Today, GameStop announced the company is not in trouble despite the rise of digital distribution of games. Most of everyone to hear this news accepts it and some think the days of going to the store to buy a game are numbered. Is GameStop doomed to be run out of business by digital distribution much like the movie rental chain Blockbuster once was? Or will the company weather the storm? The answer is more complex than one or the other.
In the last decade, digital distribution has become king of many mediums. iTunes and other online music stores dominate the music market. 2013 marked the first year that digital sales outnumbered physical copy sales. Netflix currently has over 44 million subscribers worldwide (and if you freeload on friends’ accounts like I do, you’ll know the number of Netflix users could be up to triple that amount). Steam is an absolute force of nature. Of the more than 75 million active users, up to 8 million can be found online at any given time. Steam offers thousands of games and grants the producers of each game 70% gross off of each purchase, while retail only offers 30%.
There is no question that digital distribution is king and will soon control the majority of the game sale market. However, this may not mean GameStop’s lifespan is coming to an end. In 2013, GameStop grossed a whopping $724.4 million in digital sales alone. The company offers codes for digital downloads in store and has moved on to provide PC downloads for customers. Basically, GameStop is learning from Blockbuster’s mistakes and moving on with the times.
So the company itself is safe for now, but it must decide whether keeping as many branches to sell hardcopies and employing the staff to do so is worth it. If you work at GameStop, you may want to start looking into another job.
While moving on to digital distribution is saving GameStop for the short term, the company still must face the competition in the digital market. Steam currently covers 70% of all pc download purchases. With other strong competitors like Origin, this leaves little breathing room for GameStop. The company’s survival is up in the air right now, but for different reasons than you might think.
