Is this the end of video-game retailer GameStop
MTV Multiplayer caught up with Bob McKenzie, the chain's vice president of merchandising, just as store managers were gathering for their annual Expo powwow last week.
McKenzie offers up some eye-opening insight into the company's future, but I'm not entirely sure that I'm reading this the same way as the company would like.
It's deja vu all over again, Yogi
"Going forward, the store prototype will be more than double what the average square footage of a store is now," he says. With an abundance of new titles and bigger rhythmic gaming experiences, such as Rock Band and Guitar Hero: World Tour, there is a need to grow its retail space to showcase the marquee titles.
The company wants larger stores with less clutter. "The direction we want to go is making sure the female shoppers that come into our stores are not coming into a dark store that they may be intimidated shopping in," McKenzie says.
Larger, brighter stores? That sounds like booting out a RadioShack
Am I the only one being hand-dipped in pessimism and deep-fried in panic?
There's more at issue than just the square footage, of course. The closer you look, the more GameStop is starting to take on the form of Blockbuster.
For starters, there's a blase attitude toward digital delivery, reminiscent of the way Blockbuster initially dismissed Netflix
"We tell our publishers we're not afraid to compete with anybody on digital downloads," McKenzie says. As long as the publishers don't offer an "unfair advantage," such as releasing downloaded versions before physical copies hit the market or packing digital offerings with extras, GameStop will be fine, according to McKenzie.
It won't be fine, though. In fact, the things McKenzie is worried about are happening right now. You can buy a copy of Rock Band at GameStop, but then the buyer is encouraged to buy additional tracks, digitally, directly. Even if gamers bought their copy of Take-Two Interactive's
In short, GameStop is already being Blockbustered.
The weather's fine, but I'm not tanning
Doubt me if you want, but I've been one of the company's biggest cheerleaders in the past. GameStop has trounced Wall Street expectations consistently and come in well ahead of analyst profit targets in each of the past seven quarters. Its latest quarter was another scorcher -- with 35% and 162% growth at the top and bottom respectively. So why is my voice, hoarse from cheering, suddenly begging for a lozenge?
I'll give you this much. I think GameStop is going to have a killer holiday quarter. Microsoft's aggressive console price cuts are going to spur the retailer's higher-margin software titles. Encouraging laggard gamers to embrace the 360 will also help with the trade-in business, where margins are even fatter for GameStop than on the new stuff.
However, tell me whether the following statement raises any Blockbusterish flags: "As for the higher-end guitars and drum sets that will be available this fall, we will offer those [for order] when a customer comes into the store. We can order those and will have them delivered directly to the store or to the customer's home."
McKenzie is referring to spruced-up music kits, such as a $299 drum set controller that puts the standard Rock Band equipment to shame. But you read it right: GameStop won't be stocking the big-ticket items. They will be available only as special orders.
GameStop is able to sell games at full retail prices because it offers instant gratification. Gamers aren't stupid. If they can wait a day or two, they can typically pay less by ordering through online chains such as Amazon.com, where they can often even save on shipping and sales-tax costs.
A lack of in-store selection sounds like the catalyst that helped Netflix -- with tens of thousands of available DVD titles -- take on Blockbuster. The moment you walk into a GameStop and realize that it doesn't have what you want -- or that the "instant gratification" hunger can be fed with a growing array of digitally delivered games -- where will that leave GameStop?
If GameStop really thinks it will stop publishers from trying to milk more out of their titles by selling them directly, digitally, to its end users, it's wrong. If it thinks developers will pity GameStop, which has siphoned new title sales by offering a vibrant used media marketplace -- like Blockbuster -- where the publishers get nothing on the resale, it needs to take a better look in the mirror.
You're Blockbuster in two years, dude.
Prove me otherwise.
Other cheat codes to investing:
Microsoft is a Motley Fool Inside Value pick. Take-Two Interactive Software is a Motley Fool Rule Breakers recommendation. Netflix, GameStop, and Amazon.com are Motley Fool Stock Advisor recommendations. Want to play the game for free? Sure. A 30-day trial subscription is available for either service.
Longtime Fool contributor Rick Munarriz loves playing video games, but he doesn't own shares in any of the companies mentioned in this story, save for Netflix. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.