I came across an incredible stat on the video game industry this morning. In just nine years, it’s gone from almost entirely physical to almost 100% digital:
Physical video game sales from computers & consoles have made a dramatic shift since 2009. In 2009 physical sales still accounted for 80% of the market and decreased to 17% a decade later in 2018. Video game consoles such as Xbox come with a 512GB or 1TB drive in addition to an optical drive. Profits and efficiency will continue to drive this market and I believe physical games will be a thing of the past. This presents a huge problem for GME over the next decade. Eventually the new consoles will come without an optical drive and the older systems will lose most of their allure causing the secondary market to dry up. Without the secondary market for games to trade and sell their used games GME will lose foot traffic in addition to a large business segment.
GameStop Corp. relies on secondhand game sales for a substantial portion of its business. There are no secondhand sales of digitally downloaded video games.
GameStop also has 5,000 physical stores that have little purpose in a world where almost all games are sold via digital download. And they’re locked into those leases for years, in many cases. This will drain capital and attention from their ambition to become an e-commerce leader.
In all, the industry has passed GameStop by and companies like Microsoft or other game publishers are in a much better position to benefit from these changes.
For more on GameStop, check out these posts:
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