New GameStop CEO's Half-Baked Plan to Avoid Blockbuster's Fate
GameStop's new CEO Paul Raines has picked a fun time to step into the driver's seat of the largest specialty video-game chain -- video game and software sales dropped in May and June. The former Home Depot executive recently shared with TheStreet.com his battle plan for keeping GameStop (GME) from losing big in the switch to digital game delivery and becoming the next Blockbuster (BBI).
Some parts of which make sense, and some parts of which smell like the same kind of denial that got Blockbuster into deep debt.
On the plus side:
- Raines says GameStop is studying the success of Netflix (NFLX). This is good. They're also tuned into gaming's changing demographics -- 40 percent of new gamers are women, and the average age is mid-30s.
- Rains is high on GameStop's used-game business, which is a cash cow and does provide a reason to come into stores. That'll likely continue for some time -- after all, people are still trading old vinyl. The growth of digital may only give physical games cult cachet.
- There's a loyalty program rolling out this fall that will kick out perks like passes to Comic Con. Could definitely help build the fan base.
- Part of the multi-channel plan is to turn the company's Web site into a gaming platform. This means Raines gets that in the future, it's entirely possible GameStop might be purely an online company, and they're laying some groundwork to support surviving and succeeding if the store model goes away. This is the critical piece Blockbuster still doesn't seem to understand.
- He envisions GameStop stores as "a hub where consumers can come in and...get help on how to play games." The help-desk idea could keep customers coming...but couldn't they do that with live chat online, too?
- Raines touts a deal with Microsoft to sell its digital content at GameStop stores. Apparently, gamers will do just that -- a new NPD Group study showed gamers bought nearly as many digital downloads in stores as they do physical games.
- Raines sloughs off the recent news that Best Buy (BBY) is getting into used games. Though Best Buy has tried and failed at it before, it'd probably be best to take their incursion into the used niche seriously.
- He similarly minimizes the digital threat, saying, "the world won't be all digital tomorrow." True, but what about next month, or next year? It could come on fast -- faster than digital video's progress -- since the core audience is very tech-savvy. As AppScout commented on its blog, "Only time will tell whether or not GameStop is too late on the jump to digital distribution."
- He notes that "Video gamers are spending more time playing games on multi-platforms like Facebook..." but doesn't say anything about where that leaves GameStop. Which is likely, out in the cold.
- No mention of the strategy that could really help GameStop survive -- becoming a host for regular game tournaments. Teens and tweens are holed up at mom-and-pop stores across the country playing SuperSmash Bros. Brawl all weekend, and GameStop could dominate that action, and even offer regional and national tournaments for local top-scorers. With tournaments, GameStop could be for tweens what Starbucks (SBUX) is for soccer moms -- a popular Third Place to get away and hang out.
- Raines says he gets digital, but so far, the stores don't even have individual Web sites. It's hard to promote tournaments and other in-store events that could attract shoppers when the stores essentially don't have Web sites. Right now, their only Web presence is a tiny box that pops with hours and directions that pops up in GameStop's main store locator.