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Analysis: GameStop Keeps Up With The Times

Analysis: GameStop Keeps Up With The Times

September 13, 2011 | By Chris Morris

It's no secret that game publishers have spent a lot of time focusing on the growing importance of the mobile space, but things have been a lot quieter on the retail front.

However, GameStop's pair of announcements Monday sent a clear signal to both gamers and investors that the company was planning to defend itself against the ongoing decline in retail game sales and the changing nature of the gaming market.

One thing is certain: Neither the announcement that it would begin accepting iOS devices for trade-ins nationwide or that it was launching its own GameStop-certified gaming tablet is likely to be met without criticism.

For one thing, GameStop is a company that tends to draw the ire of gamers who want to trade in their hardware and software, even though it recognizes its reliance on the practice. For another, many core gamers write off mobile devices as not having an impact on the larger game industry a defensive maneuver that's about as effective as an ostrich poking its head in the sand.

Electronic Arts has invested over $1 billion to position itself as a leader in the mobile gaming space. Disney basically shuttered its console gaming division to focus on social and mobile. And both Activision-Blizzard and Take-Two have acknowledged plans to expand in the area, though they're moving at a slower pace.

While the field is growing fast, it's also cutting out retail middlemen. That, at some point, is going to hamper GameStop's growth, so latching onto the hardware side is a smart plan for at least the short-term. And doing so via its trade-in program, which has a significantly higher profit ratio, is only natural.

GameStop says it will offer "competitive" trade-in values for iDevices, but as with any game you hope to trade, you'll have to bring your system into a store to find out exactly what "competitive" translates to in real world dollars and cents. And getting you into the store is half the battle, from GameSpot's perspective.

Certainly, given the steep new retail costs of these devices, no one will be singing songs of praise about the trade value, but GameStop's smartly preying on the early adopter profile of gamers here. The same people who will line up outside of an Apple store the day the iPhone 5 or iPad 3 goes on sale are largely the same people who attend midnight launch parties. And many of those people already have an original iPad or older iPod gathering dust and games they want to play.

It's the Gamestop-certified tablet that's likely to really raise eyebrows, though. While the company has been talking about this since April, no one really knew what to expect. What the company announced, though, caught everyone off guard.

Refurbishing an unnamed Android tablet, then reselling it with a dedicated controller sounds a bit harebrained at first. But when you consider the systems are likely to be beefed up with games and (almost certainly) the Spawn Labs streaming service, the strategy becomes a lot more interesting.

Rather than trying to compete directly with the app store, GameStop's looking to bring the core gaming experience to the mobile world. Instead of simply playing Angry Birds on yet another platform, this solution allows you to play something like Modern Warfare 3 on the go. Not an awkward port of the game, either, but the true PC or console version.

And, of course, the system will also certainly have access to the Android marketplace, letting people indulge in their snack gaming on the same system as well.

There are, of course, innumerable challenges that go with this plan. Playing a AAA release wherever you want, whenever you want sounds nice, but how many people will be willing to plop down on a bus seat, balance a tablet on their knees and pull a controller out of their bag?

And Apple's dominance in the tablet space is inarguable. That said, GameStop doesn't have to own this market. This is a case of a strategy that could succeed nicely by being an also-ran in the larger tablet biosphere.

GameStop's planning for the next step in its evolution this year has been impressive. The company has made smart buys and laid some groundwork that could prove to be quite profitable down the line.

That groundwork is just the beginning, though. If GameStop's going to successfully transition with the gaming industry as it continues to evolve, its execution is going to have to be pitch perfect.

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