Gamestop Announces Strategic partner ship with Microsoft

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.

 

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.

 

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.

 

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.

 

Nah. Retail is dead. Dead I tell ya!

 

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.

 

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?

 

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.

 

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.

 

MS should not buy GameStop.

 

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.