Channelware -
Nortel Networks makes fast entry to big markets
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‘An idea came up over a BBQ.’ said Jeff Dodge, President
of Channelware. ‘At Nortel, the guys from “residential
broadband” were thinking out loud about new uses for broadband
capacity into homes. Software, especially games, was one emerging
application. They realized you did not need to send the entire
game software down the pipe, just the license rights, and came up
with the concept for NetActive software - a hybrid technology that
uses the Internet as a catalyst to make CD games available to home
users.’
I recently talked with Dodge and Barry Gander Director,
Outreach. Channelware became independent from Nortel in
July 1999. With about 50 people, including small offices in New
York and San Francisco, the company is the first to secure
top-title software for retail distribution, with options that
include rental and complimentary play. Marketing at Channelware is
lively - here are some insider views:
Market segments are driven by customer’s customer:
Channelware’s initial customers are the software gaming companies.
Deals have been lined up with leaders such as Electronic Arts,
Fox, Interplay, Corel, Sega, and Red Storm. Their early market was
with the ‘core gamers,’ the people who play 3 hours per day, and
buy big beefy computers. But the next group (‘casual gamers’),
will need a different marketing approach. Channelware shows their
customers how they can help reach these new buyers, by developing
new channels with NetActive software. Target buyer behavior is
understood: The initial targets are VPs of Sales at the top 10
Software Games companies. ‘We don’t do trade shows, because we
won’t find them there,’ said Dodge, ‘but we spent $10,000 to do a
demo CD aimed at one prospect. We got it to the president of the
company and he spent a Sunday afternoon in his den with a
NetActive version of one of his products. It worked - we got the
account.’ To reach these decision-makers, Channelware’s initial
contacts are sales people, seeking ideas to grow revenues.
Marketing ‘Outreach’: ‘An
article in an Ottawa paper was seen by a Toronto TV show that
covers investor relations,’ commented Gander, ‘which led to a
conversation with a Calgary firm, which led to an inquiry about a
Blockbuster franchise in Texas. We ended up doing a pilot for a
group of 12 stores.’ But Channelware is still realistic about
getting buyers’ attention. ‘Customers are less interested in
traditional marketing; it is a very busy world.’ said Gander. ‘We
assume their first choice is to call someone they know, next is to
use the Internet, which is just “word-of-mouth” intermediated by a
keyboard. Editorial content is the next choice and then, only
then, would they read brochureware. So we prefer to do something
tangible, like the custom demo.’
Category leadership dynamics: Channelware uses
the media and their web site to help establish the ESA category as
well as their leadership. The NetActive.com site includes a dandy
article from USA Today, which helps validate the emergence of
pay-per-use marketing - ‘Thanks to the reach of the World Wide
Web, the proliferation of under-$1,000 personal computers, and the
roll-out of high-speed connections to the Internet, computer
gaming is gaining mass appeal. Game makers are banking on a new
generation of Internet-linked games to boost their fortunes.’ The
article goes on to mention Channelware marketing solutions (only),
with a quote from Dodge.
Future applications & categories: According to
Dodge, ‘There are really no bounds; we see much more room in the
entertainment space. In the long term, we can help with anything
digital which reaches a screen. There’s the entertainment and the
business applications side - both huge markets.’
Chasm-crossing: ‘We see no real chasm in this
market. The big software games publishers control 77 % of the
revenue, and they are not laggards.’ Says Dodge, ‘It is easy to
find the early adopters among the publishers, and when we get one
(“you work your brains out to get that guy”), we then go after the
next one. By the time we have the third one we know they will all
respond due to “fear, paranoia, suspicion & greed” in such a
competitive sector.’ The small prospects are there, but not
cost-effective to pursue. They can be expected to buy later, when
the leaders are all using NetActive software.
Tips for Canadians facing competition from California:
You have to be visible in US markets, but that’s not to say it
cannot be done from here (Channelware has 5 people in San
Francisco). As Dodge relates, ‘For us California is not the center
of our market - remember California is a problem for companies in
Chicago, too. The secret is there’s no secret - just put your feet
on the street in US markets. To beat US competitors, spend your
time with customers - our strength is the relationships we have
built up.'
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from the desk of Peter Fillmore
November 1999 |
"We don’t do trade shows ... but we spent $10,000 to do a demo
CD aimed at one prospect."
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