{"id":26071,"date":"2017-11-15T21:40:06","date_gmt":"2017-11-16T02:40:06","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/digitization-of-video-game-supply-chain-distribution-model\/"},"modified":"2017-11-15T21:40:59","modified_gmt":"2017-11-16T02:40:59","slug":"disruption-of-video-game-retailers","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/disruption-of-video-game-retailers\/","title":{"rendered":"Disruption of Video Game Retailers"},"content":{"rendered":"

\"\"<\/a>\"\"<\/a><\/em><\/strong><\/p>\n

Issue<\/em><\/strong><\/p>\n

How will digital innovation in the video game supply chain impact traditional brick and mortar gaming retailers like GameStop?<\/p>\n

\u00a0<\/em><\/strong><\/p>\n

GameStop relies on the traditional brick-and-mortar distribution model for video games <\/em><\/strong><\/p>\n

Historically, GameStop played a key role in the video game industry\u2019s $21B ecosystem by providing game publishers access to consumers via their network of ~7,000 brick-and-mortar physical retail storefronts and a salesforce of ~20,000 sales associates. Publishers relied on retailers to drive sales, execute marketing programs, promote brand advocacy, and manage inventory & returns. In exchange for these services, retailers earned high margins on the sale of video games. In addition to the sale of new games, retailers also relied heavily on used \u201ccatalogue\u201d game sales which represented a significant portion of earnings at ~48% of gross profit1<\/sup>.<\/p>\n

In 2017, GameStop reported a 16.4% revenue decline during their peak holiday season and announced 3%-10% in operating income decline expected for 20172<\/sup>.<\/p>\n

Headwinds facing GameStop and other brick-and-mortar video game retailers can be attributed to the digitization of the video game distribution model. Is GameStop destined to become the \u201cBlockbuster\u201d of the video game industry?<\/p>\n

\u00a0<\/em><\/strong><\/p>\n

The new digital distribution model for video games <\/em><\/strong><\/p>\n

Gamers no longer need to travel to physical brick and mortar retailers to purchase new or used games. Gamers can now access games by purchasing them via digital downloads or streaming directly from game console publishers like EA, Xbox, and Playstation. Consumers can bypass the traditional retailer and unlock greater value in a more convenient way through the following digital offerings:<\/p>\n

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  1. EA Access: For $4.95 per month, users have access to the EA \u2018Vault\u2019 which is comprised of over 45 popular EA titles. In addition to the game library, there are also early access benefits and discounts on game purchases. EA\u2019s Play First Trials give members of the service the chance to download and play new release EA games before anyone else3<\/sup>.<\/li>\n
  2. Xbox Game Pass: A Netflix-style subscription service which gives access to more than 100 Xbox One and Xbox 360 games for a monthly fee of $10.95. The catalogue of games will be refreshed every month with new games added \/ removed. GameStop shares fell by 8 percent upon the announcement of Xbox Game Pass as it is expected to have a negative impact on GameStop\u2019s second-hand sales4<\/sup>.<\/li>\n
  3. Xbox LIVE and Backwards Compatibility: Online multiplayer and digital media delivery service owned and operated by Microsoft. LIVE is available as a free and fee based subscription which offers: free-to-play games, Games with Gold (access to suite of new games every month), and Deals with Gold (access to monthly discounts on games) 5<\/sup>.<\/li>\n
  4. Playstation Plus: For $9.99 per month, users have access to Sony\u2019s digital media entertainment service which provides an online marketplace, enhanced gaming and social features, rentals, and purchases6<\/sup>.<\/li>\n<\/ol>\n

     <\/p>\n

    How GameStop is fighting back <\/em><\/strong><\/p>\n