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GameStop Corp. Message Board

  • joelbailleu joelbailleu Aug 20, 2009 9:50 PM Flag

    GME Headed the way of Blockbuster!

    This company will suffer the same fate as Blockbuster in the near future. Today we saw the first of many poor quarters to come. You may blame the economy, but this is a segemnt where money is spent during tough times because it is cheap entertainment for the kids.

    A few reasons.

    1. Console makers (xbox) have started to distribute titles via direct download this week. This trend will grow and new game sales will decline. This will have a huge impact on used sales too as no media will exist and resale will be impossible.

    2. Competition for the used game market is becoming more competive and less profitable. Big players are entering the market like Best Buy with a low overhead and higher buy back prices.

    3. Gamers are a "Community"! They meet sometimes 32 at a time in game lobbies talking aboout the best way to get the best deals. This is powerful counter marketing when a new idea hits the market the uptake across games is often very fast.

    4. Gamestop has for years handled the stores as glorified pawn shops which has made the population who does trade there feel like the point is to take the most advantage of them for the greatest profit. News Flash, in a bad ecomony you need to make your cleints feel good about transactions and new ways to trade will quickly replace a 17 year old clerk that turns his nose up when a trade is offered.

    This stock is a short term place to keep your money. The facts are too overwhelming to contest. Although, many of you will. GME is not correcting their sales strategy as fast as the market is changing and hence they will follow Blockbuster in the way of their stock prices and performance.

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    • We shall see, but I hope GME will prove you otherwise. Keep Shorting...

      • 1 Reply to mo22mo22moo
      • Perhaps what some of you posters are missing is simply its in a STRONG DOWNTREND. Why? If everything is firing on all cylinders, why has this stock been continuously falling since its peak of 63.77 back in late 2007? GME time has come and gone. Unless something fundamentally alters its course, it will continue to slowly drop lower and lower. BBI was once the big boy on the block. Then GME. Both have seen their day and now its gone. That is fact. GME is one more bad Q away from really being in the tank.

    • Here's the problem... Video game worlds keep getting more and more advanced.... Soon games will be filling up Blu-Ray Disks capacity of 50GIGS...

      No one is going to have the patience to download a 50 gig game until fibre is in every home and bandwidth increases.... Then in 10 years.. games will take up 100 GIGs of space and will be too slow once again...

      You'll always need physical disks and stores to hold them... Atleast for the most advanced hardcore video games.

      Why doesn't anyone bring this up?

      • 3 Replies to thebenchwarmer000
      • "Why doesn't anyone bring this up? "

        Because it is white noise. This is simply not the case today and likely not in the future since bandwidth is cheap even in RURAL ares today. People will adopt more conveinent ways to purchase games when they exist. This fact is undisputable and will be the demise of GME if they don't find an adaptaion of their model SOON!

      • "Why doesn't anyone bring this up?"

        Because you're dead wrong?

        Most 360 and PS3 games are under 10GB. Most would not require a 100% download to start playing them (you don't need levels 5-12 downloaded to start playing level 1).

        Most PSP games are a few hundred MB.

        Most DS games are 64MB or 128MB.

        Most iPhone games are 10MB-20MB.

        This idea that all games are tens of GB in size is the same fantasy put forth by the GME CEO and it has no basis in reality. I'm sure you could find one hit game that's that big, just like I could find one hit game that's 8MB in size, but it would be disingenuous of me to suggest all games are only 8MB, wouldn't it?

      • I personal am very annoyed having to wait to download software UPDATES ect.. just to play a video game.

        It feels like everytime i get to turning on my PS3 another useless software update that takes 30 minutes or more to download and install is needed.

        This stuff should all happen in the background without user input... Until I can tell my playstation 3 to download the latest game before work at 9am... and execute the command thru my IPHONE or something similar.. The current download market isn't going to be mass adopted.

        It's far to annoying and tedious in it's current state... I agree gamestop won't continue to grow forever though.. But short term this is a GREAT play through the holiday season.

        Everyone's ideas about downloading games being mass adopted is probably a decade away atleast.

    • I agree that no company can continue to grow indefinately at a growth company rate. When GME stops growing at a growth company rate, GME will probably do what every other mature company does to keep it's investors. Ie, MSFT, COST. GME will probably start to distribute it's earnings to it's shareholders. Hypothetically, if GME distrubuted 300 million to it's shareholders, it would have a dividend rate of $1.82/share and a yield of 8.1%. Can someone check my math here. I'm not an expert on this type of thing. GME is company that I expect to be around for a long time as a growth company now and as a mature dividend paying company in the future.

    • Do you dream at night a lot?


      Same argument could have been made for Netflix and somehow that company is thriving.

      Poor quarter. I don't think so, considering how difficult current environment is.

      • 2 Replies to mo22mo22moo
      • You missed the point. Netflix was a player in redifing the Blockbuster market and was for all practical purposes successfully at it. Hence, they have a valuable stock and BBI is in the dumps. Please don't post if you don't understand the conversation.

      • GME did have a poor quarter, only because people expect too much from them by blowing it out last summer. Netflix, they are a different story, I think that as a long term play, there aren't much better out there. Once people try Netflix, they are hooked, as more and more things integrate Netflix successfully (Xbox 360, etc) and people get to see how much better it is than renting or even waiting for a video to come in the mail, they are going to continue to sign up for the service in massive numbers. I have seen some complaints of the service, almost without exception they are all extremely nitpicky or just unfounded completely, Netflix is the real deal in my opinion. Perfect example, I got Netflix 2 years ago, haven't rented or purchased a movie since, and watch probably 3-4 movies/tv shows via netflix per week. If Gamefly had a better pricing model or offered similar services as Netflix (streaming, quick service turn around with good inventory) GME would be dust...but they don't, so they are safe, for now.

    • And here is the counter argument I posted a little while ago in this forum:



      A lot of people think that someday (maybe 5 years or more) that downloadable video games will put gamestop out of business. I think there are reasons this won't happen. Here is why:

      1) Convenience of Trade-In's
      Trade in's are a core piece of GME's business. Amazon and Best Buy may try to tread on this party but they won't win it. GME has the convenience that you do not have to ship your item to Amazon to get credit. Best Buy just won't beat the category killer here either. Think Home Depot, Staples versus Wal-Mart for their respective categories. Category killers kill. Try trading in your downloadable game that you are bored of, beat already, done with. Can't do that. Sorry download thesis, you lose here.

      2) Impulse Buys
      You cannot impulse buy a console or accessory and download it. Sure you can buy from amazon and have it the next day but we know now that while Amazon is growing it will not topple every brick and mortar store. GME allows for normal purchases and more importantly impulse buys of games, consoles, accessories

      3) Download games do not allow console sharing
      Many people have multiple consoles in their homes. Also many friends like to bring their games to their buddies houses to play them on their console. Downloadable games allow neither of these to happen. If you have 2 or 3 consoles in your house you want to d/l 3 copies and pay for all 3 or do you want to just move the disc from console to console? How about bringing that download to your buddies house to play...good luck with that. Strikeout for downloads here. Score zero. GME rules the roost here selling physical copies.

      Unless game companies grant multi-console licenses and friend sharing they will never win the d/l game here. Another no score for downloads.



      These 3 reasons and especially #3 just above are an enormous reason why d/l games won't put GME in a coffin anytime soon. Blockbuster was different in so many ways. People used to rent movies from them. People do not rent from GME. People trade in games at GME. People did not trade in movies en masses at blockbuster. There is a knowledgeable community and culture at GME stores adding to the "fun" for kids and gamers going there. That did not exist at blockbuster and was not part of its attraction.

      I'm long GME for these reasons and accumulating more down here while it is out of favor from the "smart" fund managers that consistently under perform the index every decade. As a small investor I'm taking advantage of their performance trading whims. Like GME's CFO who just put over a million dollars of his own money on the line at prices of 22 and 25 I'm right in there with him for all these reasons noted above.

      I have no problem as a net buyer and long term investor of GME taking shares from the fundies who constantly sell low and buy high. I'll be there to sell them their shares back at $35 plus by January.

      • 1 Reply to EquityRich
      • "Trade in's are a core piece of GME's business."

        Hence the risk. If the supply of new games drops due to digital sales, and if store saturation happens, that means a lower total supply of used games which hurts margins. I don't believe it takes digital being a significant % of sales before it kills GME's margins and eps growth.

        "GME allows for normal purchases and more importantly impulse buys of games, consoles, accessories"

        Who impulse buys $60 games and $300 consoles? It takes 2-3 weeks for a console game to go from Gold Master to shelf. Someone could download it far faster. They could download the first level, play it, and download the second level in the background or overnight. That's easier than going to the store and hoping it's in stock.

        "Download games do not allow console sharing"

        Not true with PS3. It allows 5 activations. Anyway, who needs to share? Many games come with free demos to download, like the new Batman.

        " Like GME's CFO who just put over a million dollars of his own money on the line"

        True, but that was a small fraction of the $14M he made when he sold at $55 last year a month after giving 2009 guidance of "at least 25% eps growth", which they failed to meet. And now he's retiring at 46 years old, because he sees the writing on the wall. The days of making millions from stock options are over.

        Short term, I'm somewhat bullish for the next few months due to better NPD comps and console price cuts. Five years from now, GME wil be half this price.

    • Add to that dire outlook: here come the kiosk companies...

 
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