Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Comcast's Newest Service Is Another Troubling Sign for GameStop

Comcast (NASDAQ: CMCSA  )  could soon allow its subscribers to purchase and play video games through its X1 cable box, according to Reuters. Comcast's technology will leverage its status as the nation's largest Internet provider to beam video games from distant servers to its subscribers' TVs.

While this development poses an obvious challenge to the existing console creators, the company that could be most disadvantaged is GameStop (NYSE: GME  ) . If anything, Comcast's new service illustrates the inevitability of digital distribution.

GameStop's business depends on the sale of physical video game discs
Although GameStop has begun to branch out into new areas, its business remains fundamentally based on the sale of physical video game discs. Last quarter, more than half of GameStop's revenue and two-thirds of its profit came from video game software, both used and new.

The increasing shift toward digital distribution, then, stands as an existential threat. As with the retailers that preceded it (Blockbuster, Borders Books, Tower Records, etc.), Internet distribution threatens to make GameStop's core business model irrelevant. Downloading or streaming games over the Internet removes the physical disc -- and therefore, GameStop -- from the equation entirely.

Comcast's video game ambitions
Comcast's newest cable box is (relatively speaking) a technological breakthrough. More than just a way to access paid-TV content, Comcast's X1 is a cloud-based platform, giving subscribers access to an online video store, Web apps, and voice commands.

Video games appear to be next. Like ordering a movie, Comcast could soon allow its paid-TV subscribers to rent and purchase the latest and greatest video games. Comcast's cable box lacks the high-tech processing power available to owners of the Xbox One and PlayStation 4, but by relying on its high-speed network, Comcast could eventually make the concept of a dedicated console obsolete.

Of course, GameStop will play no role in Comcast's video game ambitions. Presumably, Comcast will take its distribution cut, and pass the rest to developers. As a cloud-based service, the games played on Comcast's network will be fully digital -- there will be no discs whatsoever. Gamers using this service will not head to GameStop to pick up the newest releases; obviously, they won't have the option to trade the game back to GameStop when they're done.

Comcast isn't alone
Of course, by itself, the threat posed by Comcast is admittedly limited. Comcast is the largest paid-TV provider in the U.S., but it only has 22 million subscribers -- there are many gamers who couldn't get Comcast even if they wanted to. Moreover, for the time being, Comcast will only offer games from a single publisher: Electronic Arts. Most important, the quality of the service remains to be seen.

But Comcast is not alone in this endeavor. PlayStation Now, another video game streaming service, will debut in the coming months. Meanwhile, console creators continue to go out of their way to encourage digital distribution, adding in features like preloading, and offering discounts on digital games.

Will Comcast's new service kill GameStop's business? By itself, probably not. But it's yet another sign that video game distribution is going digital. With Comcast now actively contributing to the industry's transition, GameStop's future remains uncertain.

Comcast's video game ambitions could help reverse this troubling trend
Why is Comcast moving into video gaming? Could it help stave off a cord-cutting revolution? It looks like cable is going away -- but do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 05, 2014, at 10:50 PM, eatnaders wrote:

    Comcast has no way of providing highly intense gaming experiences that consoles provide users now. This is no possible with the X1 technology and a Cloud based streaming platform. You need a very advanced console/set top to provide unique gaming experiences that will benefit all forms of gaming. Not only that who wants to use an iPad or iPhone as a controller?

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2943424, ~/Articles/ArticleHandler.aspx, 8/29/2015 7:55:04 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Sam Mattera

Sam has a love of all things finance. He writes about tech stocks and consumer goods.

Today's Market

updated 22 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:00 PM
CMCSA $56.78 Up +0.01 +0.02%
Comcast Corp CAPS Rating: ***
GME $42.49 Down -3.71 -8.03%
GameStop CAPS Rating: *