How Could the PS5 and Xbox Series X Be Affecting GameStop's Sales?
As GameStop enters the new calendar year, questions linger as to its future in the video game industry and to its future as a corporation in general. After posting substantial net losses quarter after fiscal quarter, GameStop might be in a tight spot. 2020 is an especially significant year for the company as the new generation of gaming consoles is scheduled to launch during the holiday 2020 season, meaning that GameStop might potentially build up enough momentum and fiscal profits to sustain itself through the foreseeable future.
It does not only have strong competition from the likes of Amazon, Best Buy, and Walmart, but the PS5 and Xbox Series X will also pose a threat due to the consoles’ various focuses on streaming and digital tech. This of course means that GameStop has no choice but to engage in the profits of its potential competitors, Sony and Microsoft.
Digital sales of games now account for a significant portion of total sales in a given title’s life cycle, therefore all Sony and Microsoft have to do is simply sell the consoles to consumers with an internet connection. Console companies cannot just cut out the middleman in GameStop, however, without potentially missing out on one of the largest sources of income the companies see every year. GameStop has several thousand stores set up across the entire world and has thousands of employees.
By minimizing GameStop’s involvement in console sales, the console manufacturers could seriously hinder many people’s ability to purchase video games and gaming consoles. Simply put, for the millions of people across the various wide and spread-out areas of North America alone, GameStop is still a major company for video games.
Still, GameStop has been in a near-perilous position in regards to its sustainability in recent years. When the PS4 and Xbox One were first announced in the first half of 2013, there was a general belief among gaming press and consumers that these new consoles would prohibit the use of used games, with Microsoft going so far as to temporarily confirm these suspicions early on. Seeing as how the sale of used games is the lifeblood of GameStop’s profits, it perhaps had dodged a bullet when Sony had announced during E3 2013 that used games would in fact be playable on the PS4, subsequently pressuring Microsoft to reverse course on its decision to block used games on its platform.
With the new-found reassurance that used games would live on, GameStop managed to stand on its own feet for a few years after the PS4 and Xbox One’s launch. In 2015, it had acquired merchandising retailer ThinkGeek for 37 million dollars in an attempt to bolster its portfolio of retail sales, only to later close the acquired company in 2019. In 2016, GameStop opened a game publishing division called GameTrust. It would publish few titles, one of which was Insomniac Games’ Song of the Deep, that year which was also the last year the company published anything. After poor holiday 2016 sales, the company also closed over 100 stores across the U.S.
One controversial aspect of GameStop’s business practices was the harsh employee incentives program known as Circle of Life, in which employees were graded on a scale that reflected how many used games were sold, new PowerUp memberships on-boarded, and how many trade-ins they could procure. Lower grades sometimes came at the cost of an employee’s job. After reports of these practices became more known in 2017, GameStop announced that it would alter the program but the effect on its reputation lingered.
Though 2017 saw great success for the company from the launch of the Nintendo Switch, problems continued to persist. Console launches play a major role in keeping GameStop afloat, but the struggles continued in 2018 and 2019, leading to the early 2018 talks of a buyout. When GameStop announced in 2019 that its efforts to sell itself were unsuccessful, it could only continue to go downhill.
Going into 2020, the company’s future is not looking too great. With the PS5 and Xbox Series X less than a year from launch, it has to do its best to capitalize on the event. After all, consoles launches are enormously important for its bottom line, even if the anticipation for the PS5 and Xbox Series X causes some struggles.
With reports of the company redesigning some of its stores, closing a bunch of others, and posting another loss in the most recent quarter (in the form of 400 million dollars), one thing seems true - GameStop is on the ropes and it needs the PS5 and Xbox Series X to come quickly.
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