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Interview: Why Stardock Sold To GameStop
Interview: Why Stardock Sold To GameStop
April 8, 2011 | By Chris Morris

Stardock's recent sale of its Impulse digital distribution service to GameStop is in the history books now, but the retailer was hardly the only bidder for the service.

Brad Wardell, CEO of Stardock, says there were conversations with dozens of companies – with roughly a half-dozen of those presenting term sheets – before Stardock made its final decision. And even then, it took a lot of convincing on GameStop's part.

"At first I wasn't sure," he says in an exclusive talk with Gamasutra. "We're a PC game distributor and we knew GameStop had largely moved to consoles. Also, they're brick and mortar -- and we weren't sure we wanted to hand off Impulse to [that sort of company]."

"We wanted to sell it to someone who wanted to build the digital distribution market for PC gaming," he said. "They went to great lengths to demonstrate this was something they were taking very seriously."

Those efforts worked. By the end of the negotiations, which began late last year, the companies were getting along like old gaming buddies, even debating which was better: Ultima IV or Ultima V.

With a user base of between 3 and 4 million users, Impulse is far from the largest player in the digital space, but it had grown into a notable one. While the growth was something Stardock was happy with – and profiting nicely from – the company found itself at a crossroads at the end of last summer: Did it want to remain a technology firm or become a retailer?

That's when it decided it was time to sell off its most profitable venture.

"We realized Impulse was taking over the company with its revenues and profits," says Wardell. "Normally, that's great, but we're a technology company. We looked at what it would require to take Impulse to the next step."

He explained, "We would need account managers, a lot more technical staff, a lot more business people. … For example, every time we would talk to a publisher, they'd want us to demo Impulse. The problem is: We're in Michigan. I can't just go down the street and grab engineers. Sending out a technical guy to San Francisco or L.A. or wherever is a disruption to everything else we're doing."

That resource issue also kept the company from growing Impulse at the rate it wanted to, letting Valve Software's Steam, with its 30 million-plus accounts, get a bigger foothold in the market. With GameStop now backing the service, Wardell says he expects advances such as Impulse Reactor (which seeks to add features like achievements and social integration) will happen at a faster pace.

Stardock will remain a partner to Impulse for the foreseeable future, and Wardell is contractually committed to assist with the transition for a year. But as it hands over control to GameStop, the company, which develops and publishes games including Galactic Civilizations and Elemental, is looking at new opportunities in the gaming space.

For now, it's not talking a lot about the details of what it has planned, but Wardell did drop some hints.

"There's a whole bunch of cool things going on in the gaming business that are just in their infancy," he says. "For example, in the [social gaming space], there's a lot of cool tech that can make the game experience much more interesting."

For the most part, GameStop's purchase of Impulse has met with generally positive feedback. But the praise hasn't been universal.

Earlier this week, Blind Mind Studios announced that it would remove its Star Ruler game from the service in protest of the takeover.

"We are ending sales through Impulse due to GameStop's long, negative behavior toward the PC platform and independent games," the company wrote in a forum post. "We would never have signed onto distribution through GameStop, and being forced into this situation has only made it worse for us. We feel GameStop cannot serve as the leader of a true competitor in the digital distribution market. … We supported Brad Wardell's direction of Impulse, and his absence ruins our faith in the service's future."

While Wardell acknowledges such proclamations of faith in him are flattering, he says he was caught off guard by the action.

"I was really surprised," he says. "By his own admission, Impulse is 25 percent of his revenue. Impulse is going to continue to function as it has. If a developer wasn't paying attention to this, they wouldn't notice any difference. … On one hand, they [say they] trust me, but they don't trust me enough to realize I vetted [GameStop]. Stardock didn't have to sell Impulse."

To demonstrate this, Wardell talks about one of the other companies that submitted a term sheet for the service. He only specifies them as a multimillion-dollar national company, but what they wanted was to use Impulse to manage licenses on an enterprise software system. The offer was rejected.

"That was an example of where we really wanted to stay with our roots," he says. "We want to see PC gaming expanded. … I feel like it's in pretty good hands. They're good guys, even if they don't agree which version of Ultima was the best."

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Jeremy Reaban
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I really don't like monopolies, so I think it's good for Steam to have competition.

But Gamestop's business practices are just as bad as Valve's.

In the long run, I think this move is going to make losers out of everyone - consumers, developers, even most publishers - except Valve/Gamestop.

Because either Valve becomes even more of a monopoly. Or Gamestop actually expands into the market. Neither is a good scenario.

ron carmel
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what business practices of valve are you referring to?

Kevin Wells
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I kind of thought the same as Jeremy when I first heard of this. However, as Brad pointed out in the interview, he vetted them, so since I trust him, I guess I'll just have to watch what happens.

I don't know a whole lot about Gamestop's business practices, but what about Valve is so awful?

Maurício Gomes
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I like Gamestop.

I mean, I never bought a game from them, since they don't exist here. But they sell (and buy!) used games, and that is awesome. I wish Gamestop existed here.

Matthew Mouras
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No you don't. They are the WalMart of video game retailers. Terrible service, understaffed, poor website, etc etc etc...

Eric Geer
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As much as I dislike some of Gamestops practices(ie overcharging to buy used games and giving you significantly less when you trade the game in--along with employees using new games and bringing them back to sell as new games) but there aren't any other game stores around--I wish there was...--but no other company offers a better brick&mortar location deal than Gamestop--yeah i can send my games in to amazon or various others--but I like to browse physical media--and hate to mail stuff--if there was a better option --i would use it--all other games stores--mainly babbages and eb games have been sucked up by Gamestop--and local game stores are few and far between--I still haven't found a convenient one here in DC--the only leftover places to shop are the BestBuys/Targets...and I generally hate to shop in both---Gamestops are small enough--generally have a huge game collection..and I can buy and trade games...sooo....until there is a better choice..I will probably continue to go to Gamestop

Maurício Gomes
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Here we have WalMart and I like them too... :/

Probably it is relative, here WalMart and related companies are awesome, I buy almost everything on them.

And I wish GameStop existed here, because they sell used games, and have a good site (Yes! their site is awesome considering the sites of retailers here) and accept trade ins.

Here in Brazil almost noone accept trade ins, or returns, or anything like that, if you buy a Modern Warfare, you are screwed if you dislike MP.

(the solution for most people, is pirate it... my own solution is buy on steam, in promos... I never paid 60 USD for a game, and the only game that I will ever pay more than 30 USD is probably only The Wicher 2 that I pre-ordered... first game I pre-order in my life too).

People in the US keep complaining of how Gamestop is ruining the industry, but they don't realize how Gamestop is important, maybe publishers need Gamestop more than Gamestop need publishers.

Dave Sodee
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Sad and a bad move for the consumer even if it was business smart for Stardock because it is all about the greenbacks. Gamestop has no deals for gamers and has close to no pc support any more. The parents who do not know better shop there and pay out the rear for overpriced software. You can goto Amazon and find deals, goto Steam and get deals.. and goto Impulse and get deals.

What I fear is the prices on pc games go up on Impulse and the deals go away. They kill the service in a few years as they do not understand ...gamers are not rich and the economy sucks. We have to get the most bang for the buck no matter what bottom line your company requires or worse what projected profit you have to make to keep the shareholders happy.

If you can get a better deal you are going to go that route. I use steam a lot for the deals and it is worth it even if there is no 2nd hand market when you can get a good title for 9 bucks that is usually 30.

E Zachary Knight
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if Gamestop doesn't compete price wise with Steam or other dd services, they will fail. Why would you think they wouldn't be willing to price compete with Steam?

Daniel Camozzato
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What I fear is that Impulse might lose key features that are better than the ones seen in Steam, i.e., its cleaner & more responsive user interface (that is imho; I use both Steam and Impulse), the ability to play a game without launching the client, the ability to play a game while downloading another, and so on.

I believe Ephriam is right; it wouldn't make sense to give higher prices than your better known competitor. What I wonder is if indie games will still have a fighting chance in the store's main page - Impulse could become a mainstream-only store for the sake of profit. I guess we'll have to wait and see...

Bill A
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Gamestop Sucks!

And Ultima IV is definately better than Ultima V.

Mike Morrison
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Haha! I was going to say the same thing about Ultima IV!