GameStop’s New Gadget

November 17, 2011  

BEYOND THE BUBBLE

By Victoria Ahmadi
vahmadi@smu.edu

GameStop Corporation announced last month that it has selected Google’s Android mobile operating system as its official tablet device.

The corporation has been planning its addition for several months. GameStop is in the midst of transforming its store concept while digital gaming systems are on the rise.

It is striving to meet the demands and needs of the consumer, most of whom are starting to play games on the go. It is important that GameStop stay on trend with innovations in technology in order to stay afloat.

Camp Murphy, district manager for GameStop says that mobile gaming is the only way for consumers to experience new games, as no physical media exists. This sales model impacts the casual gamer and represents a small total amount of game industry sales. GameStop’s primary entrance into mobile gaming is through its Kongregate.com brand on Android devices.

The corporation’s most recent quarterly financial results depict a 3% decrease in revenue from $1.79 billion in 2010 to $1.74 billion in 2011. A primary factor in the decrease is the 12% drop in hardware sales and 10% drop in software sales.

When a significant amount of time passes without the release of new consoles or software, the market stays flat. In 2010 GameStop had sales of $9.47 billion, which had been a steady increase from previous years.

The sales slow down is in part due to the lack of new consoles on the market and the shift from consoles to portable devices (i.e. computers, tablets, mobile phones, iOS devices, etc.). The introduction of a new major video game console is the biggest boost of business for GameStop, even more so than new software. The last console to be released was Nintendo Wii in 2006 and there isn’t any talk of a new release until early 2013.

District manager Murphy of the Washington D.C. area says that the holiday selling season accounts for roughly 60% of business at GameStop. Post-holiday sales are generally very strong as well. The industry is very much tied to the release of new titles. At this stage big releases come throughout the year.

“Traditionally, there are a handful of highly anticipated titles released in early spring, early summer, back-to-school and the biggest titles release is in the October through November holiday shopping season,” Murphy said.

GameStop is a Fortune 500 company headquartered in Grapevine, TX. It is the world’s largest multichannel retailer of physical and digital video game products and PC entertainment software. The company operates more than 6,500 retail stores worldwide and online outlets including GameStop.com and EBgames.com. GameStop also publishes Game Informer magazine, a popular video game publication.

It sells gaming products including new and used software, hardware and a large selection of accessories. Last month GameStop announced that its stores would be taking old iOS devices (iPhones, iPods and iPads) in exchange for cash or store credit.

“GameStop is the only brick and mortar retailer partnering with Microsoft and Sony to deliver DLC directly to gamers,” said Murphy. “Gamers have always had the option to purchase downloadable content (DLC) directly from their Xbox 360 or Play Station 3 console but that purchase model requires a credit card tied to the online account.”

At GameStop, customers can pay for the same DLC offered online via credit card, cash, check or even by trading games.

GameStop’s latest earning press release shows a 69% increase in digital sales in its second quarter. This drastic increase portrays a changing dynamic between digital and analog gaming.

Jose Gutierrez, a 24-year-old video gamer feels that the wave of digital gaming is a huge improvement in the way that people can access games. “I believe it’s an easier way to entertain yourself in one device rather than having different CDs and apparatuses…plus tablets are easy to use,” he said.

“As a consumer it’s way easier to not have to visit a store for games because you have it in the palm of your hands.”

On the other hand, 22-year-old Brian Blair of Plano still likes to go to GameStop stores. He says that he doesn’t see consoles coming off the market anytime soon. “Digital gaming will never be able to compare…consoles allow people to sit back and use their TV’s in the comfort of their home,” he said. “Mobile gaming is pretty awesome but it won’t ever be able to have that at-home feel.”

GameStop’s consumer market is made up of primarily two groups of people. The first is a younger audience mostly composed of children and teens in grade school. The second is an older clientele, which consists of the parents of young gamers and adult gamers. While the cost of games ranges anywhere from $10 to $70, only those with a true gaming passion and who have disposable income can afford to make regular GameStop purchases.

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