Now that Google and Nintendo offer digital video games, GameStop could have the same fate as Blockbuster
- GameStop, one of the biggest video game retailers, could meet the same fate as Blockbuster.
- Sony, Microsoft, and Nintendo all offer ways to download games digitally, which could lead to fewer people buying physical copies.
- A recent study said 66% of gamers still prefer physical video games to digital downloads, but that nostalgia may not last long.
- GameStop has suffered decreasing stock price and flat sales.
- Visit Business Insider's homepage for more stories.
Following is a transcript of the video.
Narrator: So you wanna buy a video game. Do you download it, order it off Amazon? Oh, look, there's a Best Buy nearby. A few years ago you probably would have gone to GameStop but now you have a ton of other options. GameStop's stock has been falling steadily since 2016 and they reported a $673 million loss in 2018. Even though 66% of Americans consider themselves gamers, one of the biggest video game retailers is struggling. What happened?
Let's rewind a little. It's 2008, you just walked into a GameStop. You can't wait to get your hands on "Gears of War". Your feet glide across the soft carpet and you grab your brand new game. This is how most people used to buy video games but not anymore. Quick question, would you buy GameStop? Analysts thought a buyout could save GameStop but after several months GameStop canceled its search for a private buyer. Is it possible that it could meet the same fate as the once popular Blockbuster?
Commercial: Blockbuster Video, wow, what a difference.
Narrator: The odds are stacked against GameStop. Sony, Microsoft, and Nintendo all sell their games digitally. You can buy them right from the console without even having to get off the couch and if you want a physical copy of a game, you can order it off of Amazon. Got Prime? It'll be there in two days. Fewer people buying physical copies also means fewer used games to trade back into GameStop. That's bad news because preowned games made up over 23% of GameStop's net sales in 2017. But what about PC gaming? Well, PC gaming went digital way before consoles. Steam, the largest PC gaming platform now boasts one billion accounts and 90 million monthly active users and if you want to play a game at launch, the best way to preorder it is digital. Are you starting to see a trend? GameStop isn't just competing with other retailers like Best Buy. They're competing with everyone including the console makers themselves.
But hang on, do you even buy physical games? Well, a lot of people still do. According to Nielsen, 66% of console gamers prefer physical copies and in April, Sony announced that the upcoming PlayStation 5 would still include a disc drive. Buying physical copies is also easier in rural areas that may lack high-speed internet. So GameStop might not have to hit the reset button just yet but things will only get more challenging.
10 years ago, GameStop's revenue was growing rapidly but sales have slumped and in 2018, GameStop reported its largest loss since going public even though average monthly video game spending increased overall. GameStop has tried to gain other sources of revenue like acquiring pop culture retailer ThinkGeek and launching its own game publishing division, GameTrust but these efforts haven't paid off in any meaningful way. Collectibles, for example, made up only 6.9% of sales for GameStop in 2017.
GameStop will still be around for the near future. After all, there are still over 7,000 stores and GameStop also has nostalgia on its side. Buying a physical copy of a game or receiving one as a gift is exciting to a lot of gamers but GameStop can't rely on nostalgia forever. Gaming is only gonna get more digital and if game streaming services like Google Stadia actually take off, we might be living in a future where physical copies of games sit and collect dust like our old DVDs. That could be game over for GameStop.