Can Gamestop Survive In The Age of Digital Distribution?

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News Posted: Sun, Jul 7 2013 2:57 PM
GameStop executives and spokespeople never said much about Microsoft's original plan for the Xbox One, but the company must surely have breathed a sigh of relief when Microsoft unexpectedly canceled its original plans a few weeks later. Had the company pushed ahead with the goal of leaving game sharing in the hands of publishers, it could have had a serious impact on the used game retailer's business model.



The question is, is GameStop out of the woods yet? Long-term, that's not clear. Digital revenues continue to grow; EA and Activision Blizzard are reporting that an increasing amount of their revenues are coming directly from digital sales. With the PS4 and Xbone both offering digital as a Day One option, that revenue share is only expected to increase -- and digital revenue is revenue GameStop can't touch or tap. While the company has created its own PC download business, Sony and Microsoft aren't going to be keen on opening their outlets to third parties.

A Golden Opportunity

Hating GameStop is practically an American pastime, but standing up for the rights of physical media owners is a good idea, even if it means occasionally backing some companies we aren't necessarily fond of. Gamers clearly value the utility and ability to resell games -- the backlash against the Xbox One's original implementation proves that -- which means GameStop has an opportunity to create a better value proposition for itself around that idea.

Mathematically, the GameStop trade-in system has always benefited gamers who play and trade in a lot of titles quickly. If you have a high inventory of popular titles, GameStop offers regular deals that reduce the total price you'll end up paying for future games or systems. The system is of less value to casual gamers -- if you buy 1-2 games at a time and then show up to trade them in six months later, you may be unhappy with the offer you get. GameStop's best deals are also tilted towards offering in-store credit -- gamers hoping for cash aren't going to get as good a value.



GameStop has an opportunity here, if the company can but see it. It could rehabilitate its image with gamers by offering better pricing on games and more flexible terms that benefit more casual gamers, rather than simply catering to high-volume players. It theoretically partner with GameFly or other game rentals on its own. Heck -- less surly staff would be a start. Though, to be fair, it's hard to blame GameStop's emplolyees for being surly since working at one is, by all accounts, like having ants poured up your nose.

Still, GameStop could push back against the digital revolution by emphasizing the value and flexibility that it offers players. Whether it'll do so is another question entirely. Most likely, company executives will take the Xbox One pushback as "proof" that gamers value what they offer, dismiss the digital threat, and we'll be reading about the company's collapse 6-7 years from now. But we can hope.
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The future of GameStop is so uncertain at this point, it's almost hard to speculate. I think the biggest factor will be the digital downloads. Gamers on the PC are very familiar with that... I've bought just a single boxed game in the past five years, and it's because it wasn't available digitally. On the console though... it's a platform where gamers tend to prefer the actual retail copy, because they like to see their collection grow, and it's made simple, because PC game boxes tend to be huge... console game boxes are not.

With the inability to trade digital copies though, I do lean towards the idea that GameStop is safe for now. Like you say though, the company definitely needs to up its value proposition if it wants to survive. The company currently has almost no focus on the PC... it might as well not even focus on it at all. Consoles are its lifeline as far as I'm concerned. It might want to consider other gaming-related projects before it becomes too late. Being able to trade games online through the company might not be a bad idea.

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"gamers hoping for cash aren't going to get as good a value"- The understatement of the century, Gamestop is horrible for selling used games.

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