An international marketing and distribution company is considering several new projects related to the video game industry. They already have several products and services related to the entertainment industry, such as movie and book clubs. The company mostly deals with adult customers and markets, but the VP of marketing, Lori, wants to investigate opportunities related to the growing video game market. After spending a small fortune on a new gaming system and video games for her son, she believes that parents usually pay for video games and want to be even more informed and involved in knowing what their children are playing. She also knows that many adults spend more and more of their free time using video games, and children also pay for games and other products themselves, especially via online orders. This Video Game Market Research Project would involve several marketing and information technology professionals. The main goals of the project would be to research the current and projected market, develop and administer online surveys to collect data, hold focus groups to help understand the potential market and target markets, analyse the data, determine whether or not your company should enter this market and how, and develop a plan for moving forward, if applicable.

1.An important part of market analysis is preparing financial projections.

Make a spreadsheet that can be used to determine the profit potential of getting into the video game market. Include inputs for the initial investment cost, number of customers in the first month, customer growth rate/month, monthly rental fee/customer, and fixed and variable monthly operating costs. Determine how long it would take to breakeven (recover the investment cost - without discounting, for now), and projected profits/losses for the first twelve months in operation. Assume the following three scenarios:

Most likely

Pessimistic

Optimistic

Year 0 investment cost:

$400,000 (most likely)

$800,000 (pessimistic)

$200,000 (optimistic)

Number of customers in month 1:

2,000 (most likely)

1,000 (pessimistic)

3,000 (optimistic)

Monthly customer growth rate:

20% (most likely)

10% (pessimistic)

25% (optimistic)

Monthly rental fee/customer:

$20 (most likely)

$15 (pessimistic)

$25 (optimistic)

Fixed monthly operating costs:

$20,000 (most likely)

$30,000 (pessimistic)

$15,000 (optimistic)

Monthly operating costs/customer:

$5 (most likely)

$8 (pessimistic)

$4 (optimistic)