GameStop has confirmed they’re in discussions for a potential buyout.
Now, I’ve spoken before about high streets and brick-and-mortar retail; the world has changed dramatically in the last decade, which has seen GameStop’s market value go from $9.4 billion to $1.47 billion. You can download games in a few hours now; no need to leave the house. Or you can buy on any number of websites these days, with often free next-day delivery, with them even getting a brand new game to your door on release day if you’re still crazy enough to pre-order stuff. Going outside, getting into a car or onto public transport, spending time travelling to a shop then finding parking (and having to pay for said parking – even us disabled folk have to do that now in the vast majority of places!), then getting out and walking into the shop only to have some twerp behind the counter try selling you a magazine subscription in a day and age of social media, YouTube and easy access to tons of free gaming news services… yeah, if you haven’t worked out -why- specialised brick-and-mortar games retailers are struggling, it’s because it’s no longer convenient for most people.
Hell, one can argue now that it’s cheaper to buy online – no parking fees, no fuel consumption, no losing your parking space at home to some moron walking down to the shops because they’re too cheap to actually pay a quid for their parking… you can have it in a couple hours of download, or the next day if you can wait and twiddle your thumbs for the night.
This isn’t news to anyone – that GameStop thinks they’ll secure a solid buyer is almost comical in and of itself, because Blockbuster tried that. Twice. It didn’t go very well for them, that’s for sure. Blockbuster even made the nonsense excuse that they “needed to adapt to a changing market” or some such idiocy – forgetting that the market had already changed. That’s why they went belly-up in the first place. The meteor had already hit, and they were burning alive and thought, you know, everyone else is running for cover or underground or in water. Maybe we should do that too… maybe? Possibly? Fellow dinosaur shareholders, what do you think?
How people buy games has changed, and with streaming becoming a real thing for video games – even some of the current big online names should be a little concerned that once people don’t even need to pay $60/£50 for a title and don’t even have to wait for their game at all, that their good little thing is equally doomed to decline. This is as true for GAME in the UK; my nearest one is 21 miles from me, and I have to pay to get into the nearby car park and then worry about ramps and hills and a cobbled street on my wheelchair. It’s a lot of time, effort and planning on my part when I can just download or get it delivered the next day, or even have it in a nearby Argos for collection the same day in some cases.
What’s even more funny is that GameStop is hinging a lot of its future on, of all things, the NextBox (codename Scarlet as I understand it) and PlayStation 5.
Two things are wrong with that – the first is that their expectations of a “feeding frenzy” are likely to go unanswered; the Switch got away with this by being relatively cheap for what it was – a modest $300 pricetag for a proper hybrid machine. The XBox One X, the actual current 4K Heavyweight, is still £425 here in the UK; presumably that’s closer to $500 in the States. Even in two years, the idea that a new generation is going to be even close to that price without swallowing a massive per-unit loss is laughable to me. If they get it around $500, they’re still losing somewhere, so I’m guessing it’ll be closer to the $600 point – that’s a lot of cash to blow on a games console, and you’ll have two to buy plus for many they’ll also need to get around to buying a 4K television, further increasing the expense.
The Switch by that point should be sub-£200, getting current and relevant port jobs now the industry is waking up from its stupor and realising there’s actually money in the pockets of Nintendo fans – seriously, Pokémon, why was this ever in doubt? Sheesh! – and that they’ll want it, and with Panic Button expanding and other porting studios getting into the fray, most developers can just farm the downscaling and specialisation stuff to them and worry about their own problems with 4K.
I don’t want to say the spectre of the Wii is looming in the background… but come on, it’s there, it’s screaming at the industry and they probably should call an exorcist already.
But that’s of course possibly subject to change; we don’t know how the Switch will look in two years, and maybe Sony will swallow losses again, though perhaps this time not tens of billions of dollars worth of them. I think it’s likely, we’ve seen it before, but the market is volatile at times and who knows, maybe there’ll be a massive surge in 4K televisions sales in the next two years. Maybe.
The more tangible point to make is… this “feeding frenzy” they’re talking about is at the shortest possible route 18 months away (assuming Holiday 2019 release, which would be a bit quick in my view), and at best two and a half years from now. GameStop is bleeding money now. Right now. It’s watching a massive audience move to digital and online purchases every day, and it honestly thinks that with the current course they actually can convince a buyer that it’ll be okay and a good investment because MAYBE, in two and a half years time from now, a new console will come out and people will… what? Go and buy it from GameStop? When they can probably get a deal online, have it delivered on release day, sit back and let it come to them?
If any investor is stupid enough to buy into that; I’ve got a bridge to sell them too.
Because what that doesn’t talk about is the possibility of what happens AFTER said “feeding frenzy”; people are still going to download games and buy online. Hell, perhaps the next generation of consoles will have new algorithms and stuff that make streaming even more viable. Once the furore has died down – and as the Switch has demonstrated after giving them a very short-term cash injection, it does die down – then it’s back to the same position that it’s in now, an inconvenience masquerading as convenience. Putting all their eggs in a hardware basket is absolutely not a smart move, when they could be competing with online store prices instead. Man, what an idea. Can you imagine GameStop not selling a game at the recommended retail price and trying to cut a few bucks off to entice people in? What a dumb idea. Forget I mentioned it.
The time to start changing was five years ago; hell, ten years ago even. But this current revelation that “oh the PlayStation 5 and XBox Scarlet sales will save us!” only proves they’ve learned absolutely nothing; they’re beating the same tired drum GAME is in the UK. Most people know what game it is they want to buy – and hell, most supermarkets still sell the Top 20 games for each current platform, plus a smattering of other stock. If it’s for a kid, and it’s new, a parent can pick it up along with the weekly shop in the majority of cases.
Specialised gaming retail was a nice thing when it was niche and no-one else cared; they had exclusive domain over an entire market. The problem is, they still think they have exclusive domain over this market. They don’t. They haven’t had exclusive domain over it for a decade or more by this point and that GAME UK has been in financial problems twice before as well only proves my point; the money is going elsewhere, because it’s either cheaper or easier or more convenient for the buyer to go elsewhere. This isn’t bashing them though – I get that it’d be nice to still have specialised retailers, maybe, but they need to compete with a world where video games are mainstream, and can be bought in a variety of different ways and from a variety of different sources. They are not special anymore. They’re a business and they’re competing with bigger names like Amazon, Walmart (ASDA here in the UK – oh yes, there’s a bubble popped for some people!), Argos and others.
Hell, you can even still RENT games online; they mail them to you, you play them to death, you send it back and get the next game on your growing pile. Again, that might be a business model doomed in the future with the XBox Game Pass getting traction but that’s a bridge they need to cross as well, and think about how they will adapt – if they can adapt, of course.
Things are different, and GameStop has to stop pretending like it’s still the biggest fish in the pond – it’s not, pretty sure Amazon is right now, and GameStop may not be in the top ten “biggest fish” list anymore in this arena. New consoles won’t save them when everything else is failing; and we know they’re failing because they wouldn’t be in talks for a buyout if everything was hunky-dory, would they? (Also losing almost $8 billion in a decade when the industry spend has increased by crazy multipliers should speak volumes. Just sayin’!)
GameStop, ideally, would be bought out by another company and rolled into their stores to pad out their current business – heck, I think in some places that’s already happening. That still likely means that jobs will be lost and stores will close, but that’s a reality people may have to face up to. It’s never nice to advocate for people to lose their jobs – but it’s also cruel to keep people believing they have a secure future at a company that clearly has little future of its own. Much better to realistically remind them that, you know, make sure your CV is up to date and don’t be shocked if one day your boss tells you not to come into work because they’re not opening. Be pragmatic. Prepare for the worst and hope for the best.
And if GameStop does lumber on, whoever buys it will have to make major changes to make the business profitable again. That’s also not going to be pretty, and it’s still trying to take something that should have been competitive for a decade and making it competitive now; that’s going to cost money too, and any buyer will have to factor that into the end-purchase value. Like buying a house, some people don’t mind buying cheaper if it’s a “doer-upper”, but no-one is going to pay full market price for a place they’ve got to spend tens of thousands to make habitable.
That’s GameStop’s position right now. And I didn’t even factor in the fact that like GAME UK, most gamers absolutely loathe and despise these companies in the first place for a variety of reasons, so any buyer would also have to contend with spending a ton on fixing the stores image problems as well.
Good luck GameStop.
You’re going to need it.