Burger King (BKC) is partnering with Microsoft (MSFT) on the launch of the new Xbox 360 motion control system called the Kinect. The Kinect goes on sale in November, and is getting a lot of buzz because the technology allows gamers to control characters on the screen simply by moving around and not by pushing buttons or swinging a remote controller. But what in the heck does Burger King and BKC stock have to do with video game sales?
Actually, more than you may think. Burger King joined forces with Microsoft and the Xbox back in 2006 to order up a number of video games that featured blatant BK marketing and were offered up at dirt cheap prices of $3.99 a piece. The titles included Pocketbike Racer, bumper cars game Big Bumpin’ and a strange knock off of Metal Gear-style stealth games called
Sneak King where the big-masked King mascot would sneak up on unsuspecting customers and surprise them with Burger King foodstuffs. Strange, but strangely compelling.
You may be asking yourself why in the world BK would waste its time on this type of marketing when it could just take out a billboard or a TV ad. Well the answer is simple: The games actually made Burger King money at the same time they built up the brand.
Specifically, earnings for the fourth quarter of 2006 (games were sold from November 19 through December 24 that year) rose a better-than-expected 40%, thanks to the revenue brought in by the games and the success of the promotion.
It makes sense that Burger King would try to recreate these numbers. Burger King has been lagging significantly behind its top competitor McDonald’s (MCD) and has seen its stock lag the broader market. Specifically, McDonald’s reported a stronger-than-expected 4.8% rise in worldwide May sales while BK has seen sales struggle. BK stock is also up only about +10% in the last year, while the broader market is up +20%.
But there’s hope. Burger King ribs sales tied to its recent upscale promotion were through the roof, with the company moving more than 10 million of the barbecued delights and selling out of its entire stock early. This should give the company a boost, since these high-margin menu items will be big on profits for BKC.
Supercharging the success of this last campaign with another Xbox partnership could be just what the King needs right now to gain back some ground on McDonald’s.
As of this writing, Jeff Reeves did not own a position in any of the stocks named here.
