Gamerville, USA – Well Tuesday was a hard day for the gaming retail giant Gamestop, announcing that basically, they couldn’t sell themselves. Which then brings me back to a question I wrote about months ago, Is Gamestop This Generations Blockbuster Video?
GameStop Corp. (NYSE: GME) today announced that its Board of Directors has concluded its previously announced efforts to pursue a sale of the company in conjunction with its broader review of strategic and financial alternatives. With the news hitting the investors emails early Tuesday, what pursued was one of the largest drops in Gamestop stock in one day -27%.
So, for some, they might not know, or something I have not wanted to come to grips, but some of you might be too young to remember how it all came about. Let me give you a fast background of GameStop Corp. They are a Fortune 500 company headquartered in Grapevine, Texas. They list themselves as a global, multichannel video game and consumer electronics retailer. They have at the time of this article 5,800 stores across 14 countries.
The company’s consumer product network also includes www.gamestop.com; Game Informer® magazine, the world’s leading print and digital video game publication; ThinkGeek, www.thinkgeek.com, the premier retailer for the global geek community featuring exclusive and unique video game and pop culture products; and Simply Mac, which sells the full line of Apple products, including laptops, tablets, and smartphones and offers Apple certified warranty and repair services.
For many comes the old question, “what happened”. Well isn’t that the $815 million dollar question. That’s about the amount of debt the company is in. Seems like other stories we are hearing more and more, large companies that somehow have kept their heads above water by not paying their debts. We all know what happens when you and I don’t pay ours. Well, the knocking on the door has started at GameStop and it seems no one has a clue now what to do.
Add to this that the company is also lacking solid leadership. Yes, yes I know Shane Kim has a great resume, but what I have also learned is past performances at a company like Microsoft and being successful 15 years later at a company that seems to have issues on even knowing if they are. Are they a gaming store? Or are they a collectibles shop? Or, as I wrote about almost a year ago, they talked about becoming a comic book shop, with their own line of comics. Struggling with a corporate identity makes for a poor selling point.
And with that, the board has acknowledged this issue as well:
Furthermore, the Board is continuing its search process to appoint a highly qualified, permanent CEO and is working with a leading executive search firm.
And from its announcement Tuesday, it’s clearly hard to sell someone your company when you aren’t even sure anymore what your brand represents.
We Have Seen It Before
Let’s not forget how GameStop was conceived. It was only after they grabbed the remains of Babbage’s, Software Etc., and FuncoLand in 2000, that they then were able to become a publicly traded company two years later. But they weren’t done. They had to control it ALL.
So they went after and grabbed EB Games in 2005, making them arguably the biggest gaming retailer in the world. But that doesn’t make you immune to a changing market and culture. GameStop has fallen victim like so many others. It seems the story is actually all too familiar.
From the local VHS shops came the VHS Empire Blockbuster, which in its heyday had Stadiums and Bowl games brandishing its yellow and blue logo. But they didn’t wanna change.
Or maybe it was their business model like so many others, didn’t leave them room to. Could you imagine if they went along as Netflix did? Things would be completely different. But yet we have seen giants like Sears and Toys R Us fall to the changing times and Debt. I also must point out, these were companies that ignored change until it was too late.
Is Gamestop the next name to add to this growing list?
What's It All Mean
It wasn’t that long ago GameStop was at the top of its game (I had to get one pun). The midnight releases, the trending chatter, all about “when you heading up to Gamestop” or “You going up there tonight for the release“. And then on the flip side of that was the,” I am heading up to GS to see what I can get for these games”.
Yet it all seems to tie in with a dying breed of not just shoppers, but gamers as well.
Now with one quick click and a card on file, BOOM you can now have the newest release on your gaming system within minutes. All while staying in your PJ’s. And that brings me to my next flaw with GS business plan. Notice another part of the equation missing? Yep, the actual disc. Another huge change in the gaming world that GS has never figured out how to recoup from.
So with the move to more digital downloads, what does Gamestop have to sell, or better yet, buy back at a ridiculously low price to then markup and sell again? Or what I refer to the “double dip” business plan. Remember who else had a similar plan? Blockbuster!
It also is something to point out that GameStop owns another brand that also shares this dwindling business plan. Peach Mac. Sure you can grab some accessories for your Apple devices, but the bread and butter for them is the resale of used items purchased for pennies on the dollar and then reselling.
In December, the company let it’s investors know that they did not expect to make its Q4 2018 numbers due to “underperformance of certain titles, weakness in pre-owned and recent sales promotions,” and a sales skew toward hardware that the company hadn’t anticipated. Or basically what I just said in the above.
I have no idea what GameStops next move is, but from the looks at the market, earning reports, and a change they don’t seem prepared or equipped to contend with, they might wanna start looking for the “reset” button.