Episode 3 The Men Who Made Us Spend

We live in a world where spending never stops.

Cherie? Cherie? You're going to need to be tannoying this.

-OVER TANNOY:

-Ladies and gentlemen, can you please stop panicking?

But why DO we buy what we buy?

And how is our desire to spend manipulated?

Every other company on Earth is trying to get you to spend money

and they're putting all their effort into getting you

to spend your money on stuff all the time.

'I'm Jacques Peretti and, in this series,

'I'm going to investigate the men who've made us spend.'

'I'll look at how children

'were turned into consumerism's greatest weapon...'

We had trained a generation of kids to think,

"There's got to be a product, there's got to be toys."

Good luck. '..reveal how play

'became a serious business when targeted at grown-ups.'

What was the money that was being generated for these games?

I mean, the money is astounding.

Within a week, you're talking about billions.

'And how the techniques first used to sell to kids were used on adults,

'giving us licence to behave like children.'

The trouble with adult consumers is they think too much.

That's the last thing that those who sell to consumers want.

They'd much rather have adults go in and say, "Oooh, look at that,

"I want it, I want it now!" Like a child.

In less than 50 years, children have become prized consumers,

with British and American kids worth £700 billion a year.

Open to selling and impulsive when buying,

children are valued for their own spending power,

as well as the unique access they give to the family purse.

It is through these young consumers

the business learned to sell using fun and play.

Techniques that are now being used to sell billions of pounds' worth

of products to all of us - whether we need them or not.

And when it comes to the very young,

the key lies in creating a character which, if successful,

will be used to sell hundreds of different products.

Peppa Pig? All right. What's your favourite thing to play, Jeremiah?

This looks like a play centre, but it isn't.

Here, Dr Alison Bryant road tests new characters for the toy industry.

PEPPA PIG SNORTS

THEY SNORT, LAUGHTER

They're playing a Peppa Pig app, which they actually asked to play.

They saw it on the iPad and they said, "Oh, Peppa Pig, Peppa Pig!"

And then, as I started the app,

they were actually singing the theme song.

So, they really love the character.

'By ten, children can identify up to 400 brands,

'so it's vital for industry to target them very young.'

At what age do children start to have these relationships

-with characters?

-Oh, it can start incredibly early.

I mean, we see children start to identify with characters,

you know, at one and two.

It's different, though, at that age, because they're, sort of,

"I like this character".

As they get a little bit older, it's, "I'M like this character".

'If it's a hit, the character will appear on everything,

'from bedding to biscuits, increasing the price tag by 50%.

'This is known as licensing.

'For adults, it's just as lucrative.

'Peppa Pig replaced by David Beckham or Kate Moss.'

How valuable is licensing to selling product?

Er, I mean, licensing really

can make or break a product at this point in time.

I mean, if there's no way to create revenue outside of a TV show

or a movie or whatever it is that's establishing the characters,

it's very hard to make money in the kids' media space.

Now, of course, we see it with Marvel,

which was just purchased by Disney.

And every kid, even if they haven't seen the movies,

they want the products.

'It wasn't always like this.'

As late as the '60s,

only a few toys were advertised directly to children.

Barbie was one of the first to be widely marketed.

There wasn't the endless range of licensed products we see today.

Few toymakers saw children as spenders.

It was the parents that held the purse strings. And it was THEY

that needed persuading to buy new toys for their children.

To change this mindset,

the toy industry needed not just a new product...

..but a cultural phenomenon

that would change the way we were sold to.

Great shot, kid, that was one in a million!

-OBI-WAN KENOBI:

-'Remember, the Force will be with you...always.'

Star Wars was the singular vision of one man - George Lucas.

A sci-fi trilogy, pitching Luke Skywalker

in an epic battle against the evil Darth Vader.

Lucas may not have been a toymaker,

but he was about to turn children into voracious consumers.

I've come to California, where, in 1977, the film-maker was struggling

to find a studio to back the unpromising sci-fi project

he described to would-be investors as "cowboys and Indians in space".

To raise money, Lucas wanted to do something unheard of -

create a toy franchise, not just for the hero,

but the entire world he'd invented.

Steve.

Hi, Jacques. How are you?

-Welcome to Rancho Obi-Wan.

-Thank you for having me!

-You're welcome.

'Steve Sansweet worked at Lucasfilm for 15 years, marketing Star Wars.'

MUSIC: "The Imperial March" from Star Wars

It's phenomenal.

Well, er, this is Rancho Obi-Wan.

That's amazing.

I, erm, I'm not often lost for words.

LAUGHTER

But I am today.

So...this...Darth Vader... This is THE Darth Vader?

Lots of it are parts from the original movie costume

from Star Wars and The Empire Strikes Back.

-Can I touch...?

-Yes, absolutely.

It's like, um... it's like my generation's equivalent

-of the Turin Shroud or something.

-LAUGHTER

You said it, I didn't!

When Star Wars opened in cinemas, its tale of good battling evil

enthralled children around the world, including me.

CHEERING

The franchise had been created and the world of selling to children

and adults would never be the same again.

These are the action figures and these are the things that

really cemented fans' appreciation for Star Wars, I think.

So this Luke Skywalker was the first ever toy?

There were 12 toys that came out

-and so you can see on the back of the package...

-Mm.

But even predating that, there had never been

a successfully merchandised movie, until Star Wars.

'For the next six years, Star Wars cemented itself

'not as a movie or a toy, but an industry.'

This is ridiculously fantastic.

'But when Lucas took his idea to big toymakers...'

Whoosh!

'..none spotted its potential.'

When he first came up with the idea of Star Wars,

did he approach any toy manufacturers?

They passed on it, they passed on it. They weren't interested.

And in fact, the two guys from Fox and Lucasfilm who went

to Toy Fair International, got, literally, thrown out of

one of the toy showrooms of one of the largest toy makers at the time.

'George Lucas's idea was finally picked up by toy company Kenner.

'Together, they came up with a simple but revolutionary idea

'that would dramatically increase the volume of toys sold.'

At the time, figures were either seven inches

or the 12-inch GI Joe figures,

but having figures this size let you build environments, play sets,

vehicles. That was really the key to Star Wars' success.

And what's clever is that, by selling these small figures cheaply,

you're actually creating rolling demand for much bigger purchases

which will be like the Millennium Falcon or the big, big, set pieces.

Yeah, absolutely, because originally, these were priced in the US

at 1.97 and, of course, the marketing was all -

"Collect them all".

Star Wars set the template, not only for the toys,

but for all kinds of merchandise - apparel, bedding, you name it.

Profits increased as the range expanded, with Star Wars branding

-on everything.

-'Video games, clothing, bubble bath.'

All of which showed just how much money could be made

through selling directly to kids.

Business also learned that licensed products like this

could be sold to adults.

PHONE RINGS

Hello?

Since the launch of the first film, £13 billion pounds' worth

of Star Wars-branded products have been sold worldwide.

Star Wars heralded a new era in selling to children.

Film and TV would combine with the toy industry

to create brands that would stay with us for ever.

The 1970s saw a new conduit for selling - colour television.

The perfect medium for marketers

to drive home sales to a young audience.

Professor Benjamin Barber has studied the politics of selling.

The challenge for vendors, the challenge for producers,

was how to get to the children,

because between them and the children stood gatekeepers -

parents, teachers, government regulators.

So, how to bypass them, how to get around them, was crucial

and one of the things that was very, very important was television.

Because those who controlled what was on the screens

were in a position to market directly to the children.

Airtime quickly became cluttered with ads selling sugary foods

and toys, as children were targeted increasingly aggressively.

There was a backlash against this attempt

to turn kids into mini-consumers.

As the children's market

began opening up in ways previously undreamt of,

in the US, the Federal Trade Commission began lobbying lawmakers

to curb advertising to children. The fall-out from this battle

would change the way children across the world were sold to.

The FTC had been urged into action by an unlikely coalition

of consumer lobbyists and traditional family-value groups.

They pointed to research that showed children to be the consumer group

most susceptible to TV advertising

because their ideas were still being formed.

Kids are being told the biggest lie they will ever hear in their lives.

A lie that says they should

shove candy into their mouths,

a lie that says that 12, 20 and 30 toys work perfectly every time.

That all the other kids have them

and that they, too, must have them in order to be happy.

But their attempt to protect kids was doomed to failure.

At hearings in Washington, industry fought back.

The man defending big business was Fred Furth.

One of America's leading lawyers, Furth represented Kellogg's,

a company that advertised heavily around children's programming.

In an American democratic capitalistic society,

we all must learn, top to bottom, to care for ourselves and what

the last thing we need in the next 20 years is a national nanny.

The idea was to ban foods, er,

which advertised to children that had sugar in them and, er,

this was way beyond the authority of the FTC.

I mean, the FTC had substantial responsibilities, in regard to

mergers and acquisitions and other matters

but they're not a social agency that goes out on liberal crusades.

The people who are supposed to keep the children from eating too much sugar

are called parents and grandparents and uncles and aunts.

'With such powerful opponents,

'the government agency was soon in retreat.'

It was one of those ideas that cost millions and millions

of dollars to lots of people, cost the FTC a lot of time,

made them look foolish and it went nowhere.

'But those opposing advertising to kids hadn't just lost the battle.'

At the end of the 1970s, the US economy was in recession

and the proposed ban was portrayed in Washington as an attack on trade.

The resulting backlash gave newly-elected president,

Ronald Reagan, a mandate for huge deregulation.

As you know, I have never liked big government

and I think you would agree

there's no reason to substitute the judgment of Washington bureaucrats

for that of professional broadcasters.

APPLAUSE

The government set about dismantling the rules

that protected children from advertising.

Looking back now, do you not have any qualms about preventing

legislation going through that was designed to protect children?

I never prevented any legislation from going through.

If this was such a grievous affair,

certainly the Congress of the United States would step forward

to protect five-year-old children, if that was the great issue.

The way was clear for toy marketing to step up another gear.

US television was now free to screen programmes that were

little more than advertising slots for toys

and these would be seen by children across the world.

For the children's market, still in its infancy, it was a gold rush.

The world's largest toymakers,

Hasbro and Mattel, were the first companies to cash in.

Having seen the profits Lucas had made,

they now wanted to use television in a new way to sell their toys.

Their cunning plan was to create the toy and then invent a story.

The first and most successful to use this strategy was Transformers.

Paul Kurnit was one of the team tasked with making it happen.

You flipped the Star Wars model, didn't you, in a way?

Well, in a way, because the product came first.

We took it from this three-dimensional toy

that didn't have a lot of meaning

to a completely unique storyline that kids could get excited about.

And we had trained a generation of kids to think,

"There's got to be product, there's got to be toys."

The Transformers' back story

was to be developed by ad agency Griffin-Bacal.

My two partners, Tom Griffin and Joe Bacal, and the head of marketing

for Hasbro, Steve Schwartz, were driving back to New York that night.

And we got in the car and just started talking.

And it was kind of like being with your best buddies on a schoolyard

and just jamming and coming up with a story that had real legs.

Because in that... three-hour car drive,

we invented the entire story of Transformers.

By giving the toys characters,

they could then script a TV programme around them.

The product line was fixed - there were six cars, six planes,

a truck and a gun.

And we started coming up with names, right?

Like Autobots for cars.

Decepticons because deceptive is not a good thing.

And so, once we had our Autobots and our Decepticons,

we had the good-versus-evil, kind of, storyline

which in boys' toy play is really rather classic.

'There was an aggressive campaign behind the Transformers' launch -

'the TV mini-series, a range of toys and a Marvel comic book.

'But that was just the beginning.'

Licensing opportunities became really big,

where, if a child loved Transformers, the child would want

Transformers bedding, pillows, blankets.

A child would want to go as Optimus Prime

or Megatron on Halloween as their costume.

A child would want to carry a Transformers lunch box

or thermos with them to school.

Within two years, sales of the toy had reached 300m.

But, to its critics, Transformers shows were adverts

masquerading as programmes - half an hour of hard sell to young children.

How did you get away with making 30- minute commercials in a mini-series?

Now you're being very controversial. We did not feel they were adverts.

We were very serious about the work that we were doing.

And it was quality television programming.

Some of the finest television programming for children at the time.

But you don't feel it was a, kind of, more aggressive,

naked way of selling a product?

I think that is a cynical view and I think it sells kids short.

I think that the idea of creating worlds in which there is open-ended

play...and understanding that kids can breathe their own storyline,

their own excitement into it, is a really joyful thing to do.

'Meanwhile, Mattel created He-Man Masters Of The Universe,

'a 65-part animated TV series,

'designed to promote a new line of toys that would rival Transformers.'

-All right, Teresa, you haven't seen this for some time.

-Mm-hm.

SHE CHUCKLES

-ANNOUNCER:

-'..and The Masters of the Universe!'

For years...

'The hard sell of these shows was frowned on in Britain.

'But they were attractive to TV executives

'as they were cheap and popular.

'In 1984, Theresa Plummer-Andrews was a programme buyer for ITV.'

By the power of Grayskull...

-You know it better than I do!

-Yeah, I used to watch this.

'And I became He-Man, the most powerful man in the universe..'

It was very different from the kind of shows that were

shown before, wasn't it? It was brashly commercial?

Hugely commercial. Everybody was concerned

but it was going to happen.

You know, there was no way we could hold the floodgates back

from this onslaught of American material.

So, despite initial resistance, the need to attract viewers won out

and He-Man was shown by ITV.

That year, toy sales in Britain rocketed by an unprecedented 25%,

to £450 million, with He-Man leading the charge.

Which means that Masters of the Universe have muscled in

as masters of Santa's grotto.

Isn't a part of you thinking, "These shows really shouldn't be

"shown to kids because they are ads for toys?"

They're not coming from a place that's about imagination

and creativity. It's about cynical selling.

If I'm an investor and I'm investing in your programme,

I'm not going to give you two million quid

to go away and play with it. I want my money back.

And the only way you're going to get your money back is toys,

books, DVDs, apps nowadays, etc, etc. It's...it's commercial.

Children's programming was

now used to prime kids to want the latest licensed toy.

In time, children would help the market understand the full power

of narrative and franchising in selling to all of us.

But the project to develop them into the super-consumers of today

was just beginning.

It would be turbo-charged, thanks to a kids TV channel,

now familiar for its distinctive branding.

POPPING

Nickelodeon, the US kids' network, launched in Britain in 1993.

Heidi Diamond would help make

this aggressively-commercial new channel a success in the UK.

She was the executive vice-president tasked with winning over

the many critics of its brash approach.

We got a lot of, "Yankee, go home",

because they thought that Watch With Mother time was very sacrosanct

and the idea of children

to be wild and children to be loud and outspoken and effervescent,

that was not what the British population was used to at that time.

Heidi, how valuable was Nickelodeon to advertisers?

All of a sudden, there was a way to reach children with...

volume and frequency. It meant a lot.

And particularly, when you're selling cereal or sweets or toys.

It took a little while to catch on,

because, certainly, you know, the notion that, "Oh, my goodness,

"all of a sudden, you're doing too much programming to kids."

But advertisers started to see the light

and that here was an opportunity to message to them regularly -

before they went to school,

after they came home from school, before they went to bed.

'By 2007, the average British child

'was watching 10,000 TV adverts in a year.'

Don't you think there's something slightly immoral

about the idea of targeting people who really haven't the capacity

to judge whether it's right to be wanting that object?

You know, fair enough, the question.

But kids are consumers, the same way adults are consumers.

They get pocket money, they do chores, they earn money,

they want to go to the newsagent, they want to buy their magazines,

they want to buy their Kit Kat bars or their Mars Bars,

so why not talk to them on a level

that appreciates that they're a consumer, the same as you and I?

'Ads on Nickelodeon were not just aimed at children, but also

'at parents, who, it was assumed, would watch TV with their kids.

'But research by Nickelodeon found that children watched alone

'and it was they that saw the ads for holidays

'and cars that were aimed at their parents.'

It became evident to us

that kids had such a firm influence on their parents' decisions.

Besides saying, "Mummy, Mummy, I want this kind of ice cream."

When it came time to purchase the family car,

the children's voice was heard.

Children were, of course, primary targets for marketers

and advertisers, but increasingly, it was apparent that kids

also had considerable influence on adults as well.

They were in a position to go to their parents and not just say,

"I want this particular game, I want this particular video,"

but to also say, "Why don't we have this kind of a television?"

So, the old gatekeepers, in a sense, now became the new targets

of the very children they were supposed to be gatekeeping,

in influencing them in what they buy.

By 1996, it was estimated that British children

influenced around £31 million of adult spending each year.

Advertisers looked at children with fresh eyes.

They now saw kids as a Trojan Horse. Get the message to the child

and they would take it straight into the family home,

to the unsuspecting parent. Ads for large family purchases

would now be targeted at kids, as well as adults.

Manufacturers didn't stop at advertising to kids.

They began to redesign the very product,

according to what children wanted.

The first to do this was the Japanese car manufacturer Toyota.

In the late '90s,

sales of the people carrier went into sharp decline.

Mum and Dad thought it looked boring when compared to the SUV.

So, engineers at this American plant in Detroit came up with an idea.

If they couldn't sell the people carrier to parents,

why not try and sell it to the kids?

Andy Lund came up with the new child-friendly design.

We did not think the word "cool" and "people carrier" had to be opposites.

We wanted to make a cool van.

'Toyota weren't sure what "cool" might be for 7-14 year olds,

'so they travelled from coast to coast to find out.'

We decided that, if we're going to learn,

we have to go and listen to the children and watch the children.

What were the things that kids were saying they wanted?

There were several features. Let me show you two.

The first one is the seat.

It is a captain's chair, it's designed after the driver seat.

so the people who sit here don't feel they're stuck way back there.

A key member of the vehicle.

And so that was the first thing.

The second thing was a wide-screen rear-seat entertainment,

They're here...

An advertising campaign was launched to promote the new child-led design.

-Hi, ladies.

-Are you ready to get started?

-Shall we...?

-I want 100 cup holders.

-How about 14?

-OK.

Put a TV there, make this prettier..

-This is working well.

-Yeah.

How did these changes affect sales?

Well, focusing on what children want did help our sales of our minivan.

We always believe that, if you listen to the customer,

and if you give the customer what they want, they will reward you

by purchasing the vehicle.

-CHILDREN CHATTER

-In fact, Andy Lund's redesign

led to a rapid surge in orders,

reversing the downward trend in sales of people carriers.

-Looks like you still have a job.

-APPLAUSE

Thanks.

ANNOUNCER: It has everything kids want and everything you need.

The children's market had proved to be hugely lucrative.

Kids were model consumers, with untold influence

and the power to change the fortunes of a product or brand.

One fascinating consequence of the increasing focus on children

was that marketers begin to realise

if they could get adults to behave more like children,

they would become better buyers, better consumers.

In the early '90s, business began to encourage adults

to channel their inner child, spend money and have fun.

Children and adults were swapping places,

an idea explored in the Hollywood comedy Big.

Make my wish.

I wish I were big.

In this clever and prescient film,

Josh Baskin is a boy who desires to become big

and wakes up the next day in the body of a man, played by Tom Hanks.

KEYBOARD MUSIC

Neat!

As a grown-up, he finds work in a toy company,

but it is the child inside him - impetuous, innocent and endlessly

delighting in toys and play - that offers the key to the market.

THEY PLAY "Chopsticks"

'Today, we're all encouraged to indulge the child within us.'

Hey! Brilliant.

Those that, like me, grew up with Star Wars,

have been conditioned to consume from an early age.

This is Comic-Con, where adults and children come together to see

the latest in comic books, games and toys.

Manufacturers now see an opportunity to grow their markets

and increase their profits by keeping us playing.

Do you think there isn't really a divide between adults and children any more?

We, sort of, just consume things that are childish, but as adults?

In every man, there is still a boy left,

because men never truly grow up.

I certainly haven't put away all my childish things.

I have Lego myself that they're not allowed to play with,

so I think my parents stopped playing a lot earlier than I have.

I came here today to support my kids. Because I've always made them

costumes since they were that high...

And now they're 30 and 28!

SHE LAUGHS

Erm... They're here.

It's a different world to what we had.

'We had to grow up when you was 18 and that was all there was to it!'

Your bone's hanging out.

The boundaries separating the adult

and children's markets are invisible here.

Perfect. You look brilliant.

-Really?

-It's Pikachu.

Everyone loves Pikachu and you even have a tail.

What more could you ask for?

Increasingly, adults and children find pleasure in the same purchases.

One can notice a gradual transformation, a convergence,

of desires. Last century,

children wanted games and toys and adults wanted books and instruments

that helped them live well and take care of their families.

Today, everybody wants smartphones, everybody wants the new video games.

-Are you wanting to jump in?

-Yeah, of course, yeah.

-Good luck.

-Go.. go, go, go. Go for it.

Whoa. No.

-Whoa, no!

-Out, out, out, there you go.

-Have I bashed you yet?

-No.

-No!

-I've already finished.

Have you?! Oh, no!

'Today, the gaming industry is worth £40 billion.

'And adults happily admit to owning a gaming console.'

But in the '80s, playing games was something kids did.

Sega and Nintendo led the market,

with games depicting cartoon-style characters, like Mario and Sonic.

-Where the hell am I, what am I doing?

-Look, I spun him around.

-Oh, I want to fly.

-I've got three tails, look...

Look... I get all coins, look.

But everything was to change in the '90s,

when large multinationals saw the real cash possible in gaming.

If they could extend the market to everyone,

they'd create an entertainment industry to rival Hollywood.

The hunt was now on for games that adults would play.

One of the men who pioneered this new multi-billion-pound market

was Peter Molyneux.

'Now one of the world's leading games developers.'

-Can I be the prince?

-Yeah, you be the prince, and remember you...

The point of this game is that you are, um, going to become a king.

-And so...

-That's good.

Eventually you can wreak revenge on every single person

-that is going to do bad to you in this game.

-That sounds great.

-Yeah.

'Among Molyneux's biggest-selling games was Fable,

'which spawned two sequels.'

Who was the game aimed at, Peter?

-Well, it was aimed at 25-35 year-olds.

-Yeah.

-How successful was the game?

-Er, this sold almost five million units

-and, erm....

-How much did you make out of that? A lot?

Well... Microsoft made the money,

not me, personally... JACQUES LAUGHS

..but, you know, in the hundreds of millions, yeah.

In the hundreds of millions! I like the way you say that!

'When Sony introduced the PlayStation in 1994,

'its goal was to create gaming for a mass market.

'This was a revolutionary new console for adults.

'Ideal for the darker, violent games being developed.

'And it had a rival in Microsoft's Xbox.'

The consoles were powerful enough that the guns sounded liked guns

and the blood looked like blood, and so all of those things came together

to create what is now an entire genre, the first-person action genre.

We're making games not for kids,

we're making them for adults, and we're making them for adults

that like the horror and the brutality of those moments.

It was almost as if we took a gun and shot Mario,

that cute moustache, you know, the baggy pants,

the plumber - we as adults didn't want to play that any more.

We wanted to shoot things and it was as if we blew Mario out of the park.

Suddenly, men spent hours playing games like the all-conquering,

military shooter series Call of Duty.

With violent action games, the industry had found a winner.

This was a new golden goose in the mid-'90s and we had

Microsoft with Halo, that was set in space.

We had Activision, they came out with Call of Duty, which now...

got super, super-successful.

We had EA with Medal of Honor.

They were all vying against each other.

What was the money that was being generated for these games?

I mean, the money is astounding. Within a week, you are talking

about billons of dollars of revenue and over the Christmas period...

you know, they were huge successes,

far more successful than almost every Hollywood film.

The fantastic thing about this is this is a renewable franchise.

You're not talking about one year,

you're talking about multiple year after year after year.

For years, I've lived a double life. In the day, I do my job,

roll up my sleeves with the hoi polloi,

but at night, I live a life of exhilaration.

Of missed heartbeats and adrenaline.

Sony's unconventional appeal to an adult audience,

as seen in this dramatic PlayStation ad, had paid off.

And conquered worlds.

And though I've...

Games were increasingly dystopian.

..I've lived.

A third of all homes now had a console,

but the market was heavily skewed towards men.

The problem we had was that we were making these games -

they were becoming more and more dark,

more and more brutal, more and more horrific,

they were becoming more challenging, more hard, they were actually

constraining the audience a little bit.

And Nintendo came out and they said, "Well, you've forgotten

"about someone, you've forgotten about the rest of the world."

This is what Nintendo came up with - the Wii.

It was fun and easy to use. There were no dark,

shoot 'em up games and, instead, it was bowling, dancing and karaoke.

Importantly, it put the console back in the living room.

This was gaming for all, no matter what your age.

Finish! Second.

Mario was alive and kicking

and finding a whole new audience of 9-95-year-olds, men AND women.

Up till that point when any consumers, especially women, funny enough,

picked up a game, the same thing would happen - they would use

the thumb stick and their character would run against the wall.

They'd feel stupid, they'd feel foolish at playing a game,

they'd just put down the controller and say, "The game's not for me."

Along came the Wii, they picked up the controller

and they move this hand and the tennis racket moved.

You didn't have to learn that X button did this and Y button did that

and press red and press yellow and use the thumb stick.

With that one moment, we drew millions of new consumers

into this market, and one segment of society

could start playing games for the first time. And that was women.

The Wii was an instant success. 600,000 were sold

within a week of its launch, as supply struggled to meet demand.

Playing games is now considered acceptable to all generations,

from children to pensioners.

And last year, in the UK, games outsold music and video.

Now companies outside gaming gathered to exploit

the opportunities it opened up to sell other products.

And the people who would do that were two British students -

Adam and Donna Powell.

The couple created the online website, Neopets,

which would sow the seeds

for an entirely new way of doing business, worth billions.

So, this is the Neopets website and it might not look like it could

change the nature of selling, but these cute little characters

drew in 35 million players,

many of them - and here's the key thing - adults.

And the reason why was simple - it was fiendishly compulsive.

In order to keep your virtual pet alive,

you needed to visit the site again and again to check on it.

They had created something called "stickiness"

and it was about to change the way the world was sold to.

Neopets was the stickiest site on the web. By stickiest site, we mean

was the site where the people spent, you know,

the longest period of time on there.

We had people that were spending hours and hours a day

and were returning on a daily basis.

And we had a lot of players, a lot of eyeballs,

we had 50 million accounts.

-50 million?!

-Yeah, it was huge in the States.

Australia, we had a lot of players in Australia

and Singapore, it was hugely popular. It was a vast, vast, percentage

of the population played in Singapore.

Half the population of Singapore, at one point, were playing Neopets!

Yeah, it was... Yeah, pretty insane.

Stickiness was a games innovation,

but business was about to exploit it to get us to spend money.

Within two years, global corporations

like McDonalds, Disney and Colgate, began to advertise on Neopets.

How important was it to these companies

to get in on something like Neopets?

It was hugely important for them.

They never had an opportunity before to reach such a captive audience

that they could present their brands to, in a completely new way.

I mean, this was something that people were going nuts for.

It's the thing that marketers dream of.

Neopets offered big companies the chance to integrate their branding

into the site's content, often as part of a game.

In this way, players engaged directly with the brand.

It was called "immersive advertising".

What did they do, in terms of this immersive advertising?

Basically, we made tailored mini-games for them

which involved McDonalds' products,

where you would build a burger and things like that.

Colgate wanted Wheel of Brush which...

I'm not kidding here! SHE CHUCKLES

You basically spun a wheel and it was a toothbrush and you won a prize,

depending on where the toothbrush head landed.

'The Powells say they grew uncomfortable

'with the increasing commercialisation of the website.'

It kind of turned a little bit... too heavily towards the sponsor side.

At one point, we had five developers working on sponsor games

and one developer working on our own content.

'In 2005, Neopets was sold

'to global media corporation Viacom for £100 million.'

People have accused Neopets of being quite cynical about creating

this stickiness, about people coming back to the game again and again.

-Mm-hm.

-So...was that deliberate when you designed the game?

We didn't deliberately decide to make something that would

make people's lives hell if they didn't log on on a daily basis.

We just wanted to make something that, you know, people would

want to come back and there would be new things for them to do.

But this stickiness was something that other people have picked up on

and then have used cynically to keep people going back again and again.

Erm, yeah, I know...but...

But you did create those techniques, you know?

Yeah, I mean, we were very young, very naive

and we just wanted to try to create the best game we possibly could.

Business learned something profound from Neopets.

Consumers could be drawn back

more frequently if play combined challenges with reward.

Angry Birds put this into action. This led to games

become increasingly compulsive and involving.

We started to realise, if we compare scores,

then we can give you a ranking.

How were you better than your friends?

And that's how we could make you play more, because it wasn't

just about beating the game, it was beating your friends.

And then we introduced something called achievements.

Achievements were fantastic -

there were little bizarre things that you did in the game,

you got a gold star for doing an achievement

and that again encouraged you to keep playing the game. If you're

playing my game, you're not playing someone else's game.

Having tapped into our innate human drive to seek out easy rewards,

gaming was turning into selling.

Our brains are wired in a very specific way,

which is called intrinsic reinforcement. And how it works is,

any time you challenge yourself to something,

and then you achieve that thing, your brain secretes

a little bit of this magical neurotransmitter called dopamine.

And dopamine is, sort of, like a little bit of a high,

but it also makes you want to do that thing again.

So, challenge, achievement, dopamine.

And experts like Gabe Zichermann

began to proselytise about how marketers could take

the best ideas from games and apply them to shopping.

In a game setting, that challenge-achievement loop

is done hundreds of times per hour.

In contrast, in the real world, and most of the things people do,

whether that's work or buying stuff, there is very little of that.

We've taken all the challenge out of most things,

so we're not getting that dopamine rush.

Marketers realised that if they could inject

the same excitement and compulsion

into their products, they could dramatically increase sales,

so they began to look at ways of using gaming techniques,

such as rewards, levels and achievements,

to sell us everything from running shoes to groceries.

This cereal, Krave, has its own gaming app.

Pirates of the Caribbean - comes with its own reward scheme.

And these sausages have their own Facebook page.

'This technique became known as gamification. Manufacturers use it

'to create "stickiness" with the product and the brand.'

McDonald's Best Chance Monopoly is still on. This means...

One early and profitable example of this is the McDonald's Monopoly

promotion, which ran in the UK, as well as the US.

Based on the popular board game, shiny ads like this cleverly

lured customers, offering the chance to win wheelbarrows of cash.

We haven't won any food prizes or instant-win prizes yet,

but we got six chances, so here we go.

It looks like a simple tear-and-win game

but to make it more compulsive, players needed to collect

all the properties on the Monopoly board to win the jackpot.

McDonalds had turned a visit to their restaurant into a game.

In the United States, that game, which is played

for one month a year, every year for the last ten years,

is responsible single-handedly for an increase

of about 3% in same-store sales in the US alone.

So, this game alone is worth

nearly three quarters of a billion dollars in revenue to McDonalds.

Oh-oh-oh, guess what? I am a winner today - that's right.

I just won a medium order of French fries.

Every other company on Earth is trying to get you to spend money

and they are putting all their effort into getting you

to spend your money on stuff all the time and gamification

is one of the tools that companies might use to accomplish their goals.

Just like they incorporated television advertising 50 years ago,

gamification is the new tool set.

So, fun isn't this frivolous thing at all?

It's actually a hard-nosed currency for selling now?

Make no mistake - the house always wins.

And that's a key thing for consumers to understand.

This thing that's fun and engaging and useful, they're paying for that,

one way or the other, whether that's in cash or time.

Business had learned from selling to children how the adult market

could be turned into a game.

But there was another childish trait

which business needed to tease out of adults.

The trouble with adult consumers is they think too much.

They walk down there and say,

"I don't think I really need that,

"I think I'll put off that shoe purchase till next week."

That's the last thing that those who sell to consumers want -

that kind of reflective, deliberative approach.

They'd much rather have adults go in and say, "Oooh, look at that!

"I want it, I want it now!" Like a child.

The last 30 years of selling have been about getting us

to give in to this instant gratification.

And the greatest enabler of this is credit.

The consumer merchandisers came up with a magic bullet -

the credit card.

Cards boomed following the deregulation of credit in the 1980s.

They transformed our attitude to spending.

By infantilising us, we could now buy whatever we want without saving.

The credit card becomes the facilitator of impetuous,

narcissistic, buy-now consumerism, because you don't have

to wait a second, you've always got that credit card. You can always...

CLICKS FINGERS ..make your purchase like that.

We bought on impulse, knowing that we could pay later.

But that wasn't all.

'Studies of brain activity show that we experience

'a discomfort akin to pain when we hand over cash.'

-Hi there.

-Good morning!

-Thank you.

-Thank you.

Put simply, when I pay with cash,

I'll think more carefully about what I'm spending.

That's 7.20, please.

Right, thanks...

But when I spend with cards, I'm far more likely to spend more.

Up to 100% more.

That's 66.70, please.

'Evidence of this was provided by Drazen Prelec,

'a professor of behavioural economics.

'He and fellow academic Duncan Simester carried out an experiment.

'They set up an auction.

'And students were asked to bid for tickets at a basketball game.'

Students who were interested in basketball,

walking through the door, they received a bid sheet.

'Half of the students were told that, if their bids won the auction,

'they would have to pay with a credit card.

'The other half were told they would pay for their winning bid in cash.

'The results were extraordinary.'

The bids with the credit card condition

were about twice as high and, in fact, there were no cash bids

-up to 100, but the credit card bids went to 300 or 400.

-Wow.

Somehow, with a credit card, your tendency to purchase

is released and you're more comfortable with high figures.

You lost the tight connection between the purchase

and the actual payment itself.

-The tight connection...

-The tight connection.

-What do you mean by that?

Well, a tight connection is when you take out your wallet

and pay in cash, because there is the purchase

and then there is the cash that you see that you don't have any more.

Try to pay for everything in cash for a week

and just watch how that feels.

Just go for a cash system.

Pay your rent in cash if you can.

It's...painful, it's painful.

So what you've done with a credit card is

you've deferred the pain down the road?

Yes, you defer the pain and you have diffused it,

you have disconnected it from the purchases.

-That's the important bit.

-That's the important thing.

By the late '90s, an entire shopping culture had been

built around credit and the glamorous life it could buy,

creating a new syndrome.

-The green scarf, please!

-Good choice, it's the last one.

In lively comedy, Confessions Of A Shopaholic,

a smart, successful woman shops compulsively.

Can you put 30 on this card?

BEEPS

Ten on there?

Reflecting our growing reliance on credit, her shopping habits

run out of control, as she continues to spend money she doesn't have.

-Declined.

-Really?!

Could you just, could you try it again?

BEEPS

Really declined.

For several years, Avis Cardella was the real version,

struggling to bring her own shopping habit under control.

She wrote a book analysing how credit cards

have fed our compulsion to spend.

I remember, for me, with my first credit card,

it felt a little bit like magic.

How many credit cards did you have?

I think, at one point, I had eight or ten cards,

but when I first got them, I was this very,

very serious, responsible credit card user.

I would keep a very strict, er, record of everything that

I spent and the payments I made.

-So, you started off as a, kind of, responsible consumer?

-Very much so.

And as you got more and more credit,

you became, for various reasons, less responsible.

I think, by that point, I was indoctrinated into this

way of believing that, you know, you had these credit cards

and you just continued to use them.

Research has found that credit cards play to our innate tendency

to believe the future will be better.

So many of us believe that, by the time the bill arrives,

we'll be able to pay it.

And in allowing us to behave like children,

the credit card industry has become immensely profitable.

The adult might want a BMW, the child might want a video game,

but what's now the same is that both want it now.

Neither deliberate, neither defer their gratification, neither

feel they have to earn it. Both feel they can and should have it now and

it's that change in attitude that I think has infantilised adults.

For me, shopping was really like a candy land.

It was a place you could go and you'd see all these fabulous

things and almost, like a child, you'd want to see things that were

shiny or things that you want to hold and possess, ultimately.

Britons now owe a record £1.4 trillion.

Far from putting the brakes on spending, the new millennium

saw the process speeded up and made easier.

The internet brought the shopping mall into our homes

allowing us to pick and choose whatever we desire,

with no opening and closing times to delay our purchasing.

Two of the men behind this new multibillion dollar candy land

were Max Levchin and Peter Thiel.

The Silicon Valley pioneers recognised that whoever

created a speedy and secure way of transferring money

on the internet would reinvent shopping.

-ANNOUNCER:

-At PayPal, we securely store your payment options

-all in one place...

-Their solution was PayPal.

As its ads emphasise,

there would be no need to enter credit card numbers.

Purchasing had become instantaneous.

And with two clicks, PayPal had further disconnected

the consumer from the cash transaction and pain of payment.

MUSIC: "I Want Candy" by Bow Wow Wow

So, Narik, I want to buy this sandwich, how do I pay with PayPal?

There you go.

-So you start the PayPal app...

-Excellent...

'PayPal's Narik Patel is finding ever newer,

'pain-free ways of getting us to pay.'

-There you go.

-Great.

-That's it.

-Brilliant, we've just paid with PayPal.

-Yeah.

-Fantastic.

The big thing about it is you just needed an e-mail address

to create a PayPal account and the funding source behind it.

Everyone is marching in the same direction - quicker, simpler...

Yes, of course, businesses are trying to

look at it from their perspective of "how do I sell you more?"

We're looking at it from a shopping experience - "How do we make it better?"

And payment happens to be one of the parts of that equation.

We're doing around 5,500 per second going through our system.

And, you know, that gives you an idea of the scale

and the amount of different payments from different parts of the world.

The lure of one-click shopping is irresistible to Britons -

the biggest online shoppers in the world, our annual spending

soon likely to hit £100 billion.

It is a constant battle and a constant war

to try and make purchase as easy as possible.

Technology is moving on at a time that enables us to get more things

more quickly, so that process is speeding up all the time.

And that stops us from

taking a moment to think about what we're doing.

Yes. What you are doing is you're taking away phases

during which they may doubt or question or consider alternatives.

If you can make a purchase process automatic,

if you can buy something in one click

without having to put in lots of details, without having to go

through some big process, you will be much more likely to make a purchase.

-Narik, PayPal's slogan is "Want it, get it".

-Yeah.

-So, it really is about instant gratification, isn't it?

-Yes!

The way we see ourselves is shortening that distance

between what you want and what you get.

You can buy something in two clicks. It is quite magical that you can

see an advert for a product or something, search for it,

buy it and, next day, it's at your house.

'By removing any moment at which we may pause

'to think about a purchase, consumerism now uses tactics

'first developed on kids to sell to all of us.'

It's the latest attempt to perfect the machine that is consumerism.

As we've seem in this series, it began when industry

developed the idea of planned obsolescence -

deliberately designing items to break.

Well, planned obsolescence is an open secret.

When I'm talking to professional management people, they all say -

"Well, we all know this."

It's an idea which has evolved into the world of almost

instantaneous obsolescence we inhabit today.

Pushing us on to keep spending.

CHEERING

We want the new thing. It's hard-wired into our brain

to be looking for new stuff.

The marketers have figured out how to take advantage of that.

'The often-irresistible urge to buy is further driven by fear...

ANNOUNCER: Poor Marge, she'll never hold a man

until she does something about her breath.

'..as business summons our deepest anxieties

'and then offers us a solution.'

I relieve the fear. I relieve the anxiety.

'It's hard-wired into us by training that begins almost from birth.'

The British were once disparagingly described

as a nation of shopkeepers, but now we're a nation of shoppers.

And it's through spending that we are able to express who we are

and who we want to be.

But this entire world of consumerism was actually the result

of cleverly-crafted strategies by the men who made us spend.

But what's cleverest of all

is that the desires they created can never be satisfied.

Whatever we own, there'll always be something more, something better,

and that's what keeps us spending.

What secret methods do shops use to make you buy?

Take a ride on the Open University shopping carousel and find out

what influences you while you're shopping. Go to...

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