Razor - Thanks for the quality response to my recent rant. Comments back on yours...
- GTAV seems like the exception that proves the rule. Almost every other game franchise is reporting lower numbers each generation. (Madden, COD, Battlefield....) Also, it seems to me that it will be hard to support 6,000 brick and mortar stores as we get down to less than 20 AAA blockbuster titles per year.
- GME sells an insignificant amount of DLC and digital. They sell DL cards at very low margin. They have no chance in eCommerce because Sony, MSFT, eShop, and Stream already dominate those channels. I hope they waste alot of money on streaming because as noted elsewhere, its very hard to do.
- Downloading is better for the Publishers and soon enough, the pricing will reflect that.
- Seems to me that consoles are dying. Volumes this year already lower than last over the last several weeks. WiiU is absolutely dying and Xbone now having real questions. I have never seen anyone buy/sell/trade anything at GME other than a disk. Isnt that almost all of their used business?
- You are right. Used was up for the quarter and i need to be more careful fact checking. But, did you notice that the leading console PS4 is getting more than 50% take-rate on its games services. Old games offerred DL for free or really cheap. I think new consoles will do a lot to take share and lower prices of used games. New games were down 20% though.....
So I have heard all the chat about how huge AAA games can't be downloaded because they are so big and how this is going to save GME from oblivion. And, I agree its true that 25Gig+ games are going to be sold on disks for several more years. But, let me take a minute to remind the longs about why that is totally false hope for GME:
- Big AAA games are very expensive to make now and so volume of these games is way off. Far fewer titles even getting launched into the channel this year. Fewer disks means fewer sales.
- All sorts of other game environments competing for gaming dollars that dont use big file sizes. Free2Play; DLC add ons; microtransactions; Streaming. These are sales that GME doesnt make.
- Lots of games are NOT too big to download - for example the casual games, indie games, etc. These games are going digital only in a hurry. These are sales that GME isnt making.
- Downloading is getting better in many ways which means the big AAA game is fighting a losing battle. Examples - better eStores from all the big three hardware makers; can start play while DL is progressing; can buy on your iPhone and start downloading; improving internet capacity everywhere.
- Casual gamers are leaving the console/handheld universe in droves. They are going mobile and this means DL only for games. This is why WiiU is failing. This is why GME is barely carrying Nintendo games any more.
- All of the big three now doing a much better job of selling old catalog on digital. This is hammering GME's used business as noted last quarter by GME.
- Steam is example of how even large games can go digital only. These sales are also gone from GME's world.
- Apple and Amazon coming with their own initiatives. Sure to be Digital Only. Sorry GME.
So, I admit, I am way overly obsessed with this. I am a short addict and I need to kick my habit. But, I have a huge short position, data about the video game business keeps me constantly involved, and so I ruminate more than is healthy. I am dying for the stock to get back in the 20's so I can cover and move on with my life.
I post on the board because I dont know where else to post and I want to help protect innocent lame investors from the incessant hype of the video game industry. Plus, the more people generally understand how bad the fundamentals are (declining industry, price compression, alternative entertainment, digital downloads) the lower the price of the stock will be.
BTW - The latest interesting thought is Radio Shack. It has 75% of the stores and 75% of the sales as GME. Market cap is 6%. If GME prices like RSHK, the stock will drop 94% - to about $3 per share.
I hope Mr. Icahn is enjoying his new shares. Does he know that:
- US Console sales are down 20% from one year ago in February. Xbone selling half of what 360 was a year ago.
- Handhelds off 35%. This entire format is just about over.
- Physical sales of games are off 20% in month of February.
- Big game Thief landing like the turd it is.
- Preorders staying around half of last year. Titanfall coming but last year there were a lot of big shooters out in March. This year, its only TF. Multiperson shooter has tough job. Plus is MS only so not expecting much.
Retail nightmare continuing….
In case some long was still nursing hopes that new consoles were going to save the physical goods retail industry, think again….
According to VG Chartz…
- Console sales now showing two weeks in a row with big weekly year-on-year declines. Down 31% 2/15/2014 vs. 2/16/2013. YTD sales are only up 5% over one year ago and will apparently run negative within the next week or so.
- Xbone is just getting obliterated. 30,975 sold in US last week. Now running around half of X360 sales a year ago.
- Game sales units actually did OK last week. Plus 16% over same week one year ago but probably just making up some slack from the ugly -21% in January and -41% in first full week of February.
- Preorders – which I am assuming are a reasonable proxy for general interest in the new games coming out – down 54% last week and down 39% for the month of February.
I have to admit this is getting boring for a lot of us. Must be hell on GME management and will soon be even worse for their stockholders.
Titanfall getting ho-hum preorders, surely nowhere near enough to drive big sales of disks or consoles. Earnings announcement still a few weeks out. Ugh. Im like a kid waiting for Christmas....
sometimes wondering if anyone bothers to read this....
Hope the longs didnt miss the story about Microsoft going for the jugular with their new digital pricing experiment for Ryse. They are selling it digital for less than GME sells it used. Think about the implications for GME.....less physical disks in circulation, price cuts required on their existing used and new inventory, write downs, etc. Ryse is a three month old game.
Of course physical goods sales are down 20%. Surprised they aren't down more.....
* Total software sales down 1%. But, packaged software adjusted were down 20 percent or more. Digital is taking huge share gains.
* VG Chartz has total US preorders down from last year. Substantially.
* Developers are cutting back on packaged AAA games. They are expanding FTP, Online, Mobile, etc.
* Prices are the same for games that they do offer both ways. The point is a lot of games are now being offered without a physical release. Digital only. Plus, the publishers dont want to #$%$ off the retailers so they are maintaining digital prices. But, this will end as the retailers share continues to go down. Same as Blockbuster, and same as Steam did to PC games.
* Apple TV is going to support game controllers. Probably takes huge share from Xbox and maybe PS4. Absolutely crushes Nintendo and the family gaming segment. Apple TV will sell for a fraction of consoles - oh, and it wont have a disk. So, yes, Apple too.
So here are the latest updates:
- NPD reports new software sales in January at retail down a staggering 42% in January. Even when you adjust for reporting period difference, still looking at down 20%. Ugh.
- New games released in January down 53%. As predicted, developers are cutting back big time and its showing up at retail the worst.
- Nintendo now releasing lots of games in the eShop only at much lower prices. GME is gonna have to write down all those old little chips they sell.
- Apple TV rumors for April announcement building.
Other than that, its been a slow week for the industry. Can't wait for earnings release.....
I ain't been gone...just busy blowing my short profits on #$%$, coke, and private jet to Vegas. Im ahead by $15 on a lot of shares.
Responses to the longs and news update.
- No way GME gets bought out when their primary business line just suffered 20% decline in sales. Margins getting squeezed and no one likes retailers much these days.
- I ain't just hoping and I do admit I am totally way over obsessed with this. But, I am posting to get the word out so that people will continue to abandon this turd.
- Sony - Did everyone see the nice news that 50% of the PS4 buyers are getting PS Plus? Since that includes free games and incredibly cheap old games, then I figure all those customers are pretty much done with GME forever.
- ATVI - Of course they are talking up their new AAA content and I am sure they will sell a lot of it. But, they are also fired up about their three new FTP which GME wont sell a bit of. Of course it helps that their retail sales fell 20% during the quarter and the year.
- I dont believe the "this is just like any other console transition" These consoles aren't that different but the rest of the world is. DLC, FTP, Disk-less consoles, Steam, Hugely expensive AAA, mobile, Apple, Amazon, etc. - none of these were around the last time we had a console transition.
I got to go...I got a fine bottle of 2010 Husic Cabernet waiting for me and Trixie.....have fun boys....
Its official, the launch party is over and now the real hangover is going to kick in...VGChartz reporting the following ugly numbers in US.
Microsoft Total Console Sales (X360+X1) in US dropped from 340K last year to 244K this year. Down 28%
Sony - Total Console Sales P3+P4 up from 216K to 232K. Up 7%
Nintento - Total Console Sales (Wii+WiiU). Down 181K to 79K. Down a shocking 56%
Total Console sales down 25% from one year ago.
So all the launch parties are over. The pent-up demand is satisfied. The inventory is piling up.
And here we are....game sales down, pipeline of new games looks bleak, industry layoffs and investment looks terrible, and worst of all, people aren't buying the hardware which means no one will write the software.
Lack of content - Preorders for games are way down. Two games in Jan Feb this year are getting pre-orders. Last year same time - 9 games. Consumers are sitting on their hands because there is not much to get excited about.
Lack of content - Game sales are down, even with new consoles.
Lack of content - Big dev shops are laying people off as console sales decline. They are not investing in new content. So long term getting even bleaker. Read the news on these guys and see if you agree....Disney, Nintendo, Square Enix, EA, Avalanche Studio, TakeTwo....
I am seriously considering increasing short position again.
- VGChartz showing retail sales down for month of January.
- Feb looks bleak because last year there were lots of cool games coming out, but this year none until Titanfall. Pre-order volume is approximately half of last year.
- Game developers in crisis. Check out stories from Square Enix, EA, Avalanche Studio, TakeTwo. Number of games in the pipeline continues to really plummet.
- Apple TV continues to lurk. When it comes out, it will crush the casual gaming console market. I know people are going to say "That rumor has been out there for a long time and it hasnt happened." Yes, but delay doesnt mean denial.
I have to admit that its odd....Digital downloading of AAA games is apparently not GME's biggest problem. Lack of content, consumers who can buy games for a buck or two on mobile appears to be the biggest problem.
- New rumors of the Apple TV box. aka "The GME Killer"
- Actual news of the Amazon console. aka "Slow death cancer for GME."
- EA reports earnings and its all about digital. Physical games declined 28% year on year. Ouch, that really hurts....
- Xbones and PS4s are fully in stock almost everywhere. Xbone inventory surely piling up. Next step is price and margin cuts. What if people dont really want these after all. Its not like they loved the last Nintendo box. Even if they do, the next gen is all about download.
- Speaking of download - anyone catching the latest installments of Call of Duty? Its all DLC. Sorry GME but no product for you.....
Correction - Destiny is DRM controlled (Source: Google "Destiny DRM"). Titanfall is MSFT exclusive (X360, X1, PC) and will not require DRM. But, keep in mind that all of these are MultiPlayer Online so its VERY easy for the developer to require one account per disk.
Explanation on prior post about DL: My son is big gamer, he says it takes him 4 hours to DL a large AAA game. Not sure if he is typical but sure the speeds everywhere are only getting better all the time. If it takes 10 hours now, it will take four hours soon.....
Sorry but I really think you are wrong mjro.....
- Many of the new games like Titanfall are going to be have DRM control so even people who buy the disk can't resell it. (Also, no resale means no reason to buy physical!)
- I have been noisy about being short for months and now sitting on very large profit. Wont close it out until this thing is back in the low 20's.
- Why do you think game sales will go back up? Handhelds are basically done and this used to be a serious part of the business. If Mario Kart 8 doesnt sell (and there are no pre-orders showing) then thats it for Nintendo). Titanfall is 8 weeks out but pre-orders are 1/7th of big successes last year when they were 8 weeks out. The new consoles really dont deliver a gaming experience that is much different from the old. Plus, its brutally expensive to develop content for these monsters so the number of titles is continuing to plummet.
I just love being huge short this stock. This week's news:
- Nintendo in disarray. They slashed sales forecasts like 60-70%. Kids just giving up on them for mobile. Probably going to exit the HW and physical delivery of games. (No, Nintento games dont take long to DL.)
- Xbones piling up in inventory all over the place. See article about UK prices now below MSRP and even MSFT confirming that 900K remain unsold as of 12/31/14. Look at ebay and see prices in the low $400s. Or, just go by a GME and see how many they have. Ouch.
- Meanwhile, VGChartz reporting no rest for the weary - game sales flat and pre-order volumes are down a shocking 90% in 2014 vs 2013. Gamers showing lack of interest bodes very poorly for this beleagured company.
It ain't pretty in physical goods land and I dont see any reason it will get better. Get ready for further reduced guidance and store closings......
My understanding is that Steam is siphoning off a lot of the gaming dollars. Hard core gamers are buying a lot of games from them because so cheap and has huge variety of titles. I am sure lots of Steam people have consoles as well - but every dollar spent on Steam is probably a dollar that isnt going to console games. Steam alone is not going to kill GME, but its just one more thing taking dollars away from physical disk sales.
So funny...jumpinjeh..you are exactly what I was posting about...."physical media is down but not out". Yeah sure but how many more years of down will it take until you agree that down, down, down..equals out. Do you think that whatever problems exist now with DL and streaming won't get solved??? Ask Tower records and Blockbuster how they felt two years before they were at zero....
(Ok, I confess I need to stop posting on this board.....)
Steam announced today that they grew another 10M users (16%) in the last three months. That is amazing growth - but it is occurring right on top of the new console launches. Sounds like many of the hard core gamers are going over to PC and Digital distribution. Games on Steam are way cheaper and lots more titles. They only sell digital and Steam is probably the main reason that GME doesnt sell any PC games in their stores any more.
Just another brutal development for Gamestop....
Economics of downloading....
Lets just set some boundaries and then we can discuss the rest.
- 10 megs/sec internet speed x 60 sec per min x 60 min per hour x 24 hours per day = 864 gigs per day.
- Typical internet access at this level is maybe $1 per day
So, 864 gigs for $1 means around 1 tenth of a cent per gig.
So, 40 gig game costs maybe 4 cents to download.
So, some people are going to whine about the fact that ISP's are going to limit downloads, and my example here is extreme.
But, then I am going to whine and say that fiber is coming and 100m/sec is the FCC's near term goal and that ISP's are not yet limiting downloads, etc.
Either way, you cant get to any significant cost for downloading big AAA games compared to buying them retail.
Of course, most games are far smaller and so the cost is well under the cost shown here.