GameStop's Used And New Game Sales Are Under Assault
- 2014 sales at GameStop are supported by sales of PlayStation 4 and Xbox One, but its other major profit centers, new software and used sales, are under assault from digital.
- The shift to digital continues to accelerate with Activision’s CEO noting last week that digital sales of its game Destiny were exceeding expectations.
- EA Access and similar subscription services that provide access to older games will erode used game sales at GameStop - used sales account for ~50% of profits.
- We estimate it has a market share under 10% in digital software sales versus ~30% in physical. The shift to digital presents a significant headwind for GameStop.
- The upside surprise in the current cycle has pushed the shares higher. However, this is temporary, and the long-term concerns will return and put downward pressure on the stock.