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Interview with GameFly Co-Founder Sean Spector

Often referred to as the “Netflix of video games,” the GameFly online video game rental service allows users rent a game, play it as much as they want, and then send it back in a postpaid envelope. As soon as GameFly receives the package, it sends the user the next game on his wish list. Subscribers can keep one game at home for $14.95/month, or two games for $21.95/month. I interviewed GameFly co-founder Sean Spector on Friday January 26 about his company and overall trends in the video game business.

Often referred to as the “Netflix of video games,” the GameFly online video game rental service allows users rent a game, play it as much as they want, and then send it back in a postpaid envelope. As soon as GameFly receives the package, it sends the user the next game on his wish list. Subscribers can keep one game at home for $14.95/month, or two games for $21.95/month. I interviewed GameFly co-founder Sean Spector on Friday January 26 about his company and overall trends in the video game business.

Q: The fourth quarter of 2006 was a big period for sales of game consoles, both new and old. What trends are you seeing from your vantage point, and did the Q4 console sales figures contain any surprises?

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A) We see all of the systems looking healthy at the moment…360 is surely leading the charge with our members. The Wii and the PS3 are showing a high level of popularity with our member base as well. No big surprises in Q4 other than the lack of the new consoles compared to the demand.

Q) Which consoles were in shortest supply? Do you think some of these lost sales resulted in the consumer buying a different console, or are consumers waiting patiently for their console of choice?

A) During Q4 both new consoles were hard to find, although Nintendo had more units in the marketplace than Sony. Not sure if they lost sales to other hardware, but they lost sales. In Q1 Sony has done a better job of getting their PS3 hardware out to consumers, but the Wii is still difficult to get one’s hands on. This coming holiday season will be an important indicator. All three platforms will be out in full force and there will be a broad array of games.

Q) Why do you think the majority of your subscriber base is comprised of Xbox 360 users? Is it the high price of games for the 360?

A) Several reasons: 1) our service is very popular with core gamers, 2) the 360 audience skews older than Nintendo and Sony, therefore they tend to be more comfortable with subscription based services, 3) Xbox has promoted their “LIVE” service, which extends the life and playability of the software. The Xbox Live marketplace allows for free demo downloads as well as free levels and maps to be distributed. So we get a lot of gamers you want to try games and use Xbox LIVE.

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Q) Is the teenage gamer is more likely to rent a game at Blockbuster using his parents account than to open up his own account with GameFly?

A) Yes. In the larger picture it’s probably easier to tag on to your existing family account at your local video store then to negotiate an additional service for the family. That being said, we track new members that sign up for the their sons and daughters and they make a sizable piece of our rental business.

Q) A twenty-two year old friend tells me he buys Xbox 360 games new for $60 and sells them used to a brick-and-mortar retailer for $30. He keeps about four games at home during any particular period. So are you competing with consumers who have their own methods for cycling games in and out of the house?

A) That’s a lot of work…our service is much more convenient and far cheaper then your friends method. He should sign up for a GameFly free trial.

Q) Tell me about the business plan. Have you met your own goals for the first four years of the company’s existence? And what are the current goals for the company?

A) Things are going well. Current goals are to continue to offer a superior game rental experience and game sales experience to our consumers.

Q) Could you put a little more meat in that sandwich?

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A) We are privately held and for competitive reasons we do not disclose further information.

Q) Have you found any ways to mine your data that produce a better understanding of gaming trends than a brick-and-mortar retailer would be able to generate?

A) We have this amazing piece of technology called the GameQ (game wish list). The GameQ gives us an immediate and accurate picture of rental demand for any given game title. That is next to impossible to emulate in a brick-and-mortar world.

[Check out this link for a list of GameFly’s top ten most requested titles for the week ending January 15, 2007, plus some armchair analysis by a blogger.]

Q) How about a prediction… a year from now, which of the new generation consoles will be most successful?

A) For the first time in the video game industry I think we have a chance for three viable platforms…the gaming audience is so broad that three platforms can be successful. A lot will depend on what games come out this year and price drops on the hardware.

Greg Spotts is the Creative Director of the Shortlist Music Prize, and rocks the digital media beat for Fast Company.

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