GameStop Could Learn a Lesson or Two From Blockbuster Video

Having received a GameStop gift card from a family member for the holidays, for the first time in at least two years, I stepped foot into a GameStop. I noticed something interesting. They had a whole section devoted to used cell phones and tablets. At fist I did not think much of it, but as I continued to walk around the store I could not help to notice other oddities. For instance, GameStop had at least two racks with peg hooks filled with DLC content and download cards for full games. Then it hit me, you see I used to be a manager of a Blockbuster Video towards the end of their bittersweet downfall. I instantly was reminded of those days upon leaving the store and the correlations between the two started racing through my brain.

Towards the end of my tenure at Blockbuster we were focused heavily on our Blockbuster Total Access program. For those not familiar, this was a way for Blockbuster to try and compete with RedBox and Netflix at that time (2006-2007 era), we would up-sell each customer on the idea of signing up for our service upon checkout. Those who signed up would receive movies directly in the mail and then, when done viewing, simply return them to the store, exchange them for free in-store movie rentals and be able to order more online. Not a bad idea in principle, yet it did not catch on like they were hoping, causing them to shut down most of their locations. For the time being, RedBox and Netflix had won.

Through the next 7 years or so, Netflix saw huge increases in revenue and market share. While making the not-so-subtle switch to online streaming. RedBox, much to most everyone’s surprise, saw an increase in revenue as well, as the years went by. That is until this past quarter, when they posted that shares were down more than 22% with a loss of $286.4 million in market value, and that they were going to fall short of 4th quarter expectations. Even with that loss in revenue, to be fair to RedBox, it is impressive that they have stayed profitable this long. With the average movie viewer getting hooked on steaming, a form of DLC in itself arguably, Redbox’s best days may just be behind them.

So what does all of this have to do with GameStop? The crux of GameStop’s success will all come down to whether or not it is profitable for the companies to continue making physical copies, in the end. When you put something available for digital download, this increases their profit margins by cutting out shipping, box/DVD material, etc. In a way, this progression had started back while Blockbuster was going way of the Dodo, as the some companies in the video game industry stopped putting instructions in with the games all together. These days, it is rare to find a game with the instructions included, even rarer if the instructions are in full color.

GameStop is currently trying to block big publishers from selling download only system/game combos in their stores. Evident in the recent Madden bundle for the Xbox One they boycotted selling. It also seems that GameStop is reaching to make up for some of their lost revenue by selling used phones and tablets; something similar to what Blockbuster did when they started their Total Access Program.

With the younger generation of gamers perceiving downloadable content as the norm, it would seem like GameStop’s days may be numbered. The question remains, how long will they last? Five years? Ten? I do not have the answer, but would not be surprised if the former was the case. What do you think? Or perhaps a better question for you would be if you had the chance to buy stock in GameStop right now, would you do it? Personally, I would rather take my chances trading my used games in and getting some “decent” credit.

Thanks for reading and be sure to leave your thoughts below! How much longer do YOU think GameStop will last?