GameStop
GameStop is an American video game, consumer electronics and gaming merchandise retailer. The company is headquartered in Grapevine, Texas, United States, a suburb of Dallas, and operated 5,509 retail stores throughout the United States, Canada, Australia, New Zealand, and Europe as of February 1, 2020. The company's retail stores primarily operate under the GameStop, EB Games, ThinkGeek and Micromania-Zing brands.
In addition to retail stores, GameStop also owns Game Informer, a video game magazine.
GameStop has been the subject of criticism over the years in response to several of its policies. During the current COVID-19 pandemic, the company was criticized for their stores remaining open to customers, a decision that was later reversed the following month in response to the negative feedback.
History
Babbage's (1984–1994)
GameStop traces its roots to Babbage's, a Dallas, Texas-based software retailer founded in 1984 by former Harvard Business School classmates James McCurry and Gary M. Kusin. The company was named after Charles Babbage and opened its first store in Dallas's North Park Center with the help of Ross Perot, an early investor in the company. The company quickly began to focus on video game sales for the then-dominant Atari 2600. Babbage's began selling Nintendo games in 1987. The company went public in 1988. By 1991, video games accounted for two-thirds of Babbage's sales.NeoStar Retail Group (1994–1996)
Babbage's merged with Software Etc., an Edina, Minnesota-based retailer that specialized in personal computing software, to create NeoStar Retail Group in 1994. The merger was structured as a stock swap, where shareholders of Babbage's and Software Etc. received shares of NeoStar, a newly formed holding company. Babbage's and Software Etc. continued to operate as independent subsidiaries of NeoStar and retained their respective senior management teams. Babbage's founder and chairman James McCurry became chairman of NeoStar, while Babbage's president Gary Kusin and Software Etc. President Daniel DeMatteo retained their respective titles. Software Etc. chairman Leonard Riggio became chairman of NeoStar's executive committee.Gary Kusin resigned as president of Babbage's in February 1995 to start a cosmetics company. Daniel DeMatteo, formerly president of Software Etc., assumed Kusin's duties and was promoted to president and chief operating officer of NeoStar. NeoStar chairman James McCurry was also appointed to the newly created position of NeoStar CEO. The company relocated from its headquarters in Dallas to Grapevine later that year.
NeoStar merged its Babbage's and Software Etc. units into a single organization in May 1996 amid declining sales. Company president Daniel DeMatteo also resigned, and NeoStar chairman and CEO James McCurry assumed the title of president. In September of that year, after NeoStar was unable to secure the credit necessary to purchase inventory necessary for the holiday season, the company filed for Chapter 11 bankruptcy. With the filing, NeoStar board member Thomas G. Plaskett became chairman and James McCurry remained company chief executive and president.
The leadership changes were not enough and in November 1996 the assets of NeoStar were purchased for $58.5 million by Leonard Riggio, a founder of Software Etc. and chairman and principal stockholder of Barnes & Noble. Electronics Boutique had also bid to purchase NeoStar, but the judge presiding over NeoStar's bankruptcy accepted Riggio's bid because it kept open 108 stores more than Electronics Boutique's bid would have. Approximately 200 retail stores were not included in the transaction and were subsequently closed.
Babbage's Etc. (1996–1999)
Following his purchase of NeoStar's assets, Leonard Riggio dissolved the holding company and created a new holding company named Babbage's Etc. He appointed Richard "Dick" Fontaine, previously Software Etc.'s chief executive during its expansion in the late 1980s and early 1990s, as Babbage Etc.'s chief executive. Daniel DeMatteo, previously the president of both Software Etc. and NeoStar, became company president and COO. Three years later, in 1999, Babbage's Etc. launched its GameStop brand with 30 stores located in strip malls. The company also launched , a website that allowed consumers to purchase video games online. GameStop.com was promoted in Babbage's and Software Etc. stores.Barnes & Noble Booksellers (1999–2004)
purchased Babbage's Etc. in October 1999 for $215 million. Because Babbage's Etc. was principally owned by Leonard Riggio, who was also Barnes & Noble's chairman and principal shareholder, a special committee of independent directors of Barnes & Noble Booksellers evaluated and signed-off on the deal. A few months later, in May 2000, Barnes & Noble acquired Funco, an Eden Prairie, Minnesota-based video game retailer, for $160 million. Babbage's Etc., which had been previously operating as a direct subsidiary of Barnes & Noble, became a wholly owned subsidiary of Funco. With its acquisition of Funco, Barnes & Noble also acquired Game Informer, a video game magazine that was first published in 1991. Funco was renamed GameStop, Inc. in December 2000 in anticipation of holding an initial public offering for the company.Barnes & Noble Booksellers took GameStop public with a February 2002 initial public offering on the New York Stock Exchange. GameStop was listed under the ticker symbol GME. Barnes & Noble retained control over the newly public company with 67% of outstanding shares and 95% of voting shares. Barnes & Noble retained control over GameStop until October 2004, when it distributed its 59% stake in GameStop to stakeholders of Barnes & Noble, making it an independent company.
GameStop's successful years (2004–2016)
GameStop acquired EB Games in 2005 for $1.44 billion. The acquisition expanded GameStop's operations into Europe, Canada, Australia, and New Zealand. Two years later, in 2007, GameStop acquired Rhino Video Games from Blockbuster for an undisclosed amount. Rhino Video Games operated 70 video game stores throughout the Southeastern United States.GameStop purchased Free Record Shop's Norwegian stores in April 2008. The company acquired 49 stores and converted them into video game shops. Daniel DeMatteo replaced Richard Fontaine as GameStop CEO in August 2008. DeMatteo had served as company COO since 1996. Fontaine, who had been GameStop chairman and CEO since 1996, remained the company's chairman. J. Paul Raines, formerly executive vice president of Home Depot, became company COO in September. GameStop acquired Micromania, a French video-game retailer, in October 2008 for $700 million. GameStop, which had previously owned no stores in France, now had 332 French video-game stores. It also acquired a majority stake in Jolt Online Gaming, an Irish browser-based game studio, in November 2009. Jolt closed in 2012.
J. Paul Raines became GameStop CEO in June 2010. He replaced Daniel DeMatteo who was named executive chairman of the company. While serving as CEO in 2012, GameStop's digital revenue grew from $190 million in 2011 to more than $600 million in 2012.
GameStop acquired Kongregate, a San Francisco, California-based website for browser-based games; terms of the deal were not disclosed.
GameStop acquired Spawn Labs and Impulse in separate transactions during 2011. Spawn Labs was a developer of technology that allowed users to play video games that were run remotely on machines in data centers rather than their personal computer or console. Impulse was a digital distribution and multiplayer gaming platform. GameStop closed Spawn Labs in 2014.
GameStop purchased BuyMyTronics, a Denver, Colorado-based online market place for consumer electronics, in 2012. Later that year, it acquired a minority interest in Simply Mac, a Utah-based authorized Apple reseller. GameStop acquired the remaining 50.1% interest in Simply Mac in November 2013. GameStop also acquired Spring Mobile, a Salt Lake City, Utah-based retailer of AT&T-branded wireless services, in November 2013. They obtained 163 RadioShack locations as of February 26, 2015, as well. All GameStop stores have been closed down in Puerto Rico at the end of March 2016, citing increased rates of government taxes. On August 3, 2016, it acquired 507 AT&T store chains in plans to diversify into new businesses and less dependent on the video game market.
Decline (2016–present)
Changes in market conditions
The market for physical game media has been in a state of decline since online services such as Xbox Live, PlayStation Network, Nintendo eShop, and Steam, all of which offer downloadable digital versions of games, have taken foothold. GameStop, whose business was long rooted in new and pre-owned software, has begun feeling the effects of the changing market. In 2017, GameStop reported a 16.4% drop in sales for the 2016 holiday season, but expressed optimism in its non-physical gaming businesses. Reasons cited for the decline in sales included industry weakness, promotional pricing pressure, and lower in-store traffic.Financial losses
Shares of GameStop stock fell 16% throughout 2016. On February 28, 2017, shares dropped an additional 8% following Microsoft's announcement of its Xbox Game Pass service. Following these reports, GameStop announced it would close over 150 stores in 2017 and expand its nongaming business. On the same day, however, GameStop said it planned to open 65 new Technology Brand stores and 35 Collectibles stores due to a 44% and 28% increase in sales, respectively. GameStop expects a continued drop in operating income between 3% and 10% in 2017. GameStop's total revenue fell 7.6% to $3.06 billion in the quarter ended February 2. Analysts had estimated revenue of $3.28 billion.In late June 2018, GameStop confirmed talks of a possible sale, with Sycamore Partners, a private equity firm in New York, the most likely buyer, with a target deal expected by February 2019. However, on January 29, 2019, GameStop reported it had stopped looking for a buyer for the company, due to a "lack of available financing on terms that would be commercially acceptable to a prospective acquirer", and was looking for other actions to help re-establish its financial ground. Shares dropped 27% to a 14-year low immediately following this announcement.
The financial results for 2018 showed the biggest loss in GameStop company history. For the 52-week period ending on February 2, 2019, GameStop reported a record-breaking net loss of $673 million. This was a change from the net profit of $34.7 million in the previous year. The net sales for fiscal year 2018 were down year-on-year to $8.29 billion, a decrease of 3 percent.
Management changes
Paul Raines notified GameStop of his resignation on January 31, 2018. Raines had been on medical leave since November 2017. He had a medical reoccurrence of a brain tumor, and later died on March 4, 2018. DeMatteo, GameStop's executive chairman stepped in as interim chief executive officer. On February 6, 2018, the company announced Michael K. Mauler as the new CEO and new member of the board of directors. On May 11, 2018, Mauler resigned due to "personal reasons" and chairman Dan DeMatteo was named interim CEO. Mauler did not take any severance package or separation benefits. On May 31, 2018, GameStop named Shane Kim as interim CEO. Kim was replaced by George Sherman in March 2019. On March 12, 2020, it was announced that a group of shareholders including Hestia Capital Partners LP and Permit Capital Enterprise Fund LP sent a "threat" letter to the Grapevine, Texas, company's board, urging it to appoint a stockholder representative as a director.Turnaround efforts
In July 2019, GameStop partnered with an outside design firm, R/GA, to put forth plans to revamp stores to focus on competitive gaming and retrogaming, and to introduce new ways for customers to try games before buying them. Each concept store is expected to be mutually exclusive.A leaked email revealed on July 31, 2019, indicated that 50 employees, including district and regional managers, would be laid off as a result of reorganization efforts. Later, in August 2019, GameStop laid off over 120 positions, including about half of the staff of Game Informer as part of their "GameStop Reboot initiative to transform our business for the future and improve our financial performance".
In August 2019, Michael Burry's investment firm Scion Asset Management sent a letter to GameStop urging the company to engage in a portion of stock buybacks. The letter also revealed that Scion currently owns approximately 2,750,000 shares, or about 3.05% of GME. GME, which has been in steady decline in share price since late January 2019, saw a spike of roughly 20% after Burry revealed that he's going long on the stock in an interview with Barrons. In the interview, Burry explained that both Sony and Microsoft will enter the next console generation with a physical disc drive and therefore likely extend the longevity of GameStop. He also noted that the company's balance sheet was in good condition. However, he later went on to lower his stake in GameStop stock.
After reporting that it has missed analysts' expectations during their 2nd quarter of the fiscal year 2019 ending August 2019, as reported in September 2019, GameStop announced that it plans to close about 180–200 underperforming stores of the 5,700 it had worldwide in short term, along with developing metrics to evaluate other potential closures over the next two years. In March 2020, four members of GameStop's Board of Directors - Dan DeMatteo, Gerald Szczepanski, Larry Zilavy, and Steve Koonin - stepped down and were replaced by Reggie Fils-Aimé, Bill Simon and J.K. Symancyk as part of the company's effort to turn around the business.
The COVID-19 pandemic forced Gamestop to close the physical operation of all of it 3,500 stores from roughly March to May 2020, though not without some controversy in the early stages, though it was still able to handle online and curbside sales. Sherman and the board of the directors took a 50% pay cut while other executives took a 30% to offset losses, While digital sales grew by 519%, its retail dropped by more than 30% in the same period from the prior year, and the chain reported a loss in contrast to a for the same quarter in 2019. However, with the Xbox Series X and PlayStation 5 still planned for release in the latter part of 2020, Sherman expected to be able to recover from these losses.
Operations
GameStop is divided into two operating segments: Video Game Brands and Technology Brands. The Technology Brands segment was created during the fourth quarter of 2013 and houses the companies Simply Mac, Spring Mobile, and Cricket Wireless. As of April 2014, the Technology Brands segment included 218 retail outlets. GameStop's Video Game Brands segment includes the company's other businesses such as video game and consumer electronics retail shops; Kongregate, a digital video game distribution site; and buymytronics.com, a consumer electronics marketplace. Pre-owned and value video games accounted for 47% of GameStop's gross revenue for the fiscal year ending February 2014.Owned brands and concepts
Game Informer
Game Informer is a magazine owned by GameStop, Inc. and primarily sold through subscriptions which can be purchased at GameStop locations. Purchasing a subscription to the magazine also gets the subscriber the PowerUp Rewards Pro card, a premium version of GameStop's loyalty card. This increases all store-credit trade values by 10%, discounts all used accessories and games by 10%, gives new PowerUp members a coupon for "Buy 2 Get 1 Free" on pre-owned games and accessories, enters them twice for the Epic Rewards Giveaway for each purchase, gives the cardholder opportunities to gain points with their purchases, and redeem them for rewards and gains them access to special content on the Game Informer website.GameStop PC
GameStop PC Downloads formerly called Impulse, is a digital distribution service run and operated by GameStop. Originally known as Impulse when owned by Stardock, it was sold to GameStop in 2011 and rebranded as GameStop PC Downloads, with the Impulse client renamed as the GameStop App. Under the ownership of GameStop, the service has had a redesign and sells games that use other platforms such as Steam while also selling games that use its own proprietary DRM solution Impulse:Reactor.Trade-ins
GameStop sells games that are traded in for store credit. This practice has come under fire from game publishers and developers as they make no money from the transaction.GameStop TV
GameStop TV is the in-store television network run internally by GameStop, with non-endemic sales in partnership with Playwire Media, Inc. GameStop TV features programming designed to speak to the consumers shopping in GameStop stores. Each month brings content segments about upcoming video game releases, exclusive developer interviews, product demonstrations and more.Pre-order bonuses
Game publishers have begun to obtain more pre-orders by including exclusive in-game or physical bonuses, available only if the player pre-ordered the game. Bonuses typically include extras such as exclusive characters, weapons, and maps. For example, GameStop included an additional avatar costume for ' when it was released in November 2010, and a pictorial Art-Folio for '. Soundtracks, artbooks, plushies, figurines, posters, and T-shirts have also been special bonuses.MovieStop
GameStop founded MovieStop in 2004 as a standalone store that focused on new and used movies. More than 40 locations were opened, which typically adjoined or were adjacent to GameStop locations. GameStop spun off MovieStop to private owners in 2012. In November 2014, Draw Another Circle LLC, a company controlled by merchandising executive Joel Weinshanker that also owns Hastings Entertainment, purchased MovieStop. The chain shuttered in 2016.GameStop Kids
In October 2012 at Grapevine Mills in Dallas, GameStop introduced a new store concept known as GameStop Kids. The brand focus on children's products, and carried only games rated "Everyone" by the ESRB, along with merchandise of popular franchises aimed towards the demographic. The locations opened in 80 malls as pop-up stores for the holiday shopping season.GameTrust Games
In January 2016, GameStop announced a partnership it had made with Insomniac Games with their 2016 title Song of the Deep. GameStop executive Mark Stanley said the concept was to help the chain have more direct communication with players, and would expect to expand out to other similar distribution deals with other developers if this one succeeds. Subsequently, in April 2016, GameStop announced that it was formally creating the GameTrust Games publishing division within the company to serve as a publisher for mid-sized developers. In addition to Insomniac Games, GameTrust Games announced they were working with Ready At Dawn, Tequila Works, and Frozenbyte to prepare more titles to be published by the end of 2016.Simply Mac
In October 2012, GameStop acquired a 49.9% minority equity ownership interest in the Salt Lake City-based Apple authorized reseller and repairer Simply Mac. Simply Mac was founded in Salt Lake City in 2006. GameStop acquired the remaining 50.1% that it did not own in November 2013. GameStop tried to target areas for potential new Simply Mac locations in slight smaller markets that did not have an existing Apple Store within a reasonable driving distance.In January 2017, GameStop closed a large number of Simply Mac locations. The chain had as many as 70 locations at the time of the announcement. After the closings, a few recently vacated Simply Mac locations were replaced by sister company ThinkGeek.
Criticism
Opened copies of game titles
The company has a policy where some copies of newly released games are opened and the game discs stored behind the counter so the cases can be put on display. Purchasers of the game receive a factory-sealed copy unless the opened copy is the last copy of the game in stock, where they'll receive the opened copy sold at regular price.GameStop's check-out policy allows employees "to check out one item of store merchandise for personal use for up to four days", with the intent being to allow the employee to evaluate the game and learn about its content. This checkout policy does not apply to new as well as used merchandise, but sometimes managers abuse this system and it does happen, which has been a hotly contested practice among the community.
GameStop came under fire from critics when customers discovered that content had been removed from the original packaging of . GameStop had instructed employees to remove coupons for a free copy of Deus Ex: Human Revolution on OnLive, a cloud gaming service. GameStop stated that the coupon promoted a competitor of its subsidiaries, Spawn Labs and Impulse, which it had acquired in April 2011. Later, GameStop entirely removed the PC version of Deus Ex: Human Revolution from its stores. Square Enix, the publisher of Deus Ex, said that it "respects the right of GameStop to have final say over the contents of products it sells and to adjust them where they see fit in accordance with their policies".
Used games market
GameStop has been criticized by game developers and publishers for the retailing of used game titles. By reselling used copies at a small discount on the same shelf space as new copies of the game, it is argued that GameStop is taking profits directly from organizations such as developers and publishers which are solely dependent on their intellectual property for revenue. In effect, this means that companies such as GameStop can resell used copies of a game within days of the title's release and keep all of the profit, thereby cutting directly into the critical initial sales which would otherwise go to publishers and developers.Fingerprint identification
It was revealed in early August 2014 that GameStop was required by the Philadelphia Police to provide fingerprint identifications when customers traded in games at Philadelphia GameStop locations. The policy had been in place since early July of that year and did not apply to the suburban areas of Philadelphia. This caused some heavy criticism from video gamers living in the affected area. Philadelphia Police asserted that the fingerprint identification would help track thieves. By August 4, 2014, the policy had been reversed in all Philadelphia-area GameStop stores.Circle of Life policy
In February 2017, it was revealed that GameStop enforced, on all of its retail employees, a program known as Circle of Life. The policy itself was made to ensure that each employee would allow a certain percentage of their sales to pre-orders, rewards cards, used games, or have a customer trade in a game. Upon revelation of the policy, many GameStop employees including current and former, brought up their stories of how the policy has led to them lying to customers. Many more claim that the policy had led to poor working conditions and emotional distress. Later into the month, GameStop reformed the program to solely focus on the store as a whole instead of the previous individual employee basis, though still maintaining a heavy emphasis on the individuals' performance to maintain strong store metrics.COVID-19 pandemic response
In mid-March 2020, GameStop faced criticism for its response to the coronavirus pandemic in North America, with employees and social media users accusing the company of placing its business ahead of the safety of its staff and customers, in order to capitalize on an influx of video game purchases and related products for entertainment during the pandemic and related lockdowns. GameStop stated that it would suspend in-store events and the use of demo stations, perform additional cleaning, and structure lines and limit store capacity to enforce physical distancing. In order to prevent enlarged crowds for two high-profile video game releases on March 20 — and Doom Eternal, GameStop announced that it would begin selling Doom Eternal in its stores a day ahead of its official release date.Polygon reported on March 17 that several stores in the San Francisco area had remained open, seemingly in violation of a stay-at-home order issued by Bay Area counties that restricts non-essential business. Several employees told Polygon and Vice that they did not receive additional cleaning supplies that were to be provided by corporate, requiring them to purchase them on their own and request reimbursement.
In regards to orders restricting non-essential businesses, a memo obtained by Kotaku on March 19 indicated that GameStop saw itself as an essential business because some of its technology products are relevant to enhancing remote work. In a statement later that day, GameStop reiterated the safety measures that it had put in place, and also announced that it would reduce store hours and suspend all trade-ins until at least March 29, and offer curbside pickup. The company stated that it aimed to "continue to provide essential products to our customers that allows them to stay connected, and provide products that allow business and consumers to work remotely", as they were serving the "significant need for technology solutions" at this point in time. An employee of a GameStop store in Athens, Georgia disputed the argument, saying that the high-end, gaming-oriented peripherals sold at GameStop were not necessarily essential for remote work, and that cheaper alternatives were readily available at stores allowed to remain open, such as Walmart.
California had announced a state-wide stay-at-home order on March 19; while GameStop had originally stated to its stores it was an essential retail business, by March 20 they had instead decided to close down its California branches, while keeping most other nationwide stores open. Following similar stay-at-home orders in New York and Illinois over the following days, GameStop announced that it would close all locations effective March 22, with selected locations continuing to offer contact-free curbside pickup and home delivery. In early April, a location in Dorchester, Boston received a nuisance citation by local police, who deemed the curbside pickup a violation of the Massachusetts stay-at-home order. GameStop subsequently ceased offering curbside pickup in the state.
GameStop's Canadian subsidiary EB Games faced similar criticism on March 20 as well, as morning lineups for the new Animal Crossing and Doom games at a Toronto location induced large public gatherings discouraged by officials. The city's public health chief Eileen de Villa stated that the gathering did not "line up with what we expect from those in our community who are interested in protecting and strengthening our community". Mayor John Tory accused the company of "plac commerce above the public interest", while Premier of Ontario Doug Ford stated that "everyone in this province has a responsibility to make sure we protect each other and I am very, very disappointed in the store owner that would do this". EB Games later announced that it would close all Canadian stores on March 21.