GameStop's acquisition of indie Flash game and social hub Kongregate represents a gain in the major brick-and-mortar retailer's strategy to stay in step with fast-evolving digital trends. And while the small-developer community ethos of Kongregate might initially seem at odds with the corporate retail change, the companies see it as a net gain for all involved.
"We've been talking for a while publicly about where we see ourselves in the future as it relates to our digital strategy," says GameStop's digital ventures GM Chris Petrovic. The retailer estimates about 500 million visitors to its physical stores and 10-15 million uniques to its online destination; combined with its longstanding retail partnerships with major publishers, the company believes it's positioned as an "aggregator of great content", and that's the same way Kongregate has always viewed itself.
"They know how to bring mass amounts of community to a destination, as well as get great games from developers and monetize that," Petrovic says. "We feel we're kindred spirits in that way, we both appeal to the core gamers primarily. This allows us to fulfill a lot of what we've talked about up until now -- to be that leading destination across internet-connected devices."
GameStop's seen strong growth thanks to its ability in recent months to outperform the software market overall on sales of new goods, and in particular its thriving used game business. But many analysts have questioned the long-term relevance of physical retail alongside the rapid growth of digital business, and the company's been aiming rapidly to catch up and leverage digital rather than fight it.
What GameStop Can Learn From Kongregate
"While we have a lot of expertise in the retailing of primarily console games for the living room, we've done a lot of hard work over the past year learning a lot about the casual and free-to-play markets we're real excited to have Jim [Greer, Kongregate founder] and his team bring a ton of expertise about that market," says Shawn Freeman, GameStop's senior VP and GM of digital business and e-commerce.
Kongregate's Greer tells us that a key difference between the free-to-play and browser markets and retail is "there's such a tremendous amount of content." For example, Kongregate has had some 8,500 developers operating around 30,000 games on the service. "If you compare that with the sort of catalog that exists in the console world, it's just a whole different scope," he says. "They're all variable quality, bur model is really to build tools and systems to let our players tell us what the best stuff is. The nice thing about free-to-play is everybody can try before they buy."
So for Greer, the acquisition means that combining that platform with GameStop's reach means more players. "There's a huge offline world of gamers who maybe haven't been exposed [to free to play games]," he says. "I think it makes sense for us to be reaching them in the browser."
And further, GameStop and Kongregate see the acquisition as a way to bridge something of a knowledge gap between the world of the console gamer and that of the online free-to-play gamer. The free-to-play world is traditionally associated with a more casual player, but the two companies assert there's quite a lot of audience overlap -- on Kongregate, genres like tower defense, multiplayer shooters and RPGs are highly popular, and Kongregate users flock to console-like features like achievements and leaderboards. A benefit of the acquisition is that there's now the opportunity for data sharing, to see how the tastes and trends of the core gamer online might translate to the retail shelves, and vice versa.
"I think the way we'll do that -- it's too soon to say [specifics], but from a strategy perspective, it's important that it's the same people playing kindred content in different places."
At the end of the day, adds GameStop's Freeman, both parties are in the business of monetizing gameplay: "The exciting aspect of this for us is to get an even closer look at how that's done, and how that's done effectively over time, and how that might translate into how we improve our business both on and offline."
And the perceived gap is rapidly closing, says Greer: "A few years ago, if you went to the community of console gamers and told them about Flash games, they'd be like, 'why would I waste my time, I'm playing Call of Duty.' I think that has really changed over the last two years, as we're seeing big publishers like EA and huge companies like Bigpoint investing huge resources into the browser."
What About The Indies?
But what about the indie developer that is the lifeblood of the Kongregate community? Despite the march on the space by a huge organization, Greer stresses: "The popular stuff on our site... the majority of it continues to be from one and two-person development teams." He compares it to the evolution of the Netflix service, where thanks to the digital platform, an indie documentary can be offered side-by-side with a blockbuster release on equal footing -- and frequently see even better performance.
While the companies aren't prepared to discuss the practicals of how their integration will work, Greer says "it's going to be business as usual in terms of the way we treat [developers] in terms of transparency and access." Many indie developers and indie-loving gamers responded negatively through social media channels at the announcement of yesterday's news, off-put by the narrative of a beloved community hub being gobbled up by a corporate retail chain -- for example, Polytron's Phil Fish, creator of 2008 IGF standout Fez, left a Gamasutra comment dictating simply, "bummer."
"I hear them," says Greer. But not only does he believe in the net benefit to indies of exposing Kongregate's games to a larger, perhaps previously-untapped share of the core market, he also asserts that the decision to sell to GameStop was carefully considered, as many companies were interested in Kongregate -- for one, Greer will report directly to the company's president, Tony Bartel: "We're at the highest level of the company," Greer says. "That's just not something you ever see when a 20-person company gets bought by a 50,000-plus person company.
GameStop has no plans to "rip it apart," Greer stresses. "They love the fact that we house this wealth of content from the indie developers, and that we're able to have partnerships beyond what they currently have with the big publishers. They've made it clear to me personally and to the team what their intentions are... GameStop is very focused on our audience, and as an aggregator of games I absolutely can't describe any other company that has big resources that is as similar to us as what they do."
GameStop's Petrovic adds that supporting the indie community has long been important to the retailer, pointing to its funding of the ongoing Indie Game Challenge it sponsors along with The Guildhall at SMU, and academy The Academy of Interactive Arts & Sciences. That program also drew some indie criticism for the implication that an independently-designed challenge winner could enjoy core market shelf space alongside Modern Warfare 2 and Mirror's Edge -- but if Kongregate and GameStop execute on their combined vision, the thinking is that thanks to the digital space, perhaps that's no longer so impossible. "For those developers, they'll know that we are just as invested in their future," says Petrovic.