Game Over for GameStop

Microsoft (MSFT) announced at E3 this week that the Zune Store will be offering video game downloads to the XBox 360 console thereby removing the middle-man (read GameStop (GME) ). This is bad news for the video game retailer and comes on the heels of the Wal-Mart (WMT) announcement last month, that the giant retailer would be testing video game trade-in kiosks in 77 stores across some key markets in the east.

GameStop has had its share of woes lately, even amidst a booming video game market, which is one of the few retail segments still showing strength in these tough economic times. Last month, GameStop announced a very weak earnings forecast and trimmed its full-year same-store sales outlook. The company's outlook for the quarter ending in July called for earnings per share of 28 cents to 33 cents, while analysts were expecting for 40 cents, on average. Same-store sales are expected to drop 8 percent to 11 percent, compared with growth of 20 percent in the year-earlier quarter. Already this information hit the stock hard last month as it tumbled 15% in a single session.

With this Microsoft announcement, Gamestop's future looks pretty bleak, and they will now depend on trade-in's even more so than they did in the past. It will be interesting to see how Wal-Mart's plans shape up over the next few months.

Comments

[Hagi:]

Well, I can't agree with you. First, I think that people will preffer the physical package of a game and it's manual when they pay 20-50$ per game. Secondly, It'll take at least few hours to download a 8.5GB game, Not to mention HD space, While you can get he game by a visit to the shop near your home.
Secondly, I guess GME CFO who bought about 1.2 million $ worth of stocks for the past week in an average price of 25$ per stock.
I won't get into more issues like the wider availability of more games and products in shops, And new games that will get out in the coming holidays who moght not be released online, But I think I made my point clear....

Jun 03 04:40 AM

[northnode:]

In the time of Amazon downloads with Kindle I suspect there will still be a used bookstore or two and while there is a more negative outlook for GME I hope it can maintain a niche in the market for all those looking to save money on used games without costly high speed internet downloading.

Jun 03 05:15 AM

[User 424833:]

you also failed to mention that the game "downloads" are mostlyy for old Xbox original games that are no longer being exscepted for trade at gamestop as they have no value and customers want the bigger next generation games. This is just GME bashing and didn't do his research.

Jun 03 09:24 AM

[matttz:]

Stock goes down and these guys get their " sell " script ready and if it goes up they get the "Buy" script ready to blog.
If you did some research you would have mentioned onlive.com could be the doom of GME , not some crappy microsoft downloads.

Jun 03 11:43 AM

[Westcoaster:]

Game stop is closing stores in the future.

Jun 03 11:10 PM

[matttz:]

Nobody goes to gamestock anymore and they are not accepting any old games as they cant sell what they have.
This stock will be just like Blockbusters stock, peaked and heading down.

Jun 04 09:58 AM

[Gaucho420:]

I agree completly and make the same analysis. GME's time is very limited....don't forget the new PSP, which will only have games via digital download!!!!

Jun 04 05:47 PM

[Gaucho420:]

Huh...and the new download are FULL 360 games of this generation...Bioschock, COD2, Civ Revolution & others...perhaps those who are criticking this blogger will do their own research and not let their stock holdings influence what should be an unbiased decision...this isn't a sports team, its an investment.

GME's best days are far behind it.

Jun 04 05:49 PM

[Edward D. J...:]

Gamestop is a GREAT buy for another 2 years AT LEAST!
You're way ahead of yourself. Next thing you'll be saying we should short healthcare because in the "future" there will be a pill we can take to never die.

Jun 09 01:30 PM