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GameStop sees weaker-than-expected new software sales over holidays
GameStop sees weaker-than-expected new software sales over holidays
January 14, 2014 | By Kris Graft

January 14, 2014 | By Kris Graft
More: Console/PC, Business/Marketing

GameStop today reported a boost in total sales during the nine-week holiday period ended January 4, as the market saw the release of next-generation consoles Xbox One and PlayStation 4.

Total global sales were $3.15 billion for the period, up 9 percent year-on-year.

But that modest boost in sales hid a downward trend -- sales of new software at GameStop took a hit, falling 23 percent year-on-year to $1.08 billion for the holidays.

The reason? GameStop said strong sales of next-generation software were not enough to offset a "greater-than-expected" decline in new current-gen software for Xbox 360 and PS3.

Sales of preowned products -- which have fat gross margins of nearly 50 percent -- were up 7 percent to $567.3 million. New hardware, driven by the launches of Xbox One and PS4, brought in $1.05 billion in sales, a 100 percent year-on-year increase.

While the game industry is transitioning to a new generation of game consoles, GameStop continues to be in a transition of its own, as its physical-based retail business comes under attack from digital.

Though large amounts of people do prefer discs, GameStop is sealing the fate of significant swaths of its own business, as it sells hardware that gives customers the means to buy games via digital storefronts, circumventing physical retail altogether.

GameStop is seeing some gains as it attempts to capitalize on digital distribution. The company said digital receipts were $207.3 million, up 15 percent, while mobile revenues were $95 million, up 24 percent.

But with physical games being the bread-and-butter of GameStop, the lower software sales in light of new consoles -- combined with fiscal Q4 profit estimates that were under market expectations -- caused investors to dump shares, which fell around 18 percent this morning to $37.

GameStop will report its full quarterly fiscal results in the coming weeks.

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Kujel s
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This is not good for AAA gaming, I expect slowly over time new AAA game sales to decline and of course production costs will increase.

Kale Menges
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"AAA" is a relatively arbitrary marketing term, one that will continue to be redefined as consumer preferences change. Eliminating the need for packaging and disc printing and shelf space will ultimately LOWER production costs and allow for increased risk in game designs, making way for greater market variety. I fail to see how getting rid of "brick & mortar" is bad for "AAA" games. If anything, it makes for a much more level play field for games of all budgets and production scopes...

You also make the assumption that production scopes can't be adapted to offset increased development costs. Maybe it's high time the industry seriously begins to question what makes a great game and stop the insanity of the chronic "bigger is always better" syndrome that is slowly killing it...

Michael Wenk
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AAA in my experience refers to the budget cost of the title vs its peer titles.

And I think its a bit naive to assume that the cost savings in digital will mean more risks can be taken. Likely it means that Sony, MS, and Nin get more margin for said titles.

Also, getting rid of brick and mortar won't help or hurt AAA, the increased budgets (which will increase as power/features do) will. I doubt consumers will pay more than 60$ a game, and likely what's hurting AAA games the most is cheaper alternatives.

Nathan Mates
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In a competitive market, you need advertising to stand out from competitors. And that part of AAA game development is only going to spiral up. In the short term, I expect that any "savings" from going digital -- of which I remain unconvinced that there are any savings -- will be simply shifted into marketing $.

From my experience, it's the spiraling amount (and therefore cost) of unique art that's causing game budgets to balloon. Since I started in the industry nearly 18 years ago, the number of programmers per project have been increasing linearly. Art team sizes have been growing geometrically. I'm sure someone could scrape to detail out team sizes for the top-selling titles every 5 years and come up with hard numbers on team sizes. Marketing $ is much harder to find.

Joe Zachery
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A lot of these AAA games didn't move major units this holiday season. If you look at the launch month for the Xbox One, and PS4. The best selling exclusive across all consoles sold around 270.000 copies. That's including the launch month for Nintendo's Super Mario 3D World game. So even though both the Xbox One, and PS4 sold close to and over 1 million systems in November. The exclusive games for those systems only sold to almost 20% of the first adopters. Also none of those systems are BC so they didn't buy last gen games to play on their new systems. People really just wanted to get hardware now to sit and wait for games later. Which usually is what hurts game developers.

Michael Wenk
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I miss when gamasutra released NPD numbers.

John Flush
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Other than hardware, I didn't buy anything that was a physical copy this year during the holidays. As a long time worrier about losing my right to play with digital copies and wanting my own copy to prevent that I realized that most of these games get so many updates that the game on the disc is practically unplayable anyhow in its original disc form.

Then I added in the convenience of starting a console, finding a game and hitting 'play' without having to put in a disc and such. And on portable hardware the sake my packing for myself and my kids is now "grab you 3DS" and I don't have to worry about them losing all their cards or where they put them or any of that mumbo-jumbo has sealed the fate of physical for me. It was also pretty awesome to take their 3DS on Christmas eve, buy their games and have it already downloaded and packaged on the home screen for them in the morning. Fancy.

Someone got me a gift card to GameStop, knowing my family plays lots of games. They had good intentions, but after going in twice to find something I just don't know what to buy. I'm not ready to buy new hardware... and that appears to be the only thing I would care to get from retail anymore.