What Happened to GameStop: The Decline

684 456 Tony Guo

What Happened to GameStop: The Decline

GameStop was once the world’s biggest video game retailer, with stores not only within our borders in the US, but also overseas as well. Back then when you needed to get your hands on your favorite video game, the first thing that could come to your mind is heading over to a GameStop store. When you got your first paycheck as a teenager and wanted to treat yourself, the only thing that one had on their mind as heading over to a GameStop store and getting your hands on a video game. The same applies to parents who knew exactly where they needed to go if they wanted to buy a gift for their children. A GameStop store was a kids dream back then and that goes a long way to explain just why they were so successful back in the day when they were in their prime. This is a far cry to current events where they are in serious trouble; closing more and more stores by the day, posting bad results as well as a plummeting stock value that has seen the company’s value drop dramatically to unrecognizable levels. So, what happened to this retail giant that they declined so dramatically? Well, with the help of the subject matter experts over at runrex.com, we will attempt to get into the bottom of what was behind their decline.

One of the things that was behind their decline, as is explained by the gurus over at the excellent runrex.com, is the change in media format as far as video games are concerned. Back in 2013 when the Xbox one and the PlayStation 4 were launched, it signaled the beginning of the end of games being available on discs to games being available to download on digital storefronts. You could now head over to the storefronts operated by Sony for the PlayStation 4 or Microsoft for the Xbox One and purchase your favorite video game. For gamers all across the world, this was good news due to the convenience that came with this shift. For the world’s biggest game retailer, it was not so good news as the backbone of their business was selling video games on discs. With this new shift from discs to digital, GameStop was in danger of suffering the same fate that record stores suffered from when iTunes came into play. With downloads, GameStop’s business declined and the ground shifted beneath their feet and their inaction, at least initially, as far as this change was concerned definitely contributed to their decline.

Another thing that contributed to their decline has to do with some of their decisions regarding new businesses. Their decision to go into the smartphone stores business didn’t work out as well they had thought. They spending money on buying smartphone store chains from Spring Mobile then followed by hundreds of storefronts from AT&T to the extent that by 2016 they owned as much as 1,500 mobile phone stores, all of which they put under the Spring Mobile name, as is revealed by discussions over at the excellent runrex.com. The reason they went hard on this Spring Mobile business was due to the fact that they had expected to make about $1 million each from these stores, which for 1,500 stores, they had expected to bring in about $1.5 billion in revenue. The problem was that they had badly overestimated how successful this new business was going to be and when things didn’t go the way they had envisaged; they were left with what was an expensive liability; a white elephant. Having spent about $1.5 billion in buying all these stores, they ended up having to sell them for about $700 million to stem the bleeding, which represented really bad business. 

Another thing that may have led to the decline of Gamestop is the change in the gaming business model. Other than a shift from discs to digital downloads as mentioned above, we are seeing an increase in free-to-play games as well as subscription services. As is explained by the subject matter experts over at runrex.com, the rise of free-to-play video games such as Fortnite has definitely contributed to the decline of video game retail stores such as GameStop. We are also seeing a rise in Subscription services where one is able to buy a monthly subscription that allows them to access many games at once rather than going to the store and buying individual game titles. A good example is Xbox’s GamePass that allows users to gain access to a hundred games by just paying $10 a month. Such deals are definitely leading to a decrease in business as far GameStop is concerned and has definitely contributed to their decline. Free-to-play games like Fortnite for instance have caught on like wild fire and such games have necessitated a shift in how business is done in the gaming industry, something that has without doubt led to the decline of retail game stores such as GameStop.

There are lots of other factors that have led to the decline of GameStop and you can read more on them by heading over to the ever reliable runrex.com