Video game rental specialist GameFly is flexing its wings. The company is acquiring Shacknews, a popular provider of video game news and reviews.
The buyout is a shrewd move. In the past, new and old media companies have been the most typical purchasers of their fellow content sites. News Corp. (NYSE:NWS) bought IGN four years ago, a few years after CNET -- now in the CBS (NYSE:CBS) family -- gobbled up Gamespot.
Call me a contrarian, but I think content sites look even better on the arm of service providers and merchants. I believe that Amazon.com's (NASDAQ:AMZN) purchase of movie site IMDB.com 11 years ago was brilliant. As long as you can avoid scaring away content-site communities who fear their beloved hub's imminent commercialization, who wouldn't want to get to know their target audiences a little better?
We don't write much about GameFly around here, because it's privately held. The only real shock to me is that the niche leader in giving the Netflix (NASDAQ:NFLX) DVD mail rental model a video-game twist isn't already public.
I'm not talking about an IPO. I don't know GameFly's finances, and this is a lousy climate in which to wade into the chilly IPO waters. I'm just surprised that a larger company hasn't snapped it up already.
I can think of at least three companies -- Netflix, Amazon.com, and GameStop (NYSE:GME) -- that would be ideal suitors. Blockbuster (NYSE:BBI) and Wal-Mart (NYSE:WMT) aren't that far away, either.
Netflix and Blockbuster already have the distribution centers in place, and Blockbuster rents video games at its stores. Specialty retailer GameStop would love to have regular contact with diehard gamers. Wal-Mart has a spotty history when it comes to media rentals, but it's too big a juggernaut to dismiss. Amazon once had dreams of taking Netflix on in DVD rentals, settling for a short-lived venture abroad instead. Thus, it's only natural for Amazon to want to beat Netflix on the video game front.
Netflix is the suitor that makes the most sense. However, when I asked him in the past, CEO Reed Hastings dismissed the notion of entering the video-game market.
Fair enough. Video games cost more than DVDs, new releases age quickly (especially sporting titles), and gamers aren't always gentle when it comes to scratching discs. However, GameFly wouldn't still be in business if it weren't doing something right. Any of the five potential buyers I singled out would be able to grow the GameFly subscriber base quickly.
Who will it be, if any at all?
Other cheat codes to investing:
- I have written about how Netflix belongs in this market many, many, many times.
- I have three similar stocks that I think will beat out GameStop.
- Want to play? Here's your shot to score big.
