 10-year campaign to create an R18 video game rating is an interesting case study in industry lobbying. 

Just over 98 per cent of the 58,000 submissions to a public enquiry on the issue were in favour of R18 rating for video games.

But what wasn't prominently mentioned is that just over half, or 34,210 submissions, were created as part of a customer survey driven by retailer EB Games.

It shows how desperately the video game retail sector wanted this reform.

Sure, an R18 rating is a win for consumers, but it is only a small victory for an industry that is being eroded on multiple fronts, mainly through technological change.

The sector is being challenged by digital distribution, with game companies like Sony and Nintendo beginning to sell more of their content through online downloads, bypassing retailers.

It is also threatened by the high Australian dollar, which has seen many gamers save money by purchasing titles from overseas online retailers.

This is exaggerated by a classification system which bans retailers from selling unclassified games, but does little to stop people from purchasing them from overseas or owning them.

Customs fines of up to $110,000 for importing unclassified games are a deterrent, but there have been few reports of anyone actually receiving them.  

The only benefit the Australian video game retail industry has left is its immediacy.

Our video game retail sector is competitive in neither pricing nor range of titles when compared to overseas rivals. Gamers typically like buying new games close their release date, and with overseas shipping taking a couple of weeks to deliver, local retail still has a market.

But for how long?

“Video game retailers may have to change how they do business,” says Interactive Games and Entertainment associations CEO, Ron Curry.

Curry says that just like the music retail sector, video game distribution may eventually go digital and the industry will need to adapt for that future.

He says that last week's decision to accept an R rating into video game classification is welcome but was unsure as to how exactly it would affect the video game retail industry as there aren't too many games that would reach such a classification.

“We're not sure how mass merchants [department stores, like Target and Big W] will cope with the decision… whether they will even stock R rated games at all,” Curry says.

 “There won't be that drive to go and buy offshore,”  he says claiming that gamers were more than eager to simply import games that the classification board has refused to rate.

However, according to Jason Power, product manager for independent games retailer, Dungeon Crawl, the decision will have more of an impact than just giving consumers one less reason to shop overseas.

Power says that video game retail thrives through new release titles drawing customers into a store or website. He says the extra customer traffic often leads to add on sales.

The decision to allow R18 rated games into stores will lead to there being more new release titles.

Some of these violent new release titles are bolstered through multi-million dollar marketing campaigns from the game's developers, and are guaranteed to generate customer foot-traffic on release.

Power says that these game releases are strategically placed throughout the year to ensure traffic at the right times.

He adds that the current game classification system takes away a level of certainty that is provided to retailers, particularly when the classification board makes their decision without having played the game.

“They use briefs given to them by games producers… some of them don't even have screenshots,” Power says.

Dungeon Crawl has already begun to adapt to a changing video game market. They are a grey importer, meaning they stock is bought from overseas third parties rather than from the manufacturer.

Their business structure affords them a level of flexibility when competing with larger retails that rely on the manufacturers.

“If the ban on Mortal Kombat [a game that was refused classification last year] was lifted we could have stock ready for sale in three days, where as other stores would need to wait for the manufacturer to get into gear,” Power says.

But as the government has reiterated, the bill is not expected to come into effect until January 2013.

Now that the bill has passed, a sobering reality may come to hit the video game retail industry. While an R18 rating may help level the playing field with overseas competitors, it will not completely remedy the threats looming over video game retailing in Australia.

The battle for Australia's video game retail industry survival has just begun.