GameStop continues to struggle in face of digital downloads: cuts jobs, misses earnings estimates

[midian182]

In brief: Physical video game sales have been declining in favor of digital downloads for years. That's bad news for GameStop, which just announced that it has cut more jobs to reduce costs and reported lower-than-expected fourth-quarter results.

GameStop posted $1.79 billion in revenue for the fourth quarter, short of the expected $2.05 billion and lower than the $2.23 billion the company earned in the same quarter a year earlier. Its adjusted EPS of $0.22 per share also missed the expected gains of $0.30 per share.

Shares of GameStop crashed 17.6% yesterday and are currently at $12.60.

GameStop's share price over the last five years. From $63.41 to $12.60

Digital downloads are killing physical game sales, which in turn is having a massive impact on traditional brick-and-mortar stores like GameStop. It's a similar story in the UK, where the country's largest video game retailer, Game, this year announced it is ceasing its pre-owned and trade-in operations.

GameStop is implementing cost-reduction measures to try to streamline its business. The company has already ended its operations in Ireland, Switzerland, and Austria, and has been cutting jobs.

Reuters reports that GameStop had about 8,000 full-time salaried and hourly associates and between 13,000 and 18,000 part-time, hourly associates worldwide as of February 3. In 2023, it had 11,000 full-time salaried and hourly employees and between 14,000 and 27,000 part-time hourly employees. The lower costs of labor, consulting services, and marketing saw its expenses fall 21.2% to $357.1 million.

The biggest concern for GameStop is that there will come a time when it cannot feasibly cut any more costs and its sales will continue to decline to a point where the business is unsustainable. The retailer is also facing increasing competition in the physical gaming space from Amazon and eBay.

One platform where physical games remain more popular than their digital alternatives is the Nintendo Switch. Nintendo's most recent quarter saw it generate $1.22 billion from physical game sales, representing 55% of the total. Digital sales, which include in-game purchases, full-game sales, and subscriptions to Switch Online, were at $914 million, or 45% of the total.

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https://www.techspot.com/news/102408-gamestop-continues-struggle-face-digital-downloads-cuts-jobs.html

 

[loki1944]

Sad but not surprising

 

[amghwk]

I'm sad that the gaming scene has come to this. Digital downloads, and your ownership of the games are questionable.

Back then, it was fun buying or even just browsing all those big boxed PC games. With full printed thick manuals.

It's too late to worry about it now, but I'm glad that I lived through the true golden age of gaming back then.

 

[bviktor]

Does GS sell used console games? They should focus on those. As long as we have consoles with a disc tray, there'll be a market for them.

 

[VitalyT]

If you haven't watched 2023 movie "Dumb Money", then you don't know anything about the mega pump-and-dump that was executed against GameStop. It's quite a story, you should watch it

 

[Uncle Al]

I'm surprised it's stock price is as high as it is .... they have certainly suffered and not necessarily at their own hands ....

 

[Neatfeatguy]

Does GS sell used console games? They should focus on those. As long as we have consoles with a disc tray, there'll be a market for them.

Rumor is next gen consoles will be without disc drives. Who knows if that is true or not, but I could see it happening because the console companies want to move everything to digital. No disc drive means less overhead costs on a console, too. Cut out that $30 or so in a disc drive and keep selling the consoles at the same price they are now ($500 ish). Less over head cost on the console means the manufacturer is keeping more money in their pockets.

I miss the days that Gamestop actually bought and sold older consoles and games. Even during the start of the PS2 era you could go into a local Gamestop and still be able to haggle with a NES/SNES/Genesis/Gameboy/etc systems and even games for them. You even used to be able to buy/sell DVDs.....this is where I found the first 4 volumes of Futurama. Physical copies of PC games were also available at the stores. It was awesome!

Then the old systems/games were no longer sold and people couldn't sell/trade them in anymore.
Then they stopped dealing with DVDs.
Then physical PC games started to fade out and eventually they were dropped.
You can only find current and previous console gens/games at the stores (last I checked, but it's been 5+ year since I last set foot in a GS store)

GS tried to get into the digital side of things when it purchased Impulse (originally created by Stardock - the group that brings you the Galactic Civilization games) to try and keep up with the Joneses (Steam). But that quickly fell through and was abandoned. Think of this move from GS kind of like Blockbuster's move into the streaming world way after Netflix had established a strong foothold. It was too little, too late.

There is no new thing Gamestop can do to regain their once dominant position in the video game market. They were too slow to get with the digital side of things and they alienated the retro side of things and just kind of pigeonholed themselves. It's a lost cause.

 

[GoldenGoat]

Gamestop's problem isn't that digital downloads are replacing physical. Their problem is that the console makers have all given themselves monopolies over digital storefronts because they can technically do so. Just like Apple has done on phones. They are limiting competition to keep prices up and take all the profits for themselves.

 

[Theinsanegamer]

Gamestop's problem isn't that digital downloads are replacing physical. Their problem is that the console makers have all given themselves monopolies over digital storefronts because they can technically do so. Just like Apple has done on phones. They are limiting competition to keep prices up and take all the profits for themselves.

How would allowing alternative digital download stores help Gamestop? They dont have a digital storefront you know....

The company is dead in the water, granted artificial life after the 2021 short squeeze. Much like saddle manufacturers and home coal delivery, gamestop is a relic of the past.