There’s been a big shakeup in the game industry recently, with the addition of a new CEO. The company’s previous CEO, Mike Mauler, lasted three months before stepping down. The company has been successful in cutting costs, but its margins are still lower than they were pre-pandemic. And while the company still sells physical products like games, it’s transitioning to digital sales.
As consumers migrate to digital distribution, game stores like GameStop are feeling the pinch. Digital game downloads have been increasing for years, and consumers are getting their games straight from the distributors, eliminating the need to spend money on physical game stores. Sony, for example, pulled all digital products from GameStop stores this year, and the trend is expected to continue for the next few years. As digital gaming becomes more affordable and accessible, GameStop is looking to maximize cash flow and return profit to shareholders expotab.
In the past, gamers would gather outside GameStop stores to buy new games. Digital games, however, don’t require lines, and are available instantly. Many people no longer buy physical games anymore. Rather, they simply download the game on their computer or smartphone. It’s an obvious transition for game makers, but GameStop isn’t ready to lose that market. Its digital store strategy and inconsistent public finances may be the reason why it’s facing trouble in the future buxic..
The company needs to shift its business model to a gaming cafe. Its current business model relies on trade-ins to generate profits. While it does make 46% of its revenue from used games, that’s not enough in the digital age. The company should focus on improving cash flow and returning it to shareholders, rather than attempting to compete against online stores. And it needs to make a radical shift in its strategy.
The company is already closing a number of stores. In addition to its existing locations, it has also acquired the Spring Mobile company. This business bought hundreds of AT&T storefronts, resulting in more than 1,500 mobile-phone stores under the Spring Mobile brand. Though the stores were initially supposed to generate $1 million apiece, they ended up costing the company over a year and a half. Despite this setback, GameStop is still cash-flowing and debt-free.
GameStop’s CEO boasts that the company is complex and complicated. Having 7,000 stores around the world, the company has become the world’s largest video game retailer, with a market cap of $2.5 billion. While it continues to generate a decent return on equity, GameStop is a slow-moving vice. Secular trends in the digital age have squeezed the company. Its stock price is now up 28%, and its sales have fallen by 15% in the last year.
Another reason that GameStop could go out of business is the changing nature of the video game industry. Digitalization has impacted revenue generation in the video game industry, and the company is facing a huge headwind with regard to digital sales. As a result, GameStop’s stock price could drop below $5 in 2020. If the company fails to restructure, it may continue to suffer livechatvalue.
