Interview: GMG Entertainment On Pre-paid Cards' Potential In Retail
GMG Entertainment are a publisher of "digital currency cards" for online gaming/entertainment companies, and has just announced a new range of pre-paid cards to be sold exclusively at Toys "R" Us.
The cards are individually branded with titles from GMG partners, including AdvertureQuest, Cartoon Doll Emporium, Gala-Net, Stardoll, WildTangent and Zwinky, as well as a new partner, WeeWorld.
The announcement was made today by Rob Goldberg, founder and CEO of GMG Entertainment, and Worlds In Motion talked to Goldbert to discuss the company's entry in to the space, the unusual way that retail buying works, and the potential of pre-paid cards for both retailers and publishers.
How did the pre-paid business start to take off in North America?
GMG started in the marketing services working with retailers -- specifically Target -- but around the same time as that, well, it's not very well known, but it's Target who actually brought the idea of the pre-paid iTunes card to Apple and sold them on that. The first iTunes cards were co-branded and were exclusive to Target. In terms of retailers in North America who were focused on pre-paid cards for digital entertainment, Target were ahead of the curve. So a few years ago that led to their head of digital entertainment, Tim Pechmann, looking for additional cards to sell. He tried the eMusic card, the Rhapsody card, none of those sold particularly well, until Nexon met with him and offered him the same kind of pre-paid cards that they explained were selling so well for them in China and the rest of Asia. After a little research Target decided to sell those cards too.
Now, there's an interesting fact about these cards. Retailers love them over any other product they have in their store, because the cards themselves don't take up any inventory. They're not activated until they're purchased, so they don't sit on the balance sheet of the retailer. They feel like "free money" to retailers. So it's a very positive business for retailers to get into, and it really lowers the bar for any retailers who are unsure about it, they don't need to worry about losing money on it.
So, Target and Nexon. The only advertising that they did for that card was on their website, and yet in store it did exceptionally well. I can't quote the revenue but it did very, very well. So Target looked around for other companies to buy cards from.
Now, a very common part of retail is that the buyers are moved around the company constantly. So the DVD buyer from Target was promoted to diaper buying because it was a bigger category. So it's not like the gaming buyers at Target have years of experience buying games and know every new trend. They don't know free-to-play or microtransactions; they may not even have rudimentary gaming knowledge or experience.
Even with this kind of lack of knowledge Target were trying to get into the space. It's almost certainly the only time in history that a seventy billion dollar company has been cold-calling companies asking to sell their product.
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