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GameStop (GME) Stock Tanks on Xbox Game Pass News

Ryan McQueeney

Shares of GameStop GME dropped more than 8.5% in late afternoon trading Tuesday following the announcement of Xbox Game Pass, a subscription-based gaming service that stands to threaten the video game retailer’s business model.

Xbox Game Pass promises to be the Netflix (NFLX) of the gaming world, giving users access to a library of on-demand games for just a $10 per month subscription. The service will launch later this spring with over 100 Xbox and Xbox 360 games available to play and download on the Xbox One.

Although Microsoft MSFT, the developer of the Xbox brand, has yet to release a full list of available titles, a teaser page for Game Pass includes games like Halo 5, Fable III, Gears of War: Ultimate Edition, and NBA 2k16.

(Also Read: 3 Video Game Stocks to Buy Right Now)

GameStop is feeling the effects of the announcement because a subscription-based service like Game Pass seriously threatens its business model. In a world where most new games can already be downloaded straight to the console, one of GameStop’s only remaining appeals is its used game library.

Each individual GameStop store has its own selection of used games, and this works perfectly for gamers looking for playable, recent-but-outdated titles. If you can access all of these games through a $10 a month subscription, why even bother heading into a GameStop store?

What’s worse is that Xbox Game Pass is likely just one of the first steps in the industry-wide acceptance of subscription services. Sony SNE already has its PlayStation Now service, which allows PS4 users to stream PS3 games, but now Microsoft has joined the fray and upped the ante by giving gamers the ability to download from its library.

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