With borders going belly up yesterday, what do you guys think about this company? Looking at the financials, it doesn’t appear to be an unhealthy business. But just looking at its business model, I just cannot fathom it existing much longer than 5 years. They sell video games in malls. Really, who needs those anymore? The obvious trend is towards downloadable games and app stores. They cannot enter that market obviously. Apple, with its recent addition of the app store for you actual computer has basically made them redundant. I imagine microsoft and everyone else won’t be far behind with that. Playstration and Xbox are already well into the downloadable game market. Can they reinvent themselves? Have they tried? They announced a massive share buyback, usually a robust sign. But in my mind just a a move to lower their cost of capitol.
i don’t think they’re going to be around much longer. that industry has been consolidating over the past decade and now they’re the last one left. all new games can be downloaded over the net so they’re basically going to be gone in the next 2-3 years as everything is moving online. i can’t see them competing with bestbuy, etc. for hardware sales, either.
I think they’ll be alright. I used to be a pretty serious gamer and it’s not uncommon for a system to experience a complete hardware crash every couple years (especially the xbox). As a result, people prefer to buy hard copies of the major games. Plus you can take a hard copy with you to a friend’s house or resell it / trade it in, while you can’t do the same with a download. I mean, maybe in a decade their business model isn’t working so well, but it’s definitely not time to short yet.
Sooner or later, probably later, you will have a Netflix-like service for gaming. Bricks and mortar is done son. Plus, the majority of gamers are probably sophisticated internet users that wouldn’t mind shopping online. The only reason I see Gamestop actually staying around is for its “got to have it now” appeal.
^^There already is, it’s called GameFly.
I bet that gamemakers and consolemakers would love to cut the middleman out if they could. I agree most gamers know how to use the internet. So it makes sense they would be happy netflixing their games provided it is faster than driving to the mall. As for your thought about having physical backup. I think cloud computing is about to sort that right out with all media and games will be part of that. People used to say the same thing about dvds and cd’s they got over it. The thought about second hand selling is a good one. I have two thoughts there: you can do it and make more money on ebay or anywhere else. Secondly, it would be in the gamemakers and consolemakers interest to discourage this as it just means lost revenue for them. By having you download it directly to a rigid console you can’t really just hand over the dvd to your buddy. The only reason i can imagine the consolemakers would want to keep gamestop around is that they are helping them promote their product. I do on occasion, usually in an airport terminal, buy the odd game when I walk by HMV.
Brick and mortar is on its way out. With the exception of clothes, which people really ought to try on before they buy, I can’t think of too many things I’d buy at a mall. While I greatly underestimate women and their desire to just go out and shop, I know that most men, especially introverted computer gamer guys, would prefer not to go into a suburban mall setting if they could help it. Anyone have any other short ideas of this variety. One other one that comes to mind is BAMM I’ve never been in one of their stores but I think its got the same sort of long term issue.
ChickenTikka Wrote: ------------------------------------------------------- > One other one that comes to mind is BAMM most of those stores are f’d - borders filed yesterday and i’m not sure how b&n can stay afloat past them. everything is going digital - i’d short mall operating companies. leases/rentals need to be getting killed.
ChickenTikka Wrote: ------------------------------------------------------- > Brick and mortar is on its way out. With the > exception of clothes, which people really ought to > try on before they buy, I can’t think of too many > things I’d buy at a mall. > > While I greatly underestimate women and their > desire to just go out and shop, I know that most > men, especially introverted computer gamer guys, > would prefer not to go into a suburban mall > setting if they could help it. > You guys are making all these assumptions about gamers and the stores and it’s clear you don’t understand either. Special edition games and platforms are among the most profitable products in the industry. In most cases, the differences for special editions are cosmetic, packaging, and a few minor tweaks. In the case of consol special editions, it could be as simple as a themed console skin. Why would a market that prizes these superficial aesthetic tweaks at a premium decide to go fully digital? To understand the market you have to realize that CD and DVD stores have basically been wiped off the face of the earth or absorbed by larger electronic and media retailers, while Gamestop, catering to the most tech savy customers, considers to see a 5.5% Q3year over year real income growth. There’s obviously something you’re not getting about the market’s mentality. The truth is, most gamers could buy online, but many of them aren’t. 47% of GME’s gross profit in the first 3 quarters came from used game products, ie trades. While yes, I realize the rental is one option, I think the PITA of mailing stuff and postal wait times does not necessarily outweigh just looping by the store. And a lot of gamers enjoy browsing the store and speaking with knowledgeable employees. Same reason E3 is such a big deal. Not to mention they’ve been taking significant steps into the online realm to keep pace as changes develop.
^ Some good points, but I respectfully disagree. True, there are some hardcore gamers that will want to get their hands on physical product, but then again, there are some hardcore movie buffs that like to get their hands on an actual DVD, yet they haven’t exactly saved that market have they? I think the percentage of gamers who would care about special edition hardware is extremely low compared to the overall gaming universe. Also, your point about mailing and postage wait times being a PITA can be discredited just by looking at Netflix. They took down a giant in Blockbuster in just a few short years. Why can’t the same happen in the video game market? And sure, it is nice to have knowledgeable sales staff that can lead you to new and exciting games, but you can also get the same advice online in communities in forums that are just slightly less nerdy than this one and more geared towards gamers. It’s hard to argue with Gamestop’s financials, but as you point about 47% of GME’s gross profit is from trade-ins, which I actually see as a bearish, not bullish, signal. If there is any sort of movement at all towards digitalization of gaming, the trade in market will be completely squashed.
There’s truth to what you’re saying, but a few counter points: king_kong Wrote: ------------------------------------------------------- > ^ Some good points, but I respectfully disagree. > True, there are some hardcore gamers that will > want to get their hands on physical product, but > then again, there are some hardcore movie buffs > that like to get their hands on an actual DVD, yet > they haven’t exactly saved that market have they? > I think the percentage of gamers who would care > about special edition hardware is extremely low > compared to the overall gaming universe. I disagree the percentage is “extremely low”. I don’t have stats here, just personal experience, but I saw a lot of people buying special edition gear back when I was playing. Some key differences between DVD enthusiasts and gamers. No matter how much you love a particular DVD, you’re not going to ever spend 6 hours straight watching it. You’re definitely not going to break out that same DVD over and over again and play it at least once a week for several hours the way you would a game. As a result, of time spent there’s naturally a closer tie between gamers and their games. You also have to examine the fact that new games these days cost 60-80 bucks when they’re new. The reason digital music took off was primarily portability. I tunes is still charging $1-$1.50 per song, on a 12 track disc, that’s 12-18 bucks, so costs haven’t come down with digitization. Hence, even if there are cost savings, maybe game costs would come down from $60 to $55. Given the propensity of systems to crash and the ability to trade in hard copies at Gamestop, whereas digital rights are currently non-transferable, I don’t think that’s enough to allow an online retailer to push out gamestop. > > Also, your point about mailing and postage wait > times being a PITA can be discredited just by > looking at Netflix. They took down a giant in > Blockbuster in just a few short years. Why can’t > the same happen in the video game market? Nobody cares whether they rent the movie the first day it comes out versus the next day. All you have to do is take one look at the lines for pre-ordered Halo 3 and Call of Duty games to realize that there is a big difference between the movie and gaming industries. Part of it may be the competitive aspect, but part may be the social aspect as well. > > And sure, it is nice to have knowledgeable sales > staff that can lead you to new and exciting games, > but you can also get the same advice online in > communities in forums that are just slightly less > nerdy than this one and more geared towards > gamers. > Fair enough > It’s hard to argue with Gamestop’s financials, but > as you point about 47% of GME’s gross profit is > from trade-ins, which I actually see as a bearish, > not bullish, signal. If there is any sort of > movement at all towards digitalization of gaming, > the trade in market will be completely squashed. I don’t necessarilly see the used business as bullish, I wouldn’t call gamestop a strong growth stock ever. But I do think they’re stable and see the used market as a hard to tackle defensive nitch. Used business has growth to 47% as game prices have risen from $20 to $60 over the past decade rather than as a result of new sales receding.
Gamestop will be around for a while. Black Swan is pretty dead on. First off, developers aren’t going to switch to fully downloadable games anytime soon. I’m talking about games for the consoles, the real bread and butter for gamestop. Tons of reasons; not enough memory capacity, gamers like to get the physical game, and, unlike PC gaming, Internet connection is not a foregone conclusion with console gamers. Many more but I’m typing on an iPad and it sucks. Renting games is a complete failure. Gamers want to hold on to their games. Replay value is a huge factor for a reason. I’ve always found it’s really difficult for non gamers to evaluate the industry. They’re the same people that think EA is the best developer. They just don’t get it. That all said, I wouldn’t buy the stock. It was a huge momentum play two years ago. It’s best days are behind it.
Sweep the Leg Wrote: ------------------------------------------------------- > Gamestop will be around for a while. Black Swan is > pretty dead on. First off, developers aren’t going > to switch to fully downloadable games anytime > soon. I’m talking about games for the consoles, > the real bread and butter for gamestop. Tons of > reasons; not enough memory capacity, gamers like > to get the physical game, and, unlike PC gaming, > Internet connection is not a foregone conclusion > with console gamers. Many more but I’m typing on > an iPad and it sucks. > > Renting games is a complete failure. Gamers want > to hold on to their games. Replay value is a huge > factor for a reason. I’ve always found it’s really > difficult for non gamers to evaluate the industry. > They’re the same people that think EA is the best > developer. They just don’t get it. > > That all said, I wouldn’t buy the stock. It was a > huge momentum play two years ago. It’s best days > are behind it. You are waaaay off target on digital download. It is coming to console near you very very soon
Again, not saying digital download does not play a current role and won’t in the future, but just that it’s not going to push hard copies to obsolescence in the next 5 years. After that, anybody’s bet, but you also can’t conclude that gamestop will be unable to keep pace with the changes. So far they’ve done pretty well at that.
Black Swan Wrote: ------------------------------------------------------- > Again, not saying digital download does not play a > current role and won’t in the future, but just > that it’s not going to push hard copies to > obsolescence in the next 5 years. After that, > anybody’s bet, but you also can’t conclude that > gamestop will be unable to keep pace with the > changes. So far they’ve done pretty well at that. DVD/Bluerays will be obsolete in 5-10 years… Heck… probably even ALOT sooner (3-5)
comp_sci_kid Wrote: ------------------------------------------------------- > Black Swan Wrote: > -------------------------------------------------- > ----- > > Again, not saying digital download does not play > a > > current role and won’t in the future, but just > > that it’s not going to push hard copies to > > obsolescence in the next 5 years. After that, > > anybody’s bet, but you also can’t conclude that > > gamestop will be unable to keep pace with the > > changes. So far they’ve done pretty well at > that. > > DVD/Bluerays will be obsolete in 5-10 years… > > Heck… probably even ALOT sooner (3-5) Yeah, but then you’re right back at my argument on why games <> dvd/blueray
Hmm… without a doubt, physical media for games will eventually go away. If not in 5-10 years, than in 20-30 years. I mean seriously, in 1990, who thought that iTunes would sell more music than basically all physical stores combined? It’s just a matter of bandwidth. Music files are 3MB, so they were the first to get sold on the internet. Games are bigger, like a couple of GB, so it’s harder to download these. Eventually, we’ll get there though. Obviously, the used game market will die off also, since you can’t resell downloads. When was the last time you bought a used music CD? But anyway, this doesn’t mean that GameStop will die. They’ve been pretty good at adapting their business model to changes in the market, so maybe they will just evolve along with the industry. However, it will be tough for them to negotiate in the console download market, which is basically controlled by console manufacturers. Maybe there will be some anti-monopoly regulation that will allow third party download stores on XBox Live. Or maybe GameStop will focus on peripherals and hardware. Anyway, that’s a pretty disorganized post. The summary is that 1) yes, the game market will change a lot in the future, but 2) this might not kill GameStop, especially since they are not a very big company and might be able to squeeze themselves into some overlooked niche.
I give them three years. No one could possibly argue that an increasing proportion of games be downloaded but I think one thing that hasn’t been mentioned it the increased competition for their core audiences time and money. Phones, music devices, and tablets are occupying more people’s time and money. And they have to compete with free online porn which is a losing battle.
murders&executions Wrote: ------------------------------------------------------- > And they have to compete with free > online porn which is a losing battle. how does one break into this industry? do you need to be russian? or a mobster? gamestop makes their money as an intermediary (trading used games/systems) and as people stop buying hard copies, they’ll fall away. ebay and amazon are growing in the market place and the only way i can see them having a profitable end is to sell the brand or franchise to one or the other.