Sat, Jul 26, 2014, 3:15 AM EDT - U.S. Markets closed

Recent

% | $
Click the to save as a favorite.

GameStop Corp. Message Board

  • platytale platytale Dec 23, 2008 11:14 AM Flag

    why the decline? no one knows

    growth continues, GME will continue growing and sales thus far are quite good

    strange decline trend

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • "ship a disc to retail with all of the content, most of it unlocked later"

      Better yet, ship the disc (or SD card, or whatever) by mail directly to the consumer.

      The fact that the retailer is presently getting such a big piece of the pie only means that piece will shrink.

      GME has an aggrevated relationship with its suppliers. They see retail receiving too much for so little value added. Without doubt, they will take action to rectify the situation.

    • An easy fix for the bandwidth issue is to ship a disc to retail with all of the content, most of it unlocked later. A couple of years ago Sony talked about potentially shipping the next Gran Turismo game like this. That way the user could unlock (purchase) as much or as little of the game as they like, and there would be no additional downloads. Presumably the initial release would be cheap, and the bulk of the revenue would be digital.

      Like a movie, most games can be played for about an hour with only a fraction of the content downloaded. When the GME CEO talked about games being tens of gigs and needing ages to download before they could be played, total BS.

      Current "big" games like GTA4, Halo 3, Bioshock, fit in under 9.4GB. These games target 720p. By next cycle they may target 1080p which would mean double the texture resolution, but not everything would double in size.

      The bottom line is it's in the publishers and the platform holders interest to shift as many sales to digital as possible, and I believe they will. Like Phil Harrison said last month,

      "There’s a generation of kids being born today and probably already alive who I’m pretty confident will never buy a physical media product. They will never buy a DVD, they will never buy a CD, and they will never buy a game in a box."

    • The timeline for the takeover of digital distribution is far from certain. Drawing parallels with the music industry is an oversimplification - a 20+ GB videogame is not the same as a 100 MB album. Music artists do not sell 2/3 of their records on the first few days of a release. The size of typical music album content has decreased markedly with compression technology over the last 10 years - meanwhile a typical videogame has grown exponential with additional content and hi-def graphics. It is likely this trend will continue. Meanwhile broadband technology has been fairly stagnant after the massive overinvestment of the dot-com bust. Without a crystal ball you can not say with any degree of certainty "Within a decade, it will become as irrelevant as music retailers." - it is not the foregone conclusion you seem to be insinuating.

    • "Within a decade, it will become as irrelevant as music retailers. I see no hint that GME management will make any effort to reward its shareholders in the meantime."

      Exactly. Current management rewarded themselves very handsomely at $55, netting $14M profits each after giving guidance of 25% eps growth for 2009, then later pulling that guidance. Whenever a company projects earnings out almost 2 years, it's a smokescreen. Certainly in this sector. AKLM did it, ERTS did it, GME did it.

      If I saw something from management which could change their fate... or if I could project something to that effect myself...

      IMO they'll keep building out store count because it's the bulk of their earnings growth, in the hopes of cashing out at the end of this cycle before they retire. The job of having close to 10,000 retail stores surviving in a new digital climate for the next cycle will then be up to the suckers who replace them.

    • - Declining SSS comps, projected for 11% this year versus 24.7% last year despite new game sales having similar growth to 2007.

      - Earnings growth coming from new stores, and they're probably close to saturation in the US already so that's not a forever story.

      - Used games under attack with first use coupons for free maps, free songs, etc. This means more value to buy new instead of used.

      - Digital still growing. PSN is offering full games for download. Live is likely to start offering full 360 games. The DSi will support online sales of DS games. EA now selling games on Steam. GTA episodes out soon.

      - TTWO and ERTS have lowered 2009 guidance and ERTS especially will be cutting skus. THQ has probably done similar recently. They're expecting weaker sales in 2009, and what sales they have they're trying to push to digital for the margins (using more online portals, via DLC, ERTS experimenting with free-2-play, etc.). GME is still about the same price as before TTWO and ERTS warned.

      - Weak economy, weak consumer. High potential for more job cuts and pay cuts, either in the form of salary cuts, freezes or 401K matching cut, which all affects discretionary spending. FedEx is one example, with all salaried workers getting a 5% pay cut and 401K matching gone.

      - Mass market retailer competition will be stronger in the back half of the cycle, and in a weak economy. Walmart sold "tens of thousands" of Wii's in one day recently in a promotion with Nintendo.

      - Potential for earnings charges due to inventory. In August they said they had a ton of used music genre inventory and that was before the economy collapsed and before ATVI and others started discounting new guitar prices and bundles. New games could also see discounting after the holidays meaning used prices and margins will be pressured.

      - The real test for GME is a few years from now, when their fixed costs will be at their peak due to store saturation and the industry really starts moving into digital with the next cycle and continued broadband penetration.

      These are all valid reasons for a low single digits earnings multiple IMO.

      • 3 Replies to jesterbunk
      • Jesterbunk, I always enjoy your reasoned analysis. I can't agree with you on quite a few points, however:


        "- Declining SSS comps, projected for 11% this year versus 24.7% last year despite new game sales having similar growth to 2007."

        New game sales did not have similar growth as 2007. Obviously we don't have the final numbers yet, but first half of the year was slightly down on 2007 growth. Full year it will obviously be down a decent amount overall due to the Halo factor and the recession. Obviously that is going to impact comps. In any case, you can't expect SSS to be in line with NPD sales growth. Store count for GME and the industry as a whole is not static after all. Having said that 11% SSS in this market is still damn impressive. Gamestop advised in Q3 announcement they expected SSS for Q4 to be 4-5% range. They should beat those numbers easily, probably in the 5-8% range by my estimates.

        Here's an interesting comparision:
        Q4 SSS estimate P/E
        WMT 2.8% 16.42
        GME 4-5% 10.19

        "- Used games under attack with first use coupons for free maps, free songs, etc. This means more value to buy new instead of used."

        I agree that this is a concern. It is certainly in part a move by publishers to undermine GME's used game model. I don't think it is the primary driver, but it is an added bonus. I think it is premature to be panicing at this stage though - We haven't seen any indication that used game sales are slowing or margins are declining yet.

        "-Digital still growing. PSN is offering full games for download. Live is likely to start offering full 360 games. The DSi will support online sales of DS games. EA now selling games on Steam. GTA episodes out soon."

        You just will not see full game downloads having any meaningful impact this generation. Can we at least agree on that? Broadband technology is just not mature enough and hard drives are still too small to make it a viable alternative even at steep discounts from retail. That leaves the question of the next generation. I am still skeptical that broadband and compression technology is going to be at a level where 20+ GBs of game content are going to be easily and quickly downloadable when the next cycle rolls around. We will see, but it's all speculation at this point (Is anyone else getting sick of this argument? How long have people been saying this would be an issue and it still is not even remotely a factor).

        "- Mass market retailer competition will be stronger in the back half of the cycle, and in a weak economy. Walmart sold "tens of thousands" of Wii's in one day recently in a promotion with Nintendo."

        That's probably true but the used game market does insulate GME from competition to a significant extent. With trade-ins GME STILL has a value proposition that mass market retailers can not match currently.

        - The real test for GME is a few years from now, when their fixed costs will be at their peak due to store saturation and the industry really starts moving into digital with the next cycle and continued broadband penetration.

        I think the sensible among us will be aiming to jump ship well before digital and store saturation become a major issue. But I think there is still a lot of room for debate as to when that will be a reality.

      • "New games could also see discounting after the holidays meaning used prices and margins will be pressured."

        That's what I said a few days ago. I see Best Buy has CoD WaW for $35 on 360, and Target is selling it for $39 on 360 and PS3. GME is still trying to sell it new for $60 and used for $55. If the price they end up selling the used games for drops to $30, that kills their margins.

      • They are all valid reasons why the pps should not be 60. BUT, under 30 is absurd.

        The main reason AT THIS TIME is that RETAIL has become a dirty word.

 
GME
45.68-0.42(-0.91%)Jul 25 4:01 PMEDT

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.