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GameStop Whisper

GameStop Whisper
 

Research Question: Is a shortage of PlayStation 4 and Xbox One consoles damaging GameStop’s used game business?

Report Available: May 18, 2015

 

Blueshift’s initial research shows the PS4 and Xbox One’s immense popularity causing gamers to keep consoles and games longer than usual, thus limiting supply of highly demanded pre-owned inventory GME can acquire and sell. However, GME’s pre-owned segment is consistently growing despite greater competition from online and big-box retailers.

 

Observations

  1. Gamers might be hanging onto their PS4 and Xbox One consoles and games longer than expected due to increased console functionality (streaming movies/music, playing DVD and Blu-ray) and downloadable content (DLC), which would in turn lower the supply of preowned items sold to GME that GME would then sell to its customers. DLC entices users to keep games longer in order to unlock additional modes or levels. GME’s low prices paid for pre-owned consoles and games have incented gamers to search elsewhere for better deals. Some users have noticed GME’s entire selection faltering over time compared to BBY, EBAY, or AMZN.​
  2. GME’s game sales have risen four times faster than the industry as a whole. Sales of pre-owned games account for 25% of GME’s total revenue. GME relies on pre-owned sales to drive its bottom line since its only realizes a profit margin of 20% on new games and 10% on new consoles. One research firm believes that GME’s pre-owned games segment accounts for 41% of the company’s valuation.
  3. For years, many have expected GME to go the way of Blockbuster and other brick-and-mortar focused companies, yet the company continues to innovate and operate profitably. Recently, GME announced it would begin buying back classic gaming systems and games like Nintendo 64-bit and Sega Genesis, perhaps to supplement a shortage of newer pre-owned offerings. Last summer, GME revamped its pre-owned program which included increased payout for used games. Another strategy it could use to spur up used game supply is to offer more double in-store credit deals.
  4. Blueshift’s May 8, 2014 GME report found that downloadable games presented a larger threat to GME than WMT’s entry into the used game market. Hardcore gamers would likely remain loyal to GME. Several industry specialists believe downloadable games will become the dominant form of game purchases in the next seven years.

 

Will GME’s used game business struggle if gamers hold onto their PS4 and Xbox One consoles and games for longer periods of time? To gain insight into GME and the pre-owned market, Blueshift will gather data and issue a market research report from independent sources in the following areas: Store personnel, used game competitors, gamers, and industry specialists.

Companies: GameStop (GME), Wal-Mart (WMT), Best Buy (BBY), eBay (EBAY), Amazon (AMZN), Sony (SNE), Microsoft (MSFT), Nintendo (NTDOY)

 

To see other ideas Blueshift Research is currently working on, please click here.