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

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  • rate this
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    Comment number 95.

    If Game looks back to the time that it bought Gamestation from Blockbuster, it will realise that it has committed an act of hubris. It purchased its closest competitor which had totally different set up from Game at the time. It then turned the policies at Gamestation into clones of the policies at Game and then found itself with up to four stores in a town. Now too big it has 10,000 jobs at risk.

  • rate this
    0

    Comment number 94.

    My local branch of game has always given great service, free advice and has very knowledgeable staff - try getting that from Asda.
    One bad aspect of Game is that they put virtually all independant retailers out of business, and I think their main problem is that they now have too many stores.
    Maybe if they are rescued then their future lies in a lot fewer stores.

  • rate this
    +1

    Comment number 93.

    I look forward to the howls of rage from people cheering this when the ISPs introduce a data limit. Or when their connection goes down for a week.

    I like being able to impulse buy a 2nd hand game on the high street for

  • rate this
    0

    Comment number 92.

    Unfortunetly Game are going to be a victim of greedy publishers like EA as they want to completly stop any person buying second hand games and also borrowing a friends game as well, prime example is Battlefield 3 as only the original purchaser can play the game online, EA make more easy money when people loss their jobs. The impact of this will be on the consumer and our pockets in the end.

  • rate this
    0

    Comment number 91.

    Part 2.
    Another problem is in larger urban towns Game has multiple stores all within walking distance of each other. It's fine to have a Game and a Gamestation, but two Game stores and a Gamestation all within 5 minutes of each other seems redundant. My opinion some of these excess stores are from the EB and GAME brand merger, never selling off the excess stores.

 

Comments 5 of 95

 

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