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GAME could lose 2.5m profit over Mass Effect dispute

GAME could lose 2.5m profit over Mass Effect dispute

Fri 02 Mar 2012 9:16am GMT / 4:16am EST / 1:16am PST
BusinessRetail

International and some UK stores may be sold, says analyst

Troubled retailer GAME could lose up to 2.5 million in profits by not selling EA's forthcoming sci-fi RPG Mass Effect 3.

That's according to one analyst, who said that lost sales and compensation to those that pre-ordered the game will add to the retailer's woes in a year of struggle on the High Street.

"Working on the assumption that a decent triple A title sells 0.8m-1m titles in the first few weeks of release in the UK and assuming Game has around 20% share, we calculate that by not stocking Mass Effect 3, Game is potentially missing out on around 6m-7m of revenues in the UK given the title will retail for 39.99," said Mark Photiades of Singer Capital Markets, reports The Guardian.

"With new software margins of around 24 per cent this could result in 1.5m-2m of lost gross profit in the current year. It is also worth noting that margins will suffer as a result of the reward card points being offered in compensation. We estimate this could amount to another 0.3m of forgone gross profit as typically pre-orders account for around 30% of initial sales. So in total there could be 2m-2.5m of lost UK profit in a year where we are already forecasting losses of 8m."

It emerged this week that GAME would not be stocking any of Electronic Arts' games in March following a dispute over credit. GAME is offering those that pre-ordered the highly anticipated title refunds and 5 worth of reward card points to spend in store.

John Stevenson of Peel Hunt was more positive about the retailer, believing that the disposal of International and some UK stores will help the retailer in the longer term.

"Given recent events, further speculation and the loss of key titles will clearly not help customer confidence, future pre-order levels or Game's overall negotiations with banks, suppliers and wider stakeholders," stated Stevenson.

"That aside, the group is continuing to develop a strategic plan, which we believe will likely result in the disposal of international operations and some UK store closures. The potential for new major console releases will be a significant source of future revenue and cash generation for the group, which will be critical to underpinning any recovery plan."

14 Comments

Dominic Jakube
Student

92 13 0.1
Adding in the cost of reward card points is a bit silly isnt it?At this stage I would say they arnt worth the paper their written on.The company is likely to go into adminisation any day and the receivers wont honour things like reward points,store credit,gift cards and even deposits.This just happened 2 days ago in Australia with a 15 strong chain called WOW sight and sound.They also wont exchange or refund or houner extended warranties.

Posted:2 years ago

#1

Bruce Everiss
Marketing Consultant

1,692 594 0.4
The inter webs really are killing game. Not just by providing a better business model. But also by the media giving a minute by minute running commentry on their inevitable demise.

Posted:2 years ago

#2
There is obviously a case whereby, folks or the media (combined) could manifestly talk a business into its death throes. It happens everyday in international stock, business and trade - as fiat economy (therefore money) is all a confidence game.

Posted:2 years ago

#3

Graham Simpson
Tea boy

219 7 0.0

Posted:2 years ago

#4

Benjamin Royce
Consultant

14 0 0.0
I would be interested to know how much they would loose from not having FIFA street I could see that being a bigger loss

Posted:2 years ago

#5

Jay Filmer
Web Developer

8 0 0.0
"With new software margins of around 24 per cent..."

24 per cent!

I'd say 10 per cent at best.

Posted:2 years ago

#6

Howard Newmark
Managing Director

5 0 0.0
I'm with Bruce here - I am not sure what purpose this article serves - it's not particularly interesting, and serves no purpose. It feels like one of those tacky TV docs where we are 'invited' into someone's home to watch them die.

Come on Matt - you're better than this...

Posted:2 years ago

#7

John Donnelly
Quality Assurance

313 38 0.1
Yes Jay 24%

How do you think retailers like Tesco can undercut Game and the like or how Amazon can sell a new title for 39.99 with free shipping?

Posted:2 years ago

#8

Graham Simpson
Tea boy

219 7 0.0
Gross margins people i.e before cost of goods sold, sales, marketing, admin, saleries etc. After all that GAME operating margins are actually 2%. Quite normal for a retailer with a fixed cost base (i.e shops)

Posted:2 years ago

#9

John Donnelly
Quality Assurance

313 38 0.1
This is why Game employees will try and foist the used copy on your as the store actually has a far better margin on the 1 week old copy someone just traded in to them.

Posted:2 years ago

#10


*sigh*

Posted:2 years ago

#11

Andrew Goodchild
Studying development

1,234 394 0.3

Posted:2 years ago

#12

Paul Kelly
Producer

2 0 0.0

Posted:2 years ago

#13
"The potential for new major console releases will be a significant source of future revenue and cash generation for the group.."
What new console releases are these?

Posted:2 years ago

#14

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