12 Mar 2012

Is this GAME Over?

Nearly two years ago I wrote an article about GAME group, the leading video game retailer in the UK. The firm had just announced that profits had slumped by a third, swiftly followed by the departure of the CEO and COO. Facing pressure from all angles, GAME needed to work quickly to turn the business around.

In the intervening two years little has changed. A plan to put the business back on track failed to make significant changes, with at most 60 stores being closed. Suppliers are deserting the business out of fear that they’re not going to be repaid, while a rent bill due later in March may bring things to a final conclusion. For many, the failure to stock big releases such as Mass Effect 3 signal the end of the chain.

So where did it all go wrong. Are GAME’s ongoing issues symptomatic of wider high street woes and a depressed economy, or is the company itself largely to blame? Will there be a future on the high street for all our entertainment, or will this hasten the shift to online-only sales?

Back at the turn of the millennium I was a university student making ends meet with some part time work at GAME. The market was a hugely different place, with home broadband connections just starting to emerge. The Sega Dreamcast was struggling to gain traction and the PlayStation 2 was starting to dominate the market. But the business relied on little competition, with neither supermarkets nor online retailers posing a significant threat.

In the decade since, the market has changed tremendously. But for each of those changes, GAME has systematically failed to respond.

The high street business is now under significant competition from supermarkets, while the lucrative preowned market is being swallowed by specialist traders such as CeX. Online customers will now head direct to Amazon. PC gamers have been lost to Steam, Origin and other direct download services.

There’s also every chance things will get worse. Publishers are looking to extinguish preowned sales through the use of single-use DLC codes, or setting up their own stores such as Origin. Consoles such as the next generation Xbox are rumoured to have no media drive, instead requiring gamers to download all games purchases. Vast swathes of new casual gamers are joining in through smartphones and tablets, yet GAME aren’t even involved with the market.

Is there a way out for GAME? Five years ago, perhaps. Their strategy of being the single retailer on the high street may have been fine before online shopping became ubiquitous, but in this day and age it’s simply not enough.

If GAME are going to remain as a going concern, they need to take rapid and urgent action. Part of that is clearing out their stock of preowned games as rapidly as possible in order to generate revenue and pay the bills. Further on, they need to drastically reduce the number of stores and remove the GameStation brand. If the core of the business can’t be profitable, it needs to be wound up as rapidly as possible.

While some are hoping for a sale to US rival GameStop, It’s only likely to be GAME’s overseas arms in Spain and the Czech Republic that get picked up, where online shopping is yet to take hold. The Scandinavian, Irish and French operations are either facing an onslaught of online retailers, or trailing in their respective markets. The UK operation would likely be wound up, as the battle against competitors has already been lost.

GAME were once bastions of British gaming. But by failing to shape the video games market they are instead being pushed out of it from all angles. By failing to adapt they are being made irrelevant. And by failing to remind the games buying public of why we should use them, they are largely being forgotten.

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3 Responses to Is this GAME Over?

  1. Alan Johnstone says:

    Nice article Gaz, and Game’s plight is quite an insight into how (not) to respond to an increasingly changing business environment.

    I’m just glad I cashed in my loyalty bonus points to get SWTOR, otherwise I’d have lost £17.00+. Hope others make sure they don’t lose out….

  2. Ironshield says:

    I like to browse in GAME, but even if I find something exciting, I’ll go home and buy it on Amazon or similar.

    • Targeter says:

      Totally agree. The secondary market is their only hope now (just like GameStop) and even that gravy train will be ending by 2013 with the new console launches; I’m sort of dubious about the new systems not using disk drives though. If the new 360 wants to become a ‘hub for all entertainment’ then it needs to be able to play Blu-rays. I’d broker that the system will have an optical drive and that disc sales will be an available (albeit diminished) market.
      Targeter recently posted..Mass Effect 3 – The EndMy Profile