Tuesday, June 19, 2018

GameStop For Sale?

Is GameStop about to be sold? That's the question of the day/week/month as Reuters reports that the corporation is talking to private equity firms to buy up the business.

Right now the deal is in the early stages and a lot of unknowns are in the air. Why the buyout ? What has changed with GameStop to cause this turn of events? Is GameStop falling from "retailer grace" for everything games? What will happen to the stores, with reportedly over 7,000 worldwide (including EBGames)?

The short answer is that GameStop is doing okay. Not as great as it was during the launch of the Wii and XBox 360/PS3 timeline, but it's still turning a profit. The past few quarterly earnings reports have surpassed their goals. Yet their stock prices have been in a steady decline since 2015. In 2016, the company closed over 150 stores in the U.S (no longer present in Puerto Rico). In 2017, the number was 131 globally.

Over the years GameStop has been attempting to become a strange amalgamation. A one-stop-shop for all of your tech and geek needs without being Best Buy. The company purchased Think Geek in 2015 and has steadily added collectables and merchandise to their line-up of products. 22.8% of last quarter's earnings ($260 million USD) can be attributed to these items.

But the company has also made a lot of questionable business decisions that didn't help the brand. They purchased web-based browser game maker Kongregate and did nothing with it. They held majority stake in Jolt Online Gaming (which closed in 2012). They purchased Spawn Labs and Impulse, two tech companies that focused on cloud-based gaming services. Spawn Labs closed in 2014 and Impulse's rebranded GameStop App/PC Services went away. It also purchased over 500 AT&T mobile stores and have tried to get into the phone market (this has been an ongoing project since 2007).

GameStop has tried to diversify it's portfolio by attempting to be everything gaming and technology. The problem is that GameStop never knew how to do it well. Once they began shifting focus away from physical gaming, they got into trouble.

For example: does anyone remember that horrible digital download system on GameStop's website back in 2006-2009/2010? While GameStop was one of the earliest adopters of digital downloads, it was a constant headache. Everything was handled through a third party company who had no customer service center. There were a lot of restrictions on what PC's specs could download games (even the best Alienware systems at the time couldn't run some of the games). No MAC's, because the company didn't want to support them. The third party site was a static 1990's style page with a contact e-mail and maybe a week turn-around time. If you're lucky! And you can see how long they stuck with that vendor before acquiring a new business to manage everything in house.

The website was always good enough to work. But not Amazon quality. It was never clear about shipping and the caveats. It was never timely with pre-orders or release date information. The search system sometimes worked and sometimes didn't. The online gift cards were sometimes okay to use in stores, but not always. The website was never quite right. But it did what it needed to do to sell games, and that was enough for GameStop.

Did you know that GameStop once accepted used MP3 players for their trade-in program? They tried to make a business out of that. The problem was they limited it to only the Microsoft Zune, the lackluster product that tried to be the next Apple iPod but never understood what consumers wanted. When everyone had iPods and were ready to upgrade, you couldn't go to GameStop to get cash for them.

More recently, there was the failed PowerPass Program, which was placed on "hold" 5 days before launch. Why? Because the company's systems could not handle it. I wouldn't be surprised if they were using the same DOS program from when I worked there 10 years ago.

And then there's MovieStop, founded in 2004 that focused on new and used movies. Like their other ventures, confusion in what the company would accept as a "used" product and the pricing forced the business to sell in 2012 to a private company.

GameStop started their business focusing on buying and selling games. It was a simple an effective model. Unfortunately the company has strayed too far away from it's origins and continually attempts to capitalize on consumer trends. But they never manage to get it right. They focus on what they, the CEO and board of directors, think is cool without asking the customers what they want. GameStop Corp is still worth billions, but they are a company that's on the verge of free-falling into failure for their short-sighted efforts. The shuffling of CEO's as of late has not helped matters. The change in consumer spending habits to go online has further highlighted the unbearable in-store experience (that Circle of Life policy needs to go away). The niche hold GameStop had on the gaming retail industry is no longer there. We can get better, more cost effective service elsewhere.

It's not surprising that GameStop is looking into selling to a private firm. Not for an infusion of cash, but to overhaul the system. What GameStop needs to focus on is what they do well. Get back to the basics. Go simple. And it might take another company buying them out to realize their mistakes.

Update 6/20/18: GameStop confirmed via press release that the company was exploring options for third party sale.

0 comments:

Post a Comment

Thank you for taking the time to leave a comment.

We ask that you please do not include any offensive, sexist, or derogatory language - otherwise your comment will be removed.