PlayStation Now Pricing Details Lowers The Competitive Threat To GameStop

| About: GameStop Corp. (GME)
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Sony released initial PlayStation Now pricing details that are noncompetitive to GameStop's used games model.

GameStop senior VP said at E3 the new cheaper $399 Xbox One console is starting to "fly off the shelves".

Ubisoft said Watch Dogs sold 4 million copies in the first week; now the best selling new IP game in video-game history. Bodes well for GameStop's Q2.

One of the key legs of the GameStop bear thesis (NYSE:GME) was the competitive threat from Sony's upcoming PlayStation Now game streaming service. I've downplayed this risk in the past due to the inherent problems with streaming games as a model. Previous attempts at streaming have failed including OnLive and ironically GameStop's own SpawnLabs acquisition.

Games aren't like movies, which just require a linear stream of data. Due to the constant server interaction between the controller inputs and the instant graphics rendering required, the game streaming experience is and always will be inferior to playing the game locally off a physical disc or hard-drive. Physical disc games don't have the graphics compression, latency, and internet connectivity problems of the streaming model.

All this aside, Sony (NYSE:SNE) released more details of PlayStation Now during this week E3 video-game conference.

"Over 100 games will be available at launch, initially for rental, with subscription options planned in the future.

Sony said: "SCE will work with its publishing partners to test various rental periods and prices, depending on how and when players would like to game.

For example, there will be shorter rental periods priced as low as US$2.99, and most titles will be between US$2.99 and US$19.99." Source - CVG

The most important take-away are the high initial pricing details. Remember this service will only stream last console generation PS3 games, not the new PS4 games. Rentals of these old games will cost $2.99 to $19.99 for an unspecified time period.

This pricing seems overpriced when you consider gamers can own the same PS3 games by buying used at their local GameStop stores. A quick check of the GameStop website shows 2,766 PS3 related products available for under $20 and 1,542 under $10.

So if a gamer can buy hundreds of PS3 games for under $10, which provide ownership of the game forever, future trade-in value, and none of the playability issues with streaming, why would any gamer choose to rent on PlayStation Now for $3 to $20 per game?

And if PlayStation Now rental prices are this high already, it doesn't bode well for the pricing of subscriptions later. If they are charging $3 to $20 to rent one game for a short time period, an unlimited subscription service will likely cost much more that on a monthly basis.

These pricing details for Playstation Now clearly lowers the competitive threat to GameStop's PS3 used games business.

1. At E3 GameStop's senior VP of merchandising remarked on sales trends of the new $100 cheaper Microsoft (NASDAQ:MSFT) Xbox One consoles, "They went on sale in GameStop yesterday; these things started to fly off the shelves," Puzon told GameSpot at E3 today in Los Angeles. "It's a huge win and a huge opportunity for us." Source - Gamespot

2. Ubisoft announced the Q2 release of Watch Dogs, " is now the best-selling new IP at launch across the entire videogame industry, with more than 4 million copies sold through in its first week" Source - Ubisoft

Both data-points bode well for GameStop's near term financial results.

Disclosure: The author is long 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.