GameStop’s short on digital downloads
May the Force be with GameStop during the holiday shopping season.
That’s the “new hope” on Wall Street after the videogame retailer said sluggish sales of the new “Star Wars Battlefront” fueled worsethanexpected quarterly results.
In a call with analysts, GameStop execs said they expected demand for the new “Star Wars” title from Electronic Arts to swell on Black Friday and beyond, aided by the December release of the new “Star Wars” movie, “The Force Awakens.”
The bigger worry among investors, however, is that GameStop’s livelihood is getting siphoned away by the increasing use of digital downloads to sell video games.
GameStop shares plunged as much as 16 percent on the news before recovering most of those losses to close at $37.61, off 4.2 percent from the previous day’s close.
Digital downloads — typically purchased through online stores for consoles like Microsoft’s Xbox and Sony’s PlayStation — don’t require gamers to ever leave their couches when buying new titles.
Some investors were skeptical about claims by GameStop execs that digital downloads of hot, new gaming titles weren’t stealing sales away from stores.
For example, GameStop execs contended that 20 percent to 25 percent of sales of Microsoft’s “Halo 5” title were digital downloads. By contrast, Cowen & Co. analyst Doug Creutz estimates downloads account for half of the total. “We suspect that the average underperformance vs. their expectations is really being driven by an acceleration of digital downloads,” Creutz said.
To shore up sales at its stores, GameStop has been pushing more collectible merchandise, such as trading cards, action figures and apparel.