GAME over on the High Street?

 
GAME store

Last November Call of Duty: Modern Warfare 3 became the fastest selling entertainment product ever, with excited gamers queuing at High Street stores to pay over £40 for their fix. Spool forward to Monday, and the UK's best known games retailer Game Group has told its investors their shares may be worthless as it struggles to survive. So how do we reconcile these two pieces of news?

First of all, despite the success of blockbusters like Call of Duty, it has been a tough 12 months for the games industry - or at least for those parts of it relying on traditional console games. With no major new console launches - the year was described by Game Group as a "cyclical low point in the industry" - there has been a shortage of reasons for gamers to restock with new titles.

UKIE, the trade body for the UK games industry, described 2011 as "a challenging year for the boxed product video games market" with sales down 7% on the previous year. For High Street retailers like Game, it was probably even more challenging - the UKIE figures include online sales from the likes of Amazon and Play.com, and anecdotal evidence suggests that this is where gamers are directing more of the cash they spend on console games.

And even when a hot new title comes out, High Street shops find that their profit margins are under threat from supermarkets offering cut-price deals. The games industry site MCV quoted one independent firm describing the discounting from supermarkets and online retailers as "serious and suicidal".

But what makes the outlook for any company trying to sell games on the High Street even darker is the fact that the digital revolution is finally sweeping through this industry. The industry has been able to hold on to physical sales for longer than seemed likely, but now digital downloads are gradually taking over, and, just as in the music business, that is leaving casualties behind.

Call of Duty Blockbuster games are money-spinners

From digital distribution platforms like Steam to smartphone apps and social networking games, there are all sorts of new ways for gamers to get access to the industry's products - and at a much lower price than a boxed game. For developers and publishers who learn to adapt, that does not have to be bad news.

Electronic Arts, the giant American games firm, revealed recently that a third of its revenues came from its digital business, boasting that it was now the number one games publisher in the Apple App Store. Other firms are working out that hooking gamers into a lasting relationship with a title that involves buying virtual goods and add-ons may produce more revenue than the original boxed product.

None of this, of course, is much use to a retailer like Game. In May 2008, its share price peaked at £2.96, as the Wii, the XBox 360 and Sony's PlayStation 3 created a booming market for console games. Today, the shares are trading at about 1p - which says the market has recognised that the firm is worth virtually nothing.

In under four years, the idea of popping down to the High Street to buy a new game has become very old-fashioned - although I suspect that Game stores will currently be busy with youngsters spending those gift vouchers they got for Christmas.

What is surprising is that it took so long for such a digital industry to move away from the physical world.

 
Rory Cellan-Jones, Technology correspondent Article written by Rory Cellan-Jones Rory Cellan-Jones Technology correspondent

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  • rate this
    +11

    Comment number 1.

    To be blunt Game have sat back and expected the money to roll in for years. Their prices aren't competitive, their hardware is tied up in bundles people don't want, and their service is nothing to write home about.

    I've been in there a few times over the last few years looking for PC games, they either don't have them in stock or they are charging full price for games that are 2+ years old!

  • rate this
    0

    Comment number 2.

    Game Over?

  • rate this
    -7

    Comment number 3.

    Just another Warning to our Coalition Government that the HIGH STREET is dying rapidly and that a Costly and major infrastructure Problem is looming.

  • rate this
    -4

    Comment number 4.

    Game are a shameful company, they have pushed 2nd hand games for years even if the customer wanted a brand new copy, purely because they get more money from the transaction, whilst the publishers and developers of said game get zero, they are getting what they deserve, you reap what you sow and all that...(terrible customer service notwithstanding)

  • rate this
    +4

    Comment number 5.

    I've got no problem with GAME disappearing, what I will miss is Gamestation. GAME is little more than the gaming section in supermarkets but Gamestation is a proper little haven for geeky gamers. I like going in there, I like buying my games from there and I like the knowledgable or semi-knowledgable staff that comes with it. GAME is Modern Warfare, Gamestation is more Marvel vs Capcom...I think

 

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