Friday, August 22, 2014

GameStop Soars Despite Landscape Changes

It is hard to stay relevant for a long time in an ever changing world.  Technological change, environmental change, social change all can either propel or damage commerce.  We have seen such an effect that digital has played on big box stores competing against Amazon or how technological change has hurt the Radio Shack brand.  For those that adapt to changing market forces, like Netflix who moved from DVD to streaming, a future continues, but for those that don't shift to changing conditions, both macro and micro, like Sears, the future looks bleak.

So it is a bit surprising for many that GameStop continues to see record earnings as game use has shifted to tablets and platform games can be downloaded for play rather than purchasing a disc.  But GameStop took advantage of the new gaming platforms from Xbox and Playstation to exceed expectations.  Per the Wall Street Journal, "The retailer previously has struggled with a slowdown in sales of videogame discs as game developers and rivals expanded software downloads and other digital offerings. In one recent example, Electronic Arts Inc. EA +0.55% introduced a subscription service that lets Xbox One owners play EA's games for $4.99 a month."  A subscription service could truly hurt the current GameStop model.

Still, the problem with downloads is that once tired of the game and looking for the next one to buy, consumers are unable to sell it to someone else.  GameStop's service of purchasing and reselling used games appeals to a budget conscious consumer.  Simply put, a downloaded game can't be resold.  But GameStop can't believe that this model will be enough to remain competitive.  It must seek new sources of revenue and adapt to the changing landscape of digital.  A GameStop subscription service might just be a possible future to explore.  For now, congrats on staying relevant, but don't stop keeping your eye on future growth.