Here Comes 'Halo 3' with a Side Order of Fries

Nick Wingfield

Wall Street Journal

August 9, 2007

For years, movie studios have linked up with well-known consumer brands to help create marketing that promotes food, retail and other products alongside blockbuster films such as "Transformers" or "Shrek the Third."

But the next big entertainment property to get the Hollywood-style cross-merchandising treatment isn't a movie -- it's a Microsoft Corp. videogame called Halo 3.

Due on store shelves Sept. 25, Halo 3 is the follow-up to an enormously successful game franchise. The Halo series follows the exploits of a genetically altered super solider called Master Chief as he battles an alien race called the Covenant. The new game is widely expected to be one of the year's biggest sellers and an important part of its corporate parent's play for the living room. Halo 3 will only be available on one console: Microsoft's Xbox 360. Already gamers have pre-ordered more than one million copies, according to Microsoft.

Microsoft's marketing plans for Halo 3 also reflect broader aspirations. Many companies that work in the game industry want their products to be seen as cultural and commercial equals to movies and other forms of entertainment, rather than as a niche business. The Redmond, Wash., company and its partners will plaster the Halo 3 name and characters across cans of pop, wrappers for french fries and more. The game will also be featured in multimillion-dollar TV ad campaigns from General Motors Corp.'s Pontiac and PepsiCo Inc., along with commercials by Microsoft itself.

"Our competition isn't other videogames," says Chris Di Cesare, director of creative marketing at Microsoft. "We put it on the plane with other entertainment launches, versus other game launches."

Filmed entertainment, which includes box office and DVD sales, took in $81.2 billion in revenue last year, dwarfing the haul for game sales, which grossed $31.6 billion in revenue last year. But game sales grew 14.3% in 2006 from the previous year, compared with 2.9% for movies, according to estimates by PricewaterhouseCoopers LLP. Generally, far more people attend movies than purchase typical games, but games cost between $50 and $60, far more than movie ticket prices.

Halo is one of a handful of games that seemed to strike a broader pop-culture nerve. Microsoft says it has sold a combined 14.8 million copies of the first and second installments of Halo since the original game's release in 2001. That suggests sales of around $600 million for both, putting the haul of each game slightly ahead of the domestic box office sales of movies like "Harry Potter and the Prisoner of Azkaban" and "X-Men: The Last Stand."

Consumer brands began to take more notice of the Halo franchise after Microsoft announced that Halo 2 brought in $125 million in retail sales the first day it went on sale nearly three years ago. "Just seeing that number eclipse a huge theatrical release's box office was telling for us," says Brian Gies, vice president of marketing impact at Burger King Holdings Inc.

For several weeks starting in late September, Burger King will offer customers who purchase "king-sized" meals in its fast food stores Halo 3-themed wrappers around food, including a 42-ounce soda cup and french fry container. "We like to tap into events where there is a great deal of curiosity and anticipation involved," says Mr. Gies, who believes that Halo 3 fits the bill. Burger King has begun to do more marketing partnerships with game companies, including a deal with game publisher Electronic Arts Inc. that involved in-store promotions for a boxing game called Fight Night.

One issue for Burger King: its marketing partnerships with Hollywood studios typically involve movies that are more family-friendly than Halo 3. For example, the chain is currently running a promotion related to the PG-13 rated "Simpsons" movie. Halo 3, which features plenty of soldiers shooting aliens, is a "mature-rated" game because of violence, roughly equivalent to an R rating for a film. At the same time that the Halo campaign will run in its stores, Mr. Gies says Burger King will feature an unrelated kids meal marketing program. He says there's no barrier in place to prevent the children coming in for that program from buying the Halo 3 themed meals.

For Pepsi, the hype around Halo 3 inspired it to do something more dramatic: create an entirely new soda with the game's brand and characters on the packaging. The result is Mountain Dew Game Fuel, which adds the taste of cherry to the original Mountain Dew's citrus flavor, along with 30% more caffeine. Frank Cooper, vice president of marketing for Mountain Dew, said the soda will be available for a limited period of 12 weeks starting in mid-August, in an effort to create a sense of scarcity for the product tied to the Halo 3 launch.

A scene from the new Halo 3 game, due on store shelves Sept. 25.
Mr. Cooper says Mountain Dew is already popular among gamers and the new drink is a way to deepen that connection.

Also part of the Halo 3 marketing blitz are Halo 3 branded Slurpee cups in 7-Eleven stores. General Motors' Pontiac will host several events in cities around the country that will allow gamers to play Halo 3 prior to the game's launch. The auto maker will also feature Halo 3 in commercials for its new G6 GXP Street, a car aimed at 18- to 34-year-old men.

Games are "becoming a more and more prevalent part of entertainment," says Craig Bierley, marketing director at Pontiac. "The target audience really fits our target audience very, very well."

Michael Pachter, a game industry analyst at Wedbush Morgan Securities, says Microsoft, like movie studios, is eager to see Halo 3 open big because its sales could be highly concentrated in its first weeks on store shelves. "There's a lot riding on its launch date," Mr. Pachter says.

Microsoft is betting Halo 3 will provide a lift this holiday season for the Xbox 360, the game console it introduced two years ago. The first two Halos, created by a team of game makers at Microsoft's Bungie Studios in Kirkland, Wash., were key to getting consumers to buy the original Xbox. This is the first time a version of Halo will be designed for the Xbox 360, with its more powerful graphics and online capabilities.

Microsoft could use a good holiday season for its games business. The company recently took a more than $1 billion charge to cover costs related to defective Xbox 360s. The company said their customers experienced an "unacceptable" number of repairs on Xbox 360s, so it extended the warranty on the product to three years from one in the U.S. It says it has addressed the technical problems in the game system.

Microsoft says it has shipped more than 11.6 million Xbox 360s, but rival Nintendo Co. is gaining quickly on it with its Wii console.

The Halo franchise still is also a ways off from reaching the silver screen. Two years ago, Microsoft struck a deal with Universal Pictures and Twentieth Century Fox to create a film based on the game, but the project is now on hold due to disagreements over the financing of the project. Microsoft says it still hopes a Halo movie will happen one day.