The game industry, in general, is reeling from huge downturns in profits due to lagging sales and anticipation for next-gen machines. But in the face of all this bad news, one company seems to be holding their own, if not actually succeeding in their efforts. It isn,t a game company and it isn,t a game developer. It is none other than the retail game store giant, GameStop.
GameStop announced today, in a first quarter earnings conference call, that it was able to pull in an astounding 1.04 billion dollars in revenue. This figure beats last year,s first quarter results by more than 100%. In 2005, GameStop reported revenues of $475 million.
The increase was attributed to more Xbox 360s being made available to the public and the resulting increase in software sales connected to the next-gen console. David Carlson, CFO said, "Square Enix’s Kingdom Hearts II topped the best-seller list for the quarter, with two Xbox 360 titles, Elder Scrolls IV: Oblivion and Ghost Recon: Advanced War Fighter, showing the acceptance of the 59.99 price point with our Xbox 360 customers.”
While these blockbuster titles have been selling at the higher next-gen game price of $59.99, it can be argued that these are the exceptions rather than the rule.
Last year, GameStop bought out EB Games to form the largest gaming-only retail store in the world. All EB stores were gradually converted over to the GameStop system. Dick Fontaine, CEO of GameStop remarked upon the merger by saying:"While there is more work that needs to be done to fully complete the merger, we have concluded many critical facets of the integration, including the roll out of GameStop’s inventory management system to EB stores, applying best practices to the company’s operations, the closing of the West Chester general office and the Coatesville distribution center, and restructuring of field management. We continue to have great confidence in our new and used business model as an earnings driver while the industry moves through the transformation to multiple new hardware platforms."
The ‘used business model,, Fontaine is referring to, is the used game market that has been cornered with the merging of EB and GameStop. According to business industry estimates, the used video game trade brings in more than 800 million dollars a year. Although most new game sales are waning, the emergence of used video games has bolstered an otherwise lagging game economy.
The fact that used games are big business may be an indication of consumers speaking their minds through their wallets and pocketbooks. Games are getting too expensive to purchase. Present-gen games normally featured launch prices of $50. With the new next-gen titles coming on board, that figure has now increased to $60.
The magic bullet that the game industry has been seeking to cure its business woes may be nothing more than making games that are more affordable.
