Primarily, GameStop is famous for being a video game retailer. However, it is important to note that it is interested in selling other products as well, with examples being consumer electronics and wireless services. Unfortunately, GameStop’s recent performance has not been the best, which is prompting some people to wonder whether it will be around in 20 years’ time. After all, it wouldn’t be the first brick-and-mortar store chain to collapse because of a change in how media producers distribute their products to media consumers. Something that people who remember Blockbusters should be more than familiar with.
What Is the Problem with GameStop’s Current Business Model?
Simply put, the problem with GameStop is that it is reliant on selling video games at brick-and-mortar locations when selling video games via the Internet is becoming more and more popular. For example, when someone is interested in buying a PC game, they don’t need to head on over to a physical store, which will have no more than a limited selection of products because of their limited shelf space. Instead, they can head on over to either Steam or one of the other digital distribution platforms that can be found out there for a full list of games that go back decades and decades offered to them at reasonable prices as well as maximum convenience. Moreover, this isn’t a scenario that is limited to PC gaming, as shown by the fact that consoles are making more and more use of digital distribution as well in an ever more connected world.
Suffice to say that this is a huge problem for GameStop. After all, ferocious competition from digital distribution platforms means a smaller share of the market, which in turn, means smaller revenues. However, the real nightmare scenario is when the consoles choose to go even more digital than what they are doing now, which isn’t the stuff of fantasy but rather something that looks a lot like it is coming up the horizon.
In short, the chances of the consoles going fully digital anytime soon are not particularly high. There are going to be hold-outs because of various issues, which in turn, means that going fully digital is going to cost console makers the potential revenues from those hold-outs. However, console-makers could shift more towards digital rather than analogue means of distribution than what they are already doing, which could very well devastate GameStop’s business. In part, this is because fewer physical sales mean a smaller share for GameStop. However, it should also be noted that this would gut the used game market, which is actually one of the main sources of revenue for GameStop.
Of course, GameStop is aware of this problem, which is why it has sought to diversify its products so that it won’t be wiped out should its main business collapse. Unfortunately, its diversification efforts seem to have failed, which can be blamed in part on the fact that it went in hard on wireless services even though the smartphone market in the United States is already relatively mature. Combined with the money that it spent on said efforts, it is clear that GameStop has blundered. Granted, it is a blunder that it can recover from, but at the end of the day, even the biggest and best-established businesses can absorb no more than a limited number of such mistakes.
Will GameStop Still Be Here in 20 Years?
Theoretically GameStop might be able to make it into the future. For example, other businesses in other sectors that are under threat from their digital counterparts have had some success by changing their focus to selling an experience rather than selling just a product. This has been useful because it enables those businesses to take advantage of factors that their online counterparts can’t reproduce, which is helped by the fact that millennials are into experiential shopping in a way that their predecessors weren’t. However, it is uncertain whether such an approach would work for GameStop, not least because it would require extensive changes that are almost certainly going to come at a cost.
Regardless, the gist of things is that GameStop might be survive the threat posed to it by the digital distribution of video games. However, said phenomenon is very much an existential threat, meaning that GameStop won’t succeed in that regard unless it plays its cards well. Something that isn’t looking too good at the moment.