GameStop will not survive. It needs to evolve into something else or it is doomed to go the way of the dodo. That’s just how it is. Technology will continue marching forward, regardless of whether we want it to or not. Progress is a relentless beast, and it will cast aside GameStop just like it cast aside Blockbuster and all of those small CD stores that you used to visit.
Anyone who tells you anything different is sticking their head in the sand. That, or they have a financial incentive for you to believe otherwise.
We are now heading deeper and deeper into the age of digital distribution. Average Internet speeds will continue to increase and better Internet infrastructure will be rolled out into rural areas. As more and more people gain access to faster download speeds, GameStop’s customer base will continue to shrink.
It happened to music. It happened to movies. And now it is happening to games.
In the end, technology only goes one way.
“But I like having physical games?”
People said the exact same thing about CDs and DVDs. However, the vast majority of people soon realized that having a digital library is far more convenient.
Why lug around a case full of CDs when you can just connect a free service like Spotify to your car? Why have shelves full of DVDs when you can stream movies and TV shows whenever you feel like it? Do you remember how much of a pain it was to discover that your favorite CD or DVD had been misplaced or scratched?
That doesn’t happen with digital copies.
On message boards, websites and blogs, you will find an abundance of hardcore gamers lashing out at the latest trend while proclaiming their love for collecting hard copies. These comments paint an almost-ominous picture for the survival of physical sales, as they are an exact mirror of the comments that music lovers were posting years ago.
Before they capitulated and services such as Spotify changed their minds forever.
Digital stores offer more of a choice.
The PlayStation and the XBox have online stores that offer a wider selection of games. You can browse a multitude of old classics and new releases from the comfort of your own home. Pretty much any game that has ever been released is immediately available at the touch of a button.
Online stores do not run out of digital copies. The same cannot be said about your local GameStop outlet.
We saw it with Steam on the PC and now we are seeing it with consoles such as the PS4 and the XBox One. Digital sales will continue to rise in popularity and physical discs will become something of a novelty before eventually fading away altogether.
The number of customers who like to collect physical discs will not be large enough to prevent this from happening. Ease-of-access will win out.
If you have a fast Internet connection, there is no need to journey into town and rummage through the shelves at GameStop. You can just immediately purchase the game that you want and download it.
It’s simple and it’s fast.
GameStop’s stock price keeps falling and falling.
Wall Street knows that GameStop has a major problem. Although you will find certain investors beating their chests and trying to rally the troops, the 5 year chart doesn’t lie:
What you see above is a continuous slide downwards during one of the greatest bull market runs of all time. While the economy was doing well and the stock market was climbing up, up and up – GameStop’s stock price was tumbling down, down and down.
What will happen to GameStop when the economy takes a dive and attitudes on the stock market become far less forgiving?
Physical sales of games will continue to decline.
According to the statistics portal Statista, physical video game sales in the United States fell from 80% in 2009 to 21% in 2017:
As you can see in the chart above, digital sales overtook physical sales back in 2013. That was six years ago.
In the United Kingdom, a similar trend is showing, as digital sales made up 80% of the video game market in 2018.
The statistics above are grim news for brick and mortar stores. However, they are also a tad bit misleading, as they include revenue figures for things such as mobile game sales and Fortnite V-Bucks.
This means that while things are pretty bad, there is a lot of room for them to become much much worse.
At the moment, large AAA releases such as FIFA are still predominately sold as physical copies. However, that too is beginning to change. In the UK, 20% of all FIFA sales were digital in 2017. By the end of 2018, that figure had risen to 25%.
If you think that this trend is limited to FIFA, you are mistaken. In October of 2018, digital sales for Call of Duty: Black Ops 4 broke all Activision and PlayStation records.
During Sony’s 2016 fiscal year, 27% of all software sales for the PS4 were digital. By the end of the next fiscal year, that figure had risen to 32%. During the last quarter of the 2017 fiscal year, 43% of all software sales were digital.
ISFE figures for Q1 of 2019 showed that digital downloads for AAA games in Europe were on the verge of overtaking sales of physical copies. In fact – they had already done so in two European markets: The Nordic countries and the UK and Ireland. In the Nordic countries of Denmark, Sweden and Norway, 66% of all AAA sales were digital in Q1 of 2019.
The previous year, that figure had stood at 53%.
In Q1 of 2018, 31% of all sales for AAA games in France were digital. By Q1 of 2019, that figure had risen to 47%.
The trend is undeniable.
The second-hand game market.
The one thing that GameStop does have going for it is the second-hand game market. Customers like a good deal, and second-hand games are usually a lot cheaper than newly-released titles.
However, there are a number of things threatening GameStop’s grip on this market.
Firstly, if more and more new releases are purchased digitally, then there will obviously be less physical copies to trade on the second-hand market. If this trend continues, the second-hand game market could collapse altogether.
Digital media stores such as PlayStation Store are known to run special deals and offers, which allow gamers to purchase titles at knock-down sale prices. As I write this, Sony are running a sale called March Madness. Popular games such as Hitman 2 and Pro Evolution Soccer 2019 are 50% off and 75% off respectively. Battlefield V is 61% off. Those are very good deals.
This shows that online stores can match or even better the price of used games.
It is worth noting that other companies have been tapping into the second-hand gaming market for years. In the UK, Spain and Ireland, the chain CeX offers customers a wide selection of used games. It also sells other goods such as smartphones, tablets, cameras, DVDs, laptops and PC parts. GameStop is not the only player in this market by any means.
As Internet speeds continue to improve across the globe, there is also talk about services that will allow players to stream games online, much like we currently stream movies on Netflix and Hulu. Although talk of this is still in its infancy, the idea will almost certainly be scrutinized further by the likes of Sony and Microsoft.
There is also the possibility that these companies will introduce a subscription-based model that allows people to download and play any game that they want to for a set period of time.
Conclusion? It’s doomed.
All in all, I believe that technology will improve and threaten GameStop’s business model on multiple fronts and that the second-hand gaming market will not be its saving grace.
In 10 years, we will probably be reminiscing about GameStop the same way that we currently reminisce about Blockbuster and Xtra Vision.
Michinomiya Hirohito wrote the following comment:
Not even half true. But a cute article by someone whom is biased in his opinion. Gamestop may lose sales, but as a whole will not go away anytime soon. The truth remains, collectors are the true market, and most want copies of their game, period. And what happens if there is an internet outage? People with physical copies, whom do not rely on the internet can game happily without having to login to some online service and redownload their digital copy.
I heard the exact same argument about people wanting “physical copies” back when music downloads became a thing and CDs were up on the chopping block. Look at how that panned out. Over the past decade or so, small music stores have been completely wiped out. My hometown had four CD stores back in 2008. Now it has none.
I heard the exact same argument about DVDs. People supposedly loved their large DVD collections. Look at how that panned out. Blockbuster and other similar stores across the world have been forced to close. I can’t even remember the last time I used a DVD.
Ease-of-access will win out in the end. It won’t be tomorrow and it won’t be next week. But that time is coming and there is absolutely nothing you or I can do to stop it.