Ad space invades 'Space Invaders'

Record companies and other brand names compete for the attention of gamers in 'joystick nation.'

When punk-popsters Green Day roll out their new single this month, it won't be on the radio or MTV. It will appear as part of the soundtrack on the "Madden NFL 2005" video game.

The move is just the latest example of how video games, more and more, are setting the pop-culture agenda. As sales of video games approach $14 billion - and push advertisers' coveted audience of young males to spend more time gaming rather than watching TV - the ailing music industry and the major advertisers of consumer products are both eyeing Joystick Nation for relief. It's a trend that is of concern to some parents and consumer watchdogs.

"You're interacting with fewer people [than with TV advertising], but in a much deeper way," says Aaron Carpenter, director of presence marketing and publicity at Levi, Strauss & Co., which has negotiated a deal to be featured in a new NASCAR video game. "These games live for so long; in some cases, four or five years in someone's house."

Video game makers, who once begged to include the occasional everyday product in an attempt at verisimilitude, now often entertain pitches from major automakers and fast-food companies.

That explains why artists ranging from hip-hoppers Jermaine Dupri, Ludacris, and Snoop Dogg to rockers Good Charlotte, Pennywise, and Blink 182 have all licensed songs for games once dominated by bleeps and blips.

"The record industry has realized it's not such a bad idea to bring music to where the consumer is," says Steve Schnur, executive of music and audio at Electronic Arts, a $3 billion video game company. Mr. Schnur, who spent 18 years working at major record labels before arriving at EA, says music executives now consider video games a primary part of marketing campaigns. The cachet and cross-promotion benefit both parties, further evidence of video games' enviable imprimatur.

Like the movie industry, video-game companies have come to rely on blockbusters more and more. At the same time, development costs for new games have increased to $5 million to $10 million per title, up from $1 million to $2 million five years ago.

"When you realize that 80 percent of those games don't make their development costs back, you can see the importance of [advertising] revenue," says Douglas Lowenstein, president of the Entertainment Software Association, an industry trade group.

There's room for growth. EA, for example, will increase its in-game ad revenue by 60 percent this year, according to a recent Wall Street Journal report. Overall, video games generated $10 million in ad revenue last year.

Video games boast an enviable audience of young males (40 percent of their audience) and, by nature, elicit extended, more concentrated interaction than TV does. Those attributes have lured blue-chip advertisers such as McDonald's, Nokia, Butterfinger, and Pontiac into video games, with more on the way. Asking rates start at $150,000, industry experts say. The truest sign of ad interest in games? Firms that compile entertainment data, such as Nielsen and Massive Inc., are developing audience-trend surveys similar to those used for tracking the habits of TV viewers and radio listeners.

Unlike radio and TV, though, most ads in video games are part of the game itself, a form of promotion often referred to as "embedded advertising." For example, in the NASCAR game, players can design a Levi's-branded race track.

Such uninvited intrusions into a player's fantasy world of video games must be carefully considered, says Mr. Lowenstein. But recent Nielsen surveys of avid players contradict his concerns, with findings that 70 percent believe that seeing real products in games makes the games seem more authentic.

Others are less sanguine about the flood of product placements.

"It's nothing more than ad creep," says Gary Ruskin, executive director of Commercial Alert, a consumer-awareness group based in Portland, Ore. "It's inherently deceptive because it isn't labeled as advertising. With so many young people playing these games, the deception becomes even worse."

Testing music and advertising seems to be most prominent in video games tied to sports, a real-life venue known for its incessant commercialism. That's being reflected in video games. In a new college football video game, there's a fictional halftime show sponsored by Old Spice.

"We're incorporating the league sponsors and brands into our games in areas you would normally see them in real life," says Tim Rosa, director of promotions at Sega's ESPN Video games division.

David Anderson, senior director of business development at Activision, whose titles include "Doom 3" and "Spider-Man 2," says ads must be balanced with the ambience of a game. "Have there been a number of consumer product companies we've said no to? Absolutely," he says. Even so, Mr. Anderson sees great potential for ad revenue.

That means plenty of pop stars and products will be invading spaces once reserved for "Space Invaders."

Says Schelley Olhava of research firm IDC: "These games hit a pretty sweet market. You're talking young adults, mostly male, with few responsibilities and money to spend. That's who advertisers want."