Update: GameStop - Digital Shift Accelerating

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 |  About: GameStop Corp. (GME)
by: Jeffrey Himelson

Summary

Microsoft and EA reached a partnership that will cut away sales from GameStop and accelerate the shift to downloadable content.

My bear thesis on GameStop is cemented by this development.

In my previous article, I discussed how the digital shift was imminent and would lead to GameStop's demise.

Yesterday, Microsoft (NASDAQ:MSFT) and Electronic Arts (NASDAQ:EA) reached a partnership regarding Xbox One that paints a negative outlook for GameStop (NYSE:GME). The partnership, which will run exclusively on Xbox One, will grant players unlimited access to a variety of EA's games, for only $4.99 per month.

The subscription service will allow gamers to receive a 10% member discount on digital purchases, and early trials to new EA games, up to five days before their release. Moreover, it will allow members to have access to some of the company's most popular games, such as FIFA, Madden NFL 25, and Battlefield 4. This announcement marks an inflection point in which the market will begin shifting heavily towards downloadable content. The offer is quite compelling, as it provides customers with a tremendous amount of perks. If this program is successful, which I believe it has a great chance of, others such as Sony will follow and the digital shift will rapidly occur.

In my previous article, "GameStop: The Industry Is Leaving It In The Rear View Mirror," I opined that GME was doomed, as the digital shift is imminent. Although the company has performed well, of late, due to the newly released consoles and a plethora of blockbuster games being released, this company is doomed. GameStop is a middle-man and will soon be cut out of the market. The switch will be rapid and sales will quickly fall, and losses will mount. Beware of investing in this antiquated business.

Disclosure: The author is short GME. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.