Getting Into a New Game
By aligning with developers, Logitech became a front-runner in the race to sell accessories for videogames.
(Business 2.0) – One of the most entertaining aspects of the PlayStation 2 game SOCOM: U.S. Navy Seals is the feature that lets you bark orders at soldiers using voice commands--a trick that works only if you're using a special headset manufactured by Logitech. When the game was released in 2002, Sony published two versions: a $50 edition with just the software, and a $60 package that included the Logitech headset. Sony had modest hopes for the more expensive version, but the headset-equipped SOCOM was a surprise hit, selling 1.4 million units, while the one without the headset sold 1 million.
SOCOM was an opening foray into videogame console peripherals for Logitech, a $1.3 billion Fremont, Calif., firm best known for its PC mice and trackballs. But the company quickly established itself as a front-runner in the $556 million aftermarket game-peripherals business. Although Logitech doesn't break out sales figures for its gaming unit, Deutsche Bank analyst Mehrdad Torbati says the company has recently become the industry's biggest overall player, passing the former leader, $111 million Mad Catz. And in some categories, like cordless controllers and driving wheels, Logitech has emerged as the dominant competitor.
Logitech's sprint to the forefront of a new market has been powered by technical prowess and close relationships with game publishers like Electronic Arts and Konami. Thanks to its reputation for top-quality engineering--a perception it reinforces by showering publishers with free product samples and software integration kits--Logitech often insinuates itself into the early stages of the game development process. "They gain an advantage there," says Phil Engstrom, manager of technology development for Electronic Arts. This enables Logitech to design peripherals that are woven deeply into the architecture of many titles, resulting in one-of-a-kind features that make games more fun to play. Superior gameplay, in turn, allows the company to charge consumers more for its products.
Take driving wheels. Logitech's latest creation, which hit the market in time for the February release of Sony's Gran Turismo 4 racing game, is the Driving Force Pro steering wheel. It offers a leatherlike grip and proprietary technology that makes the wheel vibrate more like a real car's. The price tag: $150, or as much as three times the cost of competing wheels made by Intec and Thrustmaster. Will consumers balk? Fred Swan, Logitech's gaming development chief, points out that the company's previous PS2 wheel cost $99--vs. the industry average of $49--but grabbed half the market. Call it Logitech's new rules of the road: It takes a better wheel to drive sales in a commoditized market segment. -- NOAH ROBISCHON