The reason you probably see your local gamestop store turning into a video game related toy and accessories store is because the company’s long lived cash cow, USED GAMES and accessories is slowly but surely dying.
Gamestop has about a 22% margin on new games, but about a 40% margin on preowned games.
Why? Because of the rise in digital games that can be purchased from your Xbox or PlayStation at home.
Keep in mind that game developers would rather sell a new game that a used one. Game devs make no money from preowned copies of their games. There in no such thing as a preowned digital video game, so game developers should welcome the change from selling physical copies of games to digital copies.
My personal opinion is GME is going downhill. Literally almost any store could buy your used video games for dirt cheap and resell them for a ton more, or sell toys and accessories related to games.
I don’t think the rise in digital games will completely kill physical games, but I do believe the convenience of digital games will attract more people to buy the digitally. Also stores like Best Buy sell used video games, so we already have alternatives.
I don’t think gamestop is very innovative, or is providing a service that no other business could. For that reason I will not be buying gamestop stock.
May be a good short for those of you who like to do that sort of thing.
If you are planning to invest in gamestop I guess the question is, do you think gamestop can survive without its most profitable business?
Below is a Motley Fool article that goes more in depth about GameStop’s failing used game business.
Motley Fool: GameStop's Most Important Business Is in Trouble
Submitted March 19, 2019 at 12:47PM by MrGoodcat97 https://ift.tt/2CrMHlT
