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How The PS4 And Xbox One Renewed GameStop's Lease On Life

Jan 15 2014, 11:11am CST | by , in News

How The PS4 And Xbox One Renewed GameStop's Lease On Life
Photo Credit: Forbes
 
 

GameStop shares came crashing down a few days ago when the company announced lower than expected game sales over the holidays (down 22.5% from last year) and more bad news when increased hardware sales of the PS4 and Xbox One were offset by a surprisingly large decline in PS3 and 360 sales.

All of this should have been anticipated with the relatively anemic launch line-up of both the Xbox One and the PS4. And with how much hype was behind the release of both, it’s no wonder why last-gen console sales dropped when each console moved a million units in a single day, and 3-4 million since.

That said, it’s becoming relatively clear that despite its ups and downs, and the fact that nearly every brick and mortar media seller is either dead or dying, GameStop lives on, and will for quite some time.

In the current state of the video game market, it’s hard to imagine that GameStop won’t survive until the end of this console generation. This was called into doubt when Microsoft expressed an initial interest in making game discs obsolete, but since Sony backed the old format and the Xbox One was forced to change its tune, that was a reprieve for GameStop, which would have had a tough time surviving a shift to digital.

But the fact remains that far and away most markets in the world are not ready for a digital-only games market. That was made abundantly clear by the Xbox One backlash, and the fact that both systems have relatively small hard drives for a digital games collection. Also working against the idea is the fact that both ISPs and the servers of publishers are having trouble with the concept of millions of fans trying to simultaneously download a game on launch day. See the meltdown that was the first few days of the GTA 5 launch for evidence of that.

Now, there’s really no reason to think that GameStop will be significantly less useful to gamers in the next ten years than it was in the last ten years. In the end, not all that much has changed, and barring some pretty big leaps forward, console gaming is one past time that seems firmly fixed in physical media for the time being, something that can’t be said for books or movies, hence the death of Borders, Blockbuster and others.

While there are emerging threats on the horizon, it’s tough to say when they will actually materialize into something that truly puts GameStop’s existence in jeopardy. There are the Steam Machines, Valve’s fleet of boxes whose sole purpose is to bring PC gaming to the living room, a scene that notoriously needs or wants nothing to do with GameStop. There’s PlayStation Next, the OnLive-like streaming service that can play old games on a number of a devices with a reasonable internet connection and a DualShock 3.

Steam Machines are a lofty proposition, and I’ve spent a lot of time trying to imagine how they would actually pose any sort of threat to the big name consoles in their current form. PlayStation Next is a great idea, but it’s restricted to last-gen and last-last gen games, and will be for quite some time no doubt.

The fact is, most gamers seem to just want their discs. Rather than spending $60 and an unknown number of hours downloading AC IV: Black Flag, they’d rather pop over to Gamestop, pick up a disc, be playing within minutes and then sell it back for $30-40 in a week when they’ve beaten the campaign. Right now, discs are still the better proposition from both a convenience and cost perspective. Either internet speeds have to reach a point where it’s not a day-long process to download a new game, or downloadable games have to be significantly cheaper than their physical counterparts. Right now, neither is the case, generally speaking, and so purely digital distribution remains elusive, even in this allegedly forward thinking next console generation.

Our own Dave Thier thinks that Sony and Microsoft are doing a good enough job with AAA game sales to pose a real threat to GameStop, but the sales they do have often aren’t yet timely or deep enough to make a real impact. “Both PSN and Xbox Live are starting to come around to the Steam system of ultra-discounts,” he says, referencing Sony’s 14 in ’14 PS3 and Vita games sale, but given the games listed, their platforms, and their release dates, it hardly seems like enough to really take a chunk out of GameStop, which has used games on sale for cheap all the time, not just a select few titles in a limited time window. If the Big Two (sorry Nintendo) really wanted to eviscerate GameStop as a barrier to direct digital sales, then it should have been Sony following Microsoft’s model, not the other way around, but it was obvious the public wasn’t ready for such a drastic change. And as such there’s really been little change at all so far.

GameStop will be vulnerable to the winds of the industry based on what is or isn’t released in a given year, as seen by their recent woes, but they’re not running the risk of being obsolete, as with physical discs the norm for at least another five, six, eight, ten years in this new generation, their pawn shop-esque services will still be required by countless consumers.

It’s a different debate whether a middleman like GameStop is actually doing much for the industry, but regardless, thanks to the disc-committed Xbox One and PS4,  they will continue to exist for years to come, despite their media brethren dropping like flies.

Follow me on Twittersubscribe to my Forbes blog, and pick up a copy of my sci-fi novelThe Last Exodus, and its sequel.

Source: Forbes

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Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

 

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