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GameStop Corp. Message Board

  • citigroup_the_only_free_lunch citigroup_the_only_free_lunch Mar 28, 2011 7:48 PM Flag

    its days are numbered

    digital downloads on the xbox cannot be transferred to another xbox....

    cant bring a game over to a friends house without hauling the xbox across town? unacceptable.

    cant resell a digital download? unacceptable.

    cant trade in a digital download? unacceptable.

    the days of people downloading games are numbered.

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    • "I see the webcast isn't covering the cocaine and hookers part between the two presentations."

      LOL

    • " I currently have $1.30 total value in short April 19 and 20 puts which I plan to let expire. Today I shorted the April 22 calls at $0.81, which I do not intend to hold to expiry. I've done similar to this many times."

      Update: just covered the calls for like the smallest profit ever, since the big schmooze fest tomorrow may provide some juice. I see the webcast isn't covering the cocaine and hookers part between the two presentations. Hopefully I'll get another chance to sell some calls after it, to catch that theta decay before expiry.

    • Thank you for the kind words.

      I'm not short. Well, not really. I opened a short options strangle right before earnings, closed the short calls right after. I currently have $1.30 total value in short April 19 and 20 puts which I plan to let expire. Today I shorted the April 22 calls at $0.81, which I do not intend to hold to expiry. I've done similar to this many times.

      "3-5 years until the digital download revolution comes about"

      The squeeze is ongoing. Steam, iOS, Facebook, even consoles. ERTS said a few weeks ago they had a double digit % of Mass Effect 2's PS3 sales over PSN, and that was with zero marketing AFAIK. I consider myself up to date on the sector, and even I did not know it was on PSN day/date. Imagine when the pubs and Sony/MS start actually pulling customers?

      Just because digital is 1's and 0's do not mistake the impact to GME as being nothing then suddenly "uh oh". It's a long ongoing squeeze.

      "please enlighten me when will GME go belly up and the shorts reap their big pay day?!"

      I think anyone holding this until low single digits is crazy. The name will be around for a decade, though by then it may be far fewer shops, basically pawn shops, with much lower earnings. Who knows? Like I said before, current management doesn't care, they get rewarded regardless ($20 per share cash bonus on their grants).

      I also think anyone holding this hoping for a P/E in the teens is crazy. It's easy to put forth a case for a lower P/E, and much of the eps growth is via buybacks which fools few people. If you're an investor, why buy GME today with no dividend and the potential for it be more or less dead in a decade, versus say buying the S&P today with a 1.7% dividend, or INTC with a P/E around 10, plenty of cash, and a 3.6% dividend. We can say with confidence they'll be around in a decade. So even if GME goes higher, there are surely much better alternatives for an investment.

      Like I said, trading vehicle. If you're long, at least sell OTM calls each month against it rather than ride it up and down over and over while the rest of the market goes higher. Look at this past week, earnings + 3DS, and no excitement.

    • Jesterbunk:
      I appreciate your thoughtful response. I certainly cannot contest your numbers. GME recent sales trends, compared to years past, has tapered off. However, I believe that this is partially attributed to where we are in the current life cycle of the big 3 consoles and partially attributed to the economy.

      I am betting that the introduction of new consoles and the economy turning around in the next 3-5 years will be the catalyst in sky rocketing GME's value. Yes, I am long GME.

      Your bet is that the next generation consoles will rely more heavily on digital downloads and squeeze GME out of its resale game.

      I get it but I still think that you're wrong.

      The question that I keep coming back to is...
      Are you and the rest of the shorts willing to keep the value of this stock undervalued for the next 3-5 years until the digital download revolution comes about? That's an awful long time to give GME Executive Management an opportunity to build a strategy to counter your bet. You’re a smart guy (or gal) though and I am guessing that you must have already thought this thru. So, please enlighten me when will GME go belly up and the shorts reap their big pay day?!

      gme_fan

    • Live in a 1700 square ft. home....and spending tens of K upgrading it.

      ?

      I guess I touched a nerve with Cat with my logic rattling his confidence in shorting Gamestop.

      Here's another confidence killer to contemplate for the SHORTS out there.

      www.POGO.com has plenty of competitors like Kongregate.

      Gamestop's move to buy Kongregate needs to be looked at from that angle.... It's like acquiring your own www.POGO.com.

      In today's bad economy it is websites like POGO and KONGREGATE that benefit. Free to play, simple Flash Based Gaming for those who can't throw $60 at Disk Games.

      Just looking at the sheer growth of a Kongregate on Gamestop's balance sheet is enough to squelch the "Digital Gaming will destroy..." arguments.

      How do you destroy a company that has invested itself heavily in Digital?

      $100 Million set-aside this year specifically to grow their Digital Revenues.

      A brand new hire back in February Steve Nix specifically to manage Digital Sales Growth.

      Investment in (GME) should be seen from a DIGITAL perspective and no longer based on fears of Bricks and Motors going away.

      If GameStop screws up in their DIGITAL expansion plans then by all means....SHORT AWAY!

    • "This should not be confused with cracks in GME's business strategy though."

      The gamer psychology isn't relevant here. I posted software sales figures and the coincident GME forecasts, those are real.

      "However, when these announcements are made, I do not believe that they are going to announce strictly digital downloads. This in turn, will result in a significant run on GME's stock price"

      I agree new consoles won't be 100% digital. However, I expect the digital exposure to increase. Larger HDD's, more simultaneous releases, more promotion of digital releases, etc. The profit margins for Sony and MS selling on their own stores are immense compared to having GME sell in their stores, so it's natural to expect them to find ways to increase volume. Therefore I doubt the news will have an impact on GME's stock price.

      "suppose that GME works out a deal with these publishers whereby they sell a gift card with the publisher's online code simultaneously at the same time that the used game is being purchased"

      That's a good idea. I'm still not convinced it's a big market though. GME claims they don't do much re-selling of new releases (I don't believe them), and their 10K lists the average price of a used game at around $16 IIRC? Something like that. I don't expect a budget conscious consumer buying a used game for $16 is going to then buy a digital code for $10, either in-store or when they get home. A few maybe, but not a substantial amount. I'd welcome data on this, but no publishers or GME ever give details, which suggests it's minor.

    • In my opinion, what you are referring too is not cracks in GME's business strategy but rather the cyclical nature of new gaming hardware being released by Microsoft, Sony and Nitendo. You may recall that the big 3 released their new platforms in late 2005 into early 2006. GME's profit margins spiked during the 2005 thru 2008 time period as consumers could not get enough of the new hardware and where the video gaming experience had evolved too. Like any new technology, however, the excitement subsides a bit and we start to see tempored expecations of what the "real" demand is. There are still die hard gamers out their that are feverishly buying every new blockbuster game but the overall general public has subsided a bit. This should not be confused with cracks in GME's business strategy though.

      We are now hearing grumblings from Sony and Microsft that they are in the development stages of their next generation platform. My guess is that they will not announce the launch of these platforms until sometime in 2013 or 2014 with a street release date until in 2014 or 2015. However, when these announcements are made, I do not believe that they are going to announce strictly digital downloads. This in turn, will result in a significant run on GME's stock price as all the investors and shorts will realize that GME will be in the business of reselling used games for a very long time.

      I do think that we are going to see more and more developers, however, follow in EA's footsteps where they include a code in the initial purchase of the new game which enables the customer access to online play and special free upgrades. Once this code is used, it is no longer valid. What this means is that once the customer gets to the point that they no longer play the game and turn it into a GME for a store credit towards a new game, the next customer that purchases the used game from GME now needs to pay an additional fee to gain access to online play. Yes, I understand that this will dip into GME's traditional profit margins as they will most likely need to discount the games more knowing that the customer will want the online access. This, however, enables the developers to start sharing in the profits of the game's resale. Now, think about this for a minute, suppose that GME works out a deal with these publishers whereby they sell a gift card with the publisher's online code simultaneously at the same time that the used game is being purchased. GME and the Publishers could offer a bundled discount price if the used game and the online access code are sold together, similar to the 20% discount that GME offers when you buy a strategy guide at the same time as the game. This could be a new revenue stream for both GME and the Developers. ARE YOU LISTENING GME EXECUTIVE MGMT TEAM AND BOARD?!

      Last but not least, I would like to see GME institute a dividend. A dividend would entice more stability in the stock and encourage longs to stay with GME. I understand that GME still views itself as a growth company and wants to keep the cash available on its balance sheet but GME needs to start sharing the profits with its shareholders whether that is in the form of cash dividend or a stock dividend.

      Peace!
      gme_fan

    • "when will we start seeing indications of GME's demise in their financials?"

      Three years ago they had 161M shares and were forecasting EPS in the 2009 FY (ending 1/10) of around $2.90.

      Currently, they have 145M shares and are forecasting EPS in the 2011 FY (ending 1/12) of around $2.90.

      In that time, NPD shows 2007 software sales at $9.5BN and 2010 software sales at $10.1BN. We know digital sales have exploded. So the market is bigger, we've lost Circuit City as competition, and yet GME can only hit its own guidance of two years ago by spending $300M cash on buying shares.

      So there you have it, the cracks are showing.

    • "digital downloads on the xbox cannot be transferred to another xbox....

      cant bring a game over to a friends house without hauling the xbox across town? unacceptable.

      cant resell a digital download? unacceptable.

      cant trade in a digital download? unacceptable.

      the days of people downloading games are numbered."


      Replace xBox with iPad or iPod and it's the exact same thing. Yes, the end of gaming on the iOS platform is right around the corner. Any day now. Real soon. Just watch. Err, soon.

      • 1 Reply to jesterbunk
      • citigroup_the_only_free_lunch citigroup_the_only_free_lunch Mar 29, 2011 7:49 PM Flag

        Lol are you comparing the next generation consoles with the Ipad? For the record, I am typing on an Ipad as I write this. Let me tell you, the experience of gaming on an Ipad is completely different from a next gen console or pc. Ipad games compare better to Kongregate than they do a next gen console.

        So lets run the numbers.

        Ipad games cost money.
        Very few Ipad games feel polished.
        Very few Ipad games are fun to play and feel like nothing more than a time sink.

        Kongegate games are free.
        Some Kongregate games feel more polished than some PC games I have played.
        I have found enjoyment with many Kongregate games, but there are some that feel like time sinks also.

        YEAH. I would say Apple's days are numbered. Apple is worth at least a 200 billion dollar short, though I have no long/short position in that stock.

    • I must say, you take being picked on fairly well. Furthermore, you are considerably more snarky than your run of the mill basement dweller. I may have re-evaluate your presence here.....the force is string with this one. However, my opinion of GME remains, regardless whether yoy are a good sport or not.

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