This is exactly what I was saying in my posts in previous days. GME is the "theater" and the game makers are the movie makers. GME is very dependent on release dates and hit movies/titles to make the analogy. This years pipeline of hits and releases looks very positive.
Also note that GME was down much less then the overall game industry.
In my opinion the risk is not downloadable games to any console but rather consuming behaviors where kids play more on ipod, iphone and ipad versus the ps3, xbox, wii, dsi, etc. This shift in game playing time could swing dollars away from ALL traditional consoles as well as mega size hollywood video games.
I'm very bullish on GME as any sea change will not happen for many years and the opportunity to get out of GME in the 30's or 40's will be present well before such a change ever occurs (if it occurs).
Good posts guys. Definitely valid points on both sides.
What we know for sure is, GME should be able to enough cash flow in the next few years to diversify somewhat if they see fit. I agree with Alex that their core business will remain viable for a long time. Despite the threats around DLC and competition, used game growth was actually quite dramatic last year. But I don't think anyone can argue that the increase in digital distribution is going to MODERATE their growth. Taken to it's logical conclusion they HAVE to find some way to show the market that they can participate meaningfully in the growth of digital ditribution or the share price is never going to bounce back to where a year ago. The industry is clearing diversifying away from the traditional retail model and no one get's excited about a stagnant company - the prospect of growth has to be there somewhere. Historically they have been able to leverage off the growth of the gaming industry in general and by increasing store count (both in the US and internationally) - that just isn't viable anymore.
Near term the biggest threat in my mind is competition from the big retailers in the new game space. Last holiday season was brutal. I think the fear around the likes of WMT continuing to go after GME on new games every holiday season is playing on the mind of a lot of investors. I want to see some reasonable response from GME on how they perceive the threat going forward and how they are positioning to counter it.
Yes, but I was talking about possible opportunities in their field as opposed to a complete business re-engineering which is neither warranted nor advisable.
As far as an acquisition target, the possibility exists given the current P/E but I wouldn't bet on it.
"It wouldn't surprise me at some point that they actually buy a publisher (THQI has a $400 million market cap) and start integrating vertically. Or do something with Valve. Or be acquired by another retailer (Sears, Target or Walmart)."
But thats exactly my point. They need to do something (at least somewhat) different.
Blockbuster was killed by Netflix (a retailer) who basically used a non-technology based better mousetrap (movie rentals by mail and no late fees) for 6 or 7 years. Blockbuster was too stupid to recognize the threat and refused to adapt.
The current technology of streaming movies by Netflix may have served as the final kill, but the damage was already done.
So BBI was killed by NFLX but not by technology? I think you might want to rethink that one.
Also, AMZN BBY and WMT still sell a vast number of other products and while they might regret losing games and their associated products, reveues and margins, they have plenty of other stuff to more than keep them going.
I'd like to agree with you, but I've been in this stock for a long time so naturally become sort of cynical. Think I bought it first at $40..been adding and selling options and all but still probably about even or down some. Ive bought it as low at 17.46 and sold it as high as 43.43 (that was 8-22-07 when there must have been some good games).
If i had it to do all over I'd taken a pass but now the challenge is to milk it back to profitability as I do not see it going out of business for at least 10 years. So that gives me 10 years to make a buck or so
I am sorta in your boat.
BUT, I am now to the point where I see no reason for optomism.
We are in the buggie whip business. Sure we will still be selling games for a few years BUT one is supposed to invest based on FUTURE expectations NOT on the past.
Psst...Wanna buy a VHS recorder, no, how about a typewriter?
Agree. GME will continue generating cash. Thanks for the WSJ link. My son is wild about downloading things on the computer but he won't think of doing it with these games. He wants the disc in case of any problem. There are other reasons as well . . . quite certain the download threat is a long way off in the future.
People keep talkin about the next gen systems and downloading, well we haven't heard anything about next gen systems which means they're at least 2-4 years away and more than likely 4-7 years... by then I'm sure GMEs budding downloading will be adequate for all those who dare download games
completely agree with you... people are so worried about the downloads, which isn't the real concern, it's that people will move away from more expensive serious games to the cheaper individual ipod type games. I believe kids will continue to purchase the console games to play with friends though and this will mainly hurt portable game systems like the psp, ds, etc.