Analysts debate effects of new PlayStation service

Analysts split on possible effects of new PlayStation streaming service on GameStop sales

Associated Press

NEW YORK (AP) -- The announcement this week that Sony would launch a video game streaming service has re-ignited a discussion among investors about what that will mean for videogame retailers like Gamestop.

Sony announced Tuesday that it will launch PlayStation Now this summer in the U.S. The service will let people stream video games much the same way that they are now streaming music or movies. That shift destroyed retailers like Blockbuster and its created havoc in the music industry.

Streaming game services are not new, however and they have failed to gain traction in the past. Yet some see a significant turning point with Sony's PlayStation Now because it will run on a remote server, eliminating the need to download large files.

Janney Capital Markets sees little change for retailers and analyst Tony Wible backed his "Buy" rating for GameStop Corp. after the Sony announcement.

Wible pointed to past failures of streaming services and said the success of Sony's PlayStaton Now will depend on the size of its library.

That has been the hurdle in the past, with each service limited by the small number of games from third-party companies.

Wible says that Sony will also have to come up with a competitive pricing plan that appeals to both game publishers and gamers.

Stifel Nicolaus, however, sees a threat to retailers.

Analyst David Schick stripped his "Buy" rating from GameStop, saying that the service will make games easier to download and that will cut into the retailer's sales.

Schick said that while consumers have been able to buy games online for some time, PlayStation Now marks a turning point because of its use of a remote server, which could be much more convenient, and quick, for gamers.

Schick believes that streaming is the direction in which the gaming industry is moving.

Microsoft Corp. continues to develop its own streaming technology as well.

Those streaming services could cut into in used-game sales for retailers like GameStop, a major revenue generator

"Retail works best when vendors are partners - not competitors," Schick wrote. "This is an issue that is only getting worse for much of retail."

GameStop shares rose 81 cents, or 2 percent, to $44.95 in morning trading.

View Comments (1)