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Analyst: GameStop To Generate Over $200M In Digital Revenues This Year

Analyst: GameStop To Generate Over $200M In Digital Revenues This Year

October 8, 2010 | By Eric Caoili

October 8, 2010 | By Eric Caoili
More: Console/PC

GameStop will generate more than $200 million in digital-related revenues this year from Xbox Live Arcade/PSN/Wii point card sales, downloadable content, and its Kongregate service, according to estimates from Lazard Capital Markets analyst Colin Sebastian.

Sebastian, who says "digital revenue streams [are] on the cusp of contribution" for the company, believes the retail chain will be able to take advantage of digital opportunities through in-store merchandising, trade-in credits, and a loyalty program to promote its offerings.

He adds that non-console platforms like smartphones are also a focus for GameStop, as they allow the company to "aggregate content across a broad variety of connected devices". The video game retailer recently released a $0.99 iPhone game, Buck and the Coin of Destiny, starring its bunny mascot.

Sebastian also notes that GameStop management predicts "a good holiday ... expects strong demand for the Kinect controller and is also pleased with the launch of Sony's Move."

Earlier today, Gamestop revealed that pre-orders for CoD: Black Ops are outpacing those for 2009's CoD: Modern Warfare 2, which set a record for the most game reservations ever at GameStop. The chain also named Gran Turismo 5, Fable 3, Fallout: New Vegas, Assassin's Creed: Brotherhood, and Medal of Honor as key holiday releases.

GameStop's favorable forecast for the holiday comes in spite of The NPD Group's own prediction that fewer consumers intend to buy video games or video game consoles as gifts for the holidays. In a recent NPD survey, only 15 percent of respondents said they will purchase game presents this holiday, compared to 20 percent in 2009.

Furthermore, GameStop's management expects its free PowerUp loyalty program to "drive higher customer engagement". The PowerUp rewards program allows consumers to earn points from their purchases, which they can trade in for rewards such as iTunes gift cards and PSN/XBL subscriptions, among other benefits.

Sebastian said the program saw a "surprisingly successful pilot", during which 70 percent of new PowerUp customers felt it was an improvement over GameStop's prior loyalty program. A full 60 percent of new members selected the $14.99 paid program, which offers bonuses like a extra discounts and trade-in credits.

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