Gamestop Announces Strategic partner ship with Microsoft

[milk]

This is big because these game shops are usually strongly disinterested in selling All-Digital machines since those consumers wont be coming back to buy game boxes.
MS just created a way to revert that incentive completely. Their All-Digital machine just became the MOST profitable sale for GameStop.

But MS being MS, this deal is yet another one of MS's completely US-centric moves. They can't seem to break away from their typical yankee un-worldlyness.

 

[Pete]

Their All-Digital machine just became the MOST profitable sale for GameStop.

Most profitable is probably still a disc-based machine which feeds their used games cycle, but it’s better than nothing* and probably preferable to selling just the uhh disc-less console and hoping people bother coming back into their store to pick up Xbox or GamePass gift cards, as you said.

It seems like a good play from MS.

* I guess they can still make money trading used disc-less consoles and (shudder) controllers.

 

[milk]

Most profitable is probably still a disc-based machine which feeds their used games cycle, but it’s better than nothing* and probably preferable to selling just the uhh disc-less console and hoping people bother coming back into their store to pick up Xbox or GamePass gift cards, as you said.

It seems like a good play from MS.

* I guess they can still make money trading used disc-less consoles and (shudder) controllers.

The thing is a disc-consumer may or may not buy his future game boxes at the same store he got the machine from. While 100% of games bought by a consumer of a Series S from gamestop are GUARANTED to give them royalties.

 

[AlphaWolf]

Buying a console with a drive in no way guarantees they will buy disc based games. They might just want it for the back catalog they already own.

 

[eastmen]

So a retail chain already renowned for trying to sell customers what they don't want, will do it even more. As with all things like this, it looks weird from the outside but it's difficult to see the industry economics at play. Microsoft surrendering income for certain revenue streams in perpetuity is huge though. How much it'll help Gamestop in the long term is unknown. I think we all know that the days of B&M videogame stores are numbered. You'll always be able to get consoles and games at retail, but shops focussed on only this market are doomed.

it doesn't even have to be this . Sony used to pay gamestop money to have their consoles up front in the store. Now I am sure the stores will be redone with the Xbox in the ideal spots . I would also wager that Gamestop will do more xbox advertising in its windows and stores a long with having more or a better demo location set up for it.

Gamestop has already trialed concept gamestops that focus more on CCG and table top along with a retro type store. They are also supposed to start carrying more pc stuff. If anything Gamestop can now keep a smaller foot print of traditonal console gaming because they make money off digital. It will remove a large inventory and time sink for them.

 

[Silent_Buddha]

Really failing to see how this benefits MS, beyond selling a few more Xbox consoles.

Depends on how many new consumers this brings into the Xbox ecosystem versus how many already existing Xbox consumers buy a system at GameStop.

• New consumer entering Xbox ecosystem that wouldn't have otherwise is a pure win.
• Keeping a consumer from leaving the Xbox ecosystem kind of a win.
• Existing Xbox user getting an all access Xbox at GameStop is lost revenue.

Plus GameStop has also committed to using Azure cloud services and Surface devices as part of the deal. So some of that revenue that MS lost due to GameStop getting a share of all future digital content purchased for that Xbox will filter back to them. If GameStop were previously not using Azure, that's a sort of win as well. Likewise with moving more Surface devices.

And the biggest thing is that it's difficult finding partners to sell the All Access plan as the returns aren't great if the consumer isn't buying their games at the place they bought the All Access Xbox. This is similar to revenue lost at Retail when a consumer buys games on physical media versus digital. MS may just be sharing the revenue difference between a digital sale and a physical retail sale, or even just part of that difference, with GameStop.

So in terms of making All Access more easily accessible by the general public, this is a huge win.

This is big because these game shops are usually strongly disinterested in selling All-Digital machines since those consumers wont be coming back to buy game boxes.
MS just created a way to revert that incentive completely. Their All-Digital machine just became the MOST profitable sale for GameStop.

But MS being MS, this deal is yet another one of MS's completely US-centric moves. They can't seem to break away from their typical yankee un-worldlyness.

It may be about MS being US centric or not. The deal is fairly complex with not just revenue sharing but reciprocal use of MS products and services by GameStop.

To accomplish something similar in another country would require finding a large enough specialty console game retailer that wants to enter into that type of partnership. And then of course, there's navigating any potential regulatory hurdles and all that kind of stuff.

Plus, if it's just an experimental pilot program it helps to limit it to one region to see if it's desirable to expand it into other regions or not. While MS does have a lot of cash to spend, they are generally pretty conservative with how they spend it (Bethesda notwithstanding). Meaning that while they don't mind spending on some risky venture, they don't generally go ALL IN on the risky venture right from the start (Nokia notwithstanding ).

Regards,
SB

 

[eastmen]

what if this is just a precursor to MS buying GameStop ? In the bethesda thread i talked about maybe MS buying Time Warnet /AT&T and getting a large store foot print.

But MS could do the same with gamestop. Buy game stop for 1B (its valued under it right now ) There are over 5,000 in the usa and may more across the globe. MS can do what i said in the other thread. Make it into a gamestop / microsoft store and bring in surface products and surface repair which is really what the draw of the microsoft stores were anyway.

This could be MS testing the water on how smart of an idea it is. if gamestop doesn't really move the needle in terms of xboxs sold then it may not be worth it. But if it does they might purchase it

 

[Eolirin]

Depends on how many new consumers this brings into the Xbox ecosystem versus how many already existing Xbox consumers buy a system at GameStop.

• New consumer entering Xbox ecosystem that wouldn't have otherwise is a pure win.
• Keeping a consumer from leaving the Xbox ecosystem kind of a win.
• Existing Xbox user getting an all access Xbox at GameStop is lost revenue.

Plus GameStop has also committed to using Azure cloud services and Surface devices as part of the deal. So some of that revenue that MS lost due to GameStop getting a share of all future digital content purchased for that Xbox will filter back to them. If GameStop were previously not using Azure, that's a sort of win as well. Likewise with moving more Surface devices.

And the biggest thing is that it's difficult finding partners to sell the All Access plan as the returns aren't great if the consumer isn't buying their games at the place they bought the All Access Xbox. This is similar to revenue lost at Retail when a consumer buys games on physical media versus digital. MS may just be sharing the revenue difference between a digital sale and a physical retail sale, or even just part of that difference, with GameStop.

So in terms of making All Access more easily accessible by the general public, this is a huge win.



It may be about MS being US centric or not. The deal is fairly complex with not just revenue sharing but reciprocal use of MS products and services by GameStop.

To accomplish something similar in another country would require finding a large enough specialty console game retailer that wants to enter into that type of partnership. And then of course, there's navigating any potential regulatory hurdles and all that kind of stuff.

Plus, if it's just an experimental pilot program it helps to limit it to one region to see if it's desirable to expand it into other regions or not. While MS does have a lot of cash to spend, they are generally pretty conservative with how they spend it (Bethesda notwithstanding). Meaning that while they don't mind spending on some risky venture, they don't generally go ALL IN on the risky venture right from the start (Nokia notwithstanding ).

Regards,
SB

Hey now, they definitely didn't go all-in on Nokia right from the start. If they had, Windows Phone might have done better. They really dragged their feet on that one, only going all in when Nokia was getting ready to ditch them for Android.

 

[cheapchips]

what if this is just a precursor to MS buying GameStop ? In the bethesda thread i talked about maybe MS buying Time Warnet /AT&T and getting a large store foot print.

But MS could do the same with gamestop. Buy game stop for 1B (its valued under it right now ) There are over 5,000 in the usa and may more across the globe. MS can do what i said in the other thread. Make it into a gamestop / microsoft store and bring in surface products and surface repair which is really what the draw of the microsoft stores were anyway.

This could be MS testing the water on how smart of an idea it is. if gamestop doesn't really move the needle in terms of xboxs sold then it may not be worth it. But if it does they might purchase it

Nah. Retail is dead. Dead I tell ya!

 

[eastmen]

Nah. Retail is dead. Dead I tell ya!

For some product yes. But retail is changing. For someone who uses a computer for work or school getting it fixed same day or replaced same day will always be important.

 

[Deleted member 11852]

For some product yes. But retail is changing. For someone who uses a computer for work or school getting it fixed same day or replaced same day will always be important.

Remember that Microsoft closed 83 retail stores earlier this year. COVID has resulted in a lot of retail space becoming free so it would be a waste of money buying another company for their retain space, they can get retail space cheap right now.

 

[eastmen]

Remember that Microsoft closed 83 retail stores earlier this year. COVID has resulted in a lot of retail space becoming free so it would be a waste of money buying another company for their retain space, they can get retail space cheap right now.

They can get retail space cheap yes , but a lot of people still use gamestop as their primary purchase point. For many its a trusted brand. more importantly they have an existing staff to run 5k locations. MS would have to build that out on their own. Servicing 83 stores is a lot different than 5000

 

[Deleted member 11852]

They can get retail space cheap yes , but a lot of people still use gamestop as their primary purchase point. For many its a trusted brand.

I thought GameStop's reputation was largely crappy prices on used games and trying to sell you things you don't want at checkout. When did it become a trusted brand?

 

[eastmen]

I thought GameStop's reputation was largely crappy prices on used games and trying to sell you things you don't want at checkout. When did it become a trusted brand?

there are a lot of people who only shop at gamestop.

Selling stuff you don't want at check out is what retail does now. MS can easily stop it if they want

 

[Deleted member 11852]

Selling stuff you don't want at check out is what retail does now. MS can easily stop it if they want

It still makes no sense. Microsoft chose to close 83 stores months before launching their new console. Closing stores then buying a retail chain suggests zero planning or strategy.

 

[eastmen]

It still makes no sense. Microsoft chose to close 83 stores months before launching their new console. Closing stores then buying a retail chain suggests zero planning or strategy.

Microsoft stores had a lot of issues. They had huge foot prints and sold a small selection of hardware and software. The stores themselves were built to be experience centers like 13 years ago and so they had theaters for large events which for most of the day or week was dead space and in some malls that space would be almost $200 per sqf . Game stops are typically hole in the walls while microsoft stores are larger sometimes 3-4 times the size of a game stop.

The staffing is also different than a gamestop.

Gamestop you have sales associates making minimum wage. Leads making $10 an hour , ASMs at $12 to $14 and hour and managers making 50k. only ASM and Managers have benefits. Typical gamestop has less than 10 staff that might swell to 15 during the holdiay

MS store you have Product advisors making $15 an hour or more , Specialists making $20+ an hour , Service advisors making $25+ an hour . Then you have management. You have a learning specialist making 50k+ , Community Manager making 50k+ , up to 4 ASMs making 60k+per store and store manager making 100K+ a year. all get benefits typical staff per store is 30

There are vast differences between the two operations. Microsoft made a smart choice , the stores had been closed for 3 months just sitting there and they had done remote operations giving bonuses for those who would work from home. So they reskilled and are reskilling a lot of workers. Now they can unload costly leases they made years ago when retail was still doing well.

 

[Deleted member 11852]

Microsoft stores had a lot of issues. They had huge foot prints and sold a small selection of hardware and software. The stores themselves were built to be experience centers like 13 years ago and so they had theaters for large events which for most of the day or week was dead space and in some malls that space would be almost $200 per sqf .

And many of their stores were opened in the last few years and in the case of London, last year. Microsoft were chasing Apple's retail success. If want want retail success you need to be offering what the public want where high amounts of retail customers go or you need to be the only option in town. Gaming retail is dwindling and outlets like Walmart will mean GameStop is rarely the the only option. Why on earth do Microsoft want to be dealing with smaller retails stores where the economics and even more challenging.

 

[Johnny Awesome]

MS should not buy GameStop.

 

[eastmen]

And many of their stores were opened in the last few years and in the case of London, last year. Microsoft were chasing Apple's retail success. If want want retail success you need to be offering what the public want where high amounts of retail customers go or you need to be the only option in town. Gaming retail is dwindling and outlets like Walmart will mean GameStop is rarely the the only option. Why on earth do Microsoft want to be dealing with smaller retails stores where the economics and even more challenging.

You really never listen to what I have to say because your busy trying to prove your own point.

1) Yes London opened last year but MS closed 32 kiosk locations for its stores in the USA last year

2) The main benefit would be rapid exchanges on Microsoft product. The biggest draw to a microsoft store was its answers desk. That drove the business with people using complete to swap out their computers and to also have software issues addressed. MS would be able to use the 5k locations of gamestop to offer complete exchanges on their devices.

3) I think you don't understand how big microsofts stores are in terms of foot print. A microsoft store isn't just the front portion of the store which depending on location would be many times bigger than gamestop. But gamestop's typically have small walk in closet sized backrooms with a bathroom and thats it. Microsoft has a complete kitchen area able to hold 30 people complete with lockers and a managers office. They then have 2 very large bathrooms about the size of a gamestop back room. Then they have a server room about the size of a gamestop backroom. They have a specilst office and finally an inventory room that itself is about the size of a gamestop.

They over built and over leased in every way and the majority of microsoft stores are in malls that demand huge rent. A lot of gamestops are in strip malls that have much lower rent requirements


4) Microsoft still has Microsoft stores they have 4 or 5 they are keeping open including london , nyc and hawaii

 

[Deleted member 11852]

You really never listen to what I have to say because your busy trying to prove your own point.

I'm listening, you're just not saying anything that changes my view. Retail across the board is dwindling and the niche that is videogames stores has been shrinking faster than most other types of retail which is the inevitable consequence of video games content favouring digital-only over physical.

While that doesn't mean the physical market is completely dead, it does call into question whether running a nationwide retail chain is a cost effective way to deal with them when other options like Walmart and other outlets cater to that market already and are doing better by virtue of diversity of products.