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Retail

GAME: Total group sales down ten percent

Wed 16 Nov 2011 8:49am GMT / 3:49am EST / 12:49am PST
RetailFinance

Retailer in trouble as major software release sales drop sharply after week one

The GAME Group released its latest financial interim statement today, showing a 8.6 per cent drop in like for like sales and a 10.6 per cent drop in total group sales over the 41 week period up to November 12, suggesting that the UK's high street retailers are still facing tough times.

All categories of product have seen revenue fall, and even major game releases are seeing a big drop off after the initial launch week, with catalogue sales dropping. Online sales remained stable, with market share holding at 19 per cent.

28 per cent of total sales are now coming from the second hand market, which operates at a 40 per cent margin.

Overall the UK video games market was reported as having fallen by 12.3 per cent during the period.

As well as revealing a 51 million loss for the 26 weeks to July 2011 earlier this year, the GAME Group has closed 37 stores this year, and hopes to see a 1 per cent increases in the number of gamers visiting its shops. It also launched the GAMEwallet in October.

"Major software titles are launching in line with first week expectations, but are then seeing a quicker tail-off than historically experienced."

GAME Group interim report

Unsurprisingly, CEO Ian Shepherd remained positive despite the disappointing results.

"The overall video games market remains very challenging, despite strong title launches, and our guidance today reflects the extraordinary economic times in which we are operating. GAME has outperformed the market, reinforcing our position as market leader, and I am hugely proud of our teams."

"They remain focussed on delivering our strategy, controlling costs and driving operational cashflow, and we remain well placed to benefit in the medium term both from the next console cycle and the growth in digital and social gaming."

The company is now projecting full year like for like revenues of -7 per cent, but operating costs that are 8 to 10 million lower than last year.

Results for the vital Christmas period will be available on January 11.

20 Comments

Sam Maxted
Journalist / Community / Support

153 62 0.4
As I write this, GAME's shares are down 36% on this news, from 19p to 12p a share.

Posted:2 years ago

#1

Rupert Loman
Founder & CEO

135 14 0.1
Not looking good. But what are their options?

Posted:2 years ago

#2

Neil Young
Programmer

232 186 0.8
"even major game releases are seeing a big drop off after the initial launch week, with catalogue sales dropping."

tbh, I've been finding specialist bricks and mortar less and less useful for older 1st hand titles, so this isn't surprising - they seem to be focussing more and more on launch week and 2nd hand?

Posted:2 years ago

#3

Terence Gage
Freelance writer

1,288 120 0.1
They're going to have to drastically reduce the size of their business and perhaps look at getting into the digital distribution business if they've any hope of lasting in my opinion, because while it's still currently important to the industry, the role the high street stores play is only going to reduce over the next 5-10 years.

I wonder how much their websites - Game.co.uk, Gameplay and Gamestation.co.uk - sell relative to other big online retailers like Amazon, eBay, etc. Maybe these should be pushed as the cornerstone of the business while their high-street presence is reduced in order to cut overheads.

Posted:2 years ago

#4

Darren Stewart
Videogame investor

52 17 0.3
Neil, they actually say they've out-performed the market, i.e. they've grown market share, so their problems aren't strictly to do with the fact that they are "bricks and mortar". It's more to do with the fact that, despite the best release schedule for many years, consumers aren't buying games as much as they used to.

There's not a lot GAME can do (apart from moving into different categories) if the whole market is down.

Personally, it seems to me that the key problem is that there's nothing to drive the market. We had Guitar Hero type games which stuck about 15% on the size of the market at its peak, then we had Wii which put an enormous percentage onto the market and since then we've had....well, nothing really. I know somebody is going to say that social gaming has been the recent thing but revenues from that are fairly small and pretty much all gobbled up by Zynga/Facebook anyway.

A few months back I really thought the stellar release schedule was going to drive some growth in the market these last few months but the mediocre NPD numbers and Charttrack's information which showed that sales were dropping off faster than they used to had really put a big question mark over that.

GAME's profit warning seems to confirm it.

Gamestop announcing Q3 numbers tomorrow - it will be interesting to see if the US is following the same trajectory or if this is a European thing.

http://www.bougafer.com - investing in video games.

Posted:2 years ago

#5
Its simple,

Food, Fuel and survival come before entertainment. If entertainment is TOO expensive, then less sales.
All again pointing towards a better RRP that is tiered at the 30 mark

Posted:2 years ago

#6
Yep, I'd agree with those saying people simply don't have the money. Game has other problems, sure, but right now its biggest one is that people are on the whole, to put it bluntly, broke.

Posted:2 years ago

#7

John Bye
Senior Game Designer

477 434 0.9
"Even major game releases are seeing a big drop off after the initial launch week, with catalogue sales dropping" is hardly surprising if"28 per cent of total sales are now coming from the second hand market, which operates at a 40 per cent margin".

If you dedicate more than half your store space to second hand and push it aggressively on customers, nobody's going to *be able to* buy catalogue titles, because you've got little to no stock outside of the top ten and the handful of new releases you promote each week, and what stock you do have is jumbled on the shelves where nobody can find it.

Besides, when even your own website is undercutting your in-store prices by 5 or more in many cases, and everyone from Tesco to Toys R Us is cheaper too, why would anyone buy new games in Game?

Posted:2 years ago

#8

Andreas Gschwari
Senior Games Designer

542 528 1.0
I still pick up games i would not normaly pick up to check out and for reference, but far less so than a few years ago. I have to admit i also look at second hand sales to save money.

full retail price for some games simply is not an option anymore at the current levels.

Posted:2 years ago

#9

Mike Wells
Writer

59 23 0.4
"... we remain well placed to benefit in the medium term both from the next console cycle and the growth in digital and social gaming." You really aren't. Wishing it doesn't make it true and I wish you'd stop coming out with this nonsense. You are a bricks-and-mortar led retailer. That makes you a pimple on the massive behind of social/digital gaming. And you're not competitive on price with online retailers and non-specialist competitors in an economic slump that is going to last for years. You were good, but your time has passed and you've been out-evolved.

Posted:2 years ago

#10

James Ingrams
Writer

208 72 0.3
Other games retailers in other countries operate on a different basis. For example, I saw three copies of "The Longest Journey", a 2000 PC title in a German store this past summer. They had other European PC titles too, going back 2-3 years.

The problem is that the game industry decided it was like the movie business, and operates the same way, with major AAA titles getting far too much hype and the smaller quality games always on the periphery.

If it had decided it was like the book industry, we would be a much more profitable industry with better games and a more "grown-up" media and industry. Classic titles, like X-Com would still be on sale for 14.99, in it's big box with it's 100 page manual. along with other classic titles. Just like you would have no problem getting a copy of any classic book from almost any era of the last 200 years, from Shakespeare to Arthur C. Clarke! Computer gaming could have been the same, but it decided it wanted to be like the throw-away movie business.

Posted:2 years ago

#11

Aleksi Ranta
Product Manager - Hardware

246 96 0.4
Dr. Chee: That is not necessarily true. Here in Finland we have seen more entertainment (music, movies, games) sales during a ressession than the period before it. People need entertainment in their lives even when only eating bread and water. I agree that basic human needs come first but games are not always the first thing people let go of when they think about saving money, for example.

Posted:2 years ago

#12
@ Aleski.

True, but it's more the number of games people will buy, and whether they buy them new. For example, right now Batman Arkham City, Battlefield 3, Uncharted 3 and Modern Warfare 3 are all out. And, by and large, they're competing for the same customers, and generally at 35-40 each. Coming up to Christmas, people don't have over 100 to spare to buy more than a couple of them, especially when, if they wait a little, they'll pick them up second hand or reduced for much less.

People haven't stopped buying games, but they DO seem to have reduced the number of games they buy.

Posted:2 years ago

#13
@ Aleksi - I guess its hard to gauge variability in various Euro countries. In UK, the main massive rise in inflation is - food (wheat is dear, rice has taken a hit due to flooding); imports become more expensive
- Cost of electronics increased and global market forces (strong yen, loss of manufacturing in Japan, thailand)
- Fuel (the govt takes home 66% in UK)
- Increased energy costs (energy companies have risen their prices to maintain profits) - now that winter is here, people choose the basics over entertainment
- Decreased benefits (UK) due to pegging of RPI - overall people take home less. So again, food and fuel come first
- Less cheap credit available & crazy interest rates of 23-30% (so people either try to pay debt off, and thus again have less opportunity to purchase goods. If they do so, online is more affordable - unless you're Asda)

all in all, in UK there is less immediate need to buy entertainment due to the high cost (console), as such people still want entertainment for sure. As such, the IOS and smartphone become particularly attractive, whilst for console lovers, it becomes a hard choice to fork out for 1-2 titles ONLY.

such is the current ground situation as I perceive it to be.

Posted:2 years ago

#14

Graham Simpson
Tea boy

220 7 0.0
Personally I think Gamestop will now be looking at the wounded animal now. The UK is still one of the biggest video games markets and they have no presence apart from that website that was thrown together by a freshman student.

Posted:2 years ago

#15
The options for Game are really simple. They have lost 94% of value since the 2008 peak.

1/ Sell off 90% of its retail shops, leaving few key strategic stores in each city. These can act to help acquaint customers to electronics, peripherals and games. (YOU DONT NEED outposts in every village)

2/ Secure stronger online sales and on time deliveries

By paring these excess off and re-strategizing, there can be profits to be made.

Posted:2 years ago

#16

James Verity

132 25 0.2
it dosnt help the company having both Game and Gamestation stores within a stones throw of each other... also they need to be more competitive... or just combine both Game and Gamestation together in one shop, like the Currys/PCWorld combo

Posted:2 years ago

#17

Sam Maxted
Journalist / Community / Support

153 62 0.4
In Brighton, there are 2 GAMEs and a Gamestation, and getting between the furthest two takes under five minutes. This is probably an extreme example, but I wouldn't be surprised if GAME looked at places like Brighton and closed down some of its redundant stores.

Posted:2 years ago

#18
Only if they had their cost cutting hats on

Posted:2 years ago

#19

Paul Dixon
Territory Manager P&G

1 0 0.0
Surely that would lead to loss of market share which is the cornerstone of their previous success

Posted:2 years ago

#20

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