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Retail

GAME may close rather than suffer more losses - report

GAME may close rather than suffer more losses - report

Mon 05 Mar 2012 11:47am GMT / 6:47am EST / 3:47am PST
Retail

Sources "close to the situation" say retailer will be shuttered if more suppliers back away

An investigation published by the UK newspaper The Express has alleged that senior figures at The GAME Group are close to "pulling the plug" on the embattled high-street retailer

According to a report on Eurogamer, a source "close to the situation" claimed that the company's inability to sell Electronic Arts' March release slate has caused widespread doubt over its chances of surviving.

"There is a real risk that GAME's directors will pull the plug because they can't be sure that the company can survive through the next trading season, and then insolvency becomes inevitable," the source said.

"They are in discussions with their legal advisers about whether to shut up shop rather than rack up more losses."

EA is releasing Tiger Woods 13, Fifa Street and Mass Effect 3 this month. Last week, Singer Capital Markets analyst Mark Photiades estimated that Mass Effect 3 alone would cost the company 7 million in revenue and 2.5 million in profit.

Other products not being stocked by GAME include Nintendo's Mario Party 9 and the latest iteration of Tekken for the Nintendo 3DS. Ubisoft's entire launch line-up for the PlayStation Vita was originally unavailable at GAME, but that issue has since been resolved with the retailer now stocking titles such as Rayman Origins.

The Express also cites a number of sources close to the Royal Bank Of Scotland - which leads The GAME Group's syndicate of lenders - who believe that RBS is "running out of patience" and will be forced to take action if more suppliers withdraw their products.

"The immediate response from RBS will be to push for more store closures, but the tipping point for the directors and the lending banks will come when the stores don't have products to sell," one of the sources said. "This could happen if more suppliers follow suit."

"Suppliers pulling their products is a stepping stone to administration, but the problem for RBS pulling the plug is that it will be an expensive and complex administration because GAME has 1274 stores across Europe and Australia," another source added

"Lending banks will only want to consider a pre-pack administration, where there is a pre-arranged buyer, but who would want to buy GAME?"

Last week, The GAME Group played down the severity of the situation to its shareholders, releasing a statement that called the absence of key products "temporary" and confirming that discussions are taking place to secure future launches.

"As part of the strategic plan development process which it announced on February 3, the Group has been working closely with its suppliers, as well as other stakeholders," the statement read.

"In particular, the Group has been discussing with its suppliers the level of support and engagement it needs from them over the coming months. There have, during that process, been isolated instances where it has not been possible to agree launch plans for individual game titles,"

The Royal Bank of Scotland has declined to comment on the investigation.

15 Comments

Joe Bognar
PR Account Executive / Journalist

99 2 0.0
Told you so...

I feel really bad for the staff though... Everyone loves GAME but their business model is old-fashioned and not working for about 3 years now. Also there was a lot of hate about people who made negative comments about GAME. As I said: I can only feel sorry for the employees and not the management/company anymore.

The issue of pre-owned exists for many years now and I'm sure that publishers like EA came up with a solution like this as this was the most beneficial for GAME. Let's face it. GAME will not be able to come out of this as a winner. It can only loose here. The question is how much? Do they really need to close shop or adapt more to the business and the industry.

I was thinking about this issue for years now but never really wanted to put it out to the public (even though I'm sure that a lot of people had similar ideas already). There are two possible ways for GAME to stay in business.

1: Go with the flow. Accept the publishers' offers. If they want more money for the new games, so be it. You'll still make money, just not as much as before.
2: Why not give a certain percentage to the publishers on pre-owned games? 5-10%? Sure, this solution will cost more but wouldn't it be nice to be considered as a part of the industry again? Someone who helps the industry even in these troubled times. Of course, the requested higher amount for new games would not be requested anymore, I'm sure of it. Also, I'm quite certain that after a move like this, publishers would be more than happy to help GAME out in more ways than before.

It would be great to see GAME thriving again but as it stands, it looks like either they will be closed or bought by a company that has the money to buy it...

Posted:2 years ago

#1
I think, if no credible solution is offered to RBS, then the axe gets potentially dropped lower - unfortunately

Posted:2 years ago

#2

Sam Brown
Programmer

237 163 0.7
So, pre-packaged administration deal straight to Gamestop?

Posted:2 years ago

#3

Tommy Thompson
Programme Leader of BSc (Hons) Computer Games Programming degree.

42 21 0.5
I can't say I'm surprised. Given the recent issues they have suffered and the poor turnover during the Xmas period, the writing's on the wall. Time to spend your in-store credit if you still shop with them.

Sadly Joe I think it's best to let it die. As a business it is sluggish, ill-managed and far from competitive within its market. As regular readers know it is far from an amicable business partner when dealing with publishers. Most importantly, it's the only specialist retailer I can think of on the high street that provides no real benefit over any other store that stocks the same products. Sadly, while it's easy to say it's of benefit to the high street on a message board, the reality is a retail chain disappearing and more jobs lost.

Posted:2 years ago

#4
Yep, sad for their employees, but no sympathy for them as a company.

Posted:2 years ago

#5

Jim Webb
Executive Editor/Community Director

2,210 2,048 0.9
Joe, I'm certain publishers would love to be given a chunk of second hand sales but their doesn't exist a precedent in any business or industry for this. Used cars, books, movies, music, clothes, electronics, jewelry, etc...none of them return a portion of their receipts back to the original producers. Droit De Suite laws for fine art may be the only exception and that's hotly debated in some circles.

The market dynamic exists today as it does across all these industries with the understanding that second hand sales are not being split with the original producers. If this dynamic were to change with just 1 industry, you can be certain demand in dozens of others would follow and we'd see a massive shift in the market dynamics.

We'd also see a lot of pressure put on Right of First Sale laws and service versus product laws.

Posted:2 years ago

#6

John Donnelly
Quality Assurance

314 38 0.1
Jim, except for a car dealer name me on retailer who sell new and pre-owned products in the same shop space and would rather you buy the used product?

Posted:2 years ago

#7

Peter Dwyer
Games Designer/Developer

458 254 0.6
If it goes I'll miss them. Purely because you used to be able to get any game there, no matter how obscure. I fear the same will definitely not be said of whatever replaces them.

Their strange idea of selling pre-owned games at only around a fiver less than full priced was totally nonsense. The management clearly ran game on greed and lack of morals instead of any real plan for a lasting business.

Retaining stores in only viable areas, lowering their prices to compete and overhauling their pre-owned policies are the only way they will survive.

Posted:2 years ago

#8

Jim Webb
Executive Editor/Community Director

2,210 2,048 0.9
John, many industries would prefer you purchase the used product as they get a higher margin on it. The video game industry just tends to be more vocal about that corporate preference and the consumers are more aware of it as well.

What tends to separate the video game industry with others is that video games tend to meld new and used in the same store. Consignment businesses for most industry segments tend to be a separate corporate entity or even a small, private business. That's why Gamestop and Game get so much hell. I don't condone their mark up (absolutely nuts it is) but they aren't doing anything different from the rest consignment industry aside from (as a vehicle dealership does) selling both new and used.

Posted:2 years ago

#9

Christopher Bowen
Editor in Chief

393 503 1.3
I hear people mentioning Gamestop - this very site did as well - but I think there are some fundamental differences between Gamestop's situation and GAME's. For one, GameStop doesn't see the same kind of competition that GAME did. WalMart, Target, all of our big retail stores in America sell the games for the same price, with only a few cents difference. However, High Street retailers like Tesco are slashing prices well below MSRP in an effort to get customers into the store to buy higher-margin items. GAME, who has no other items outside of games, cannot do that. So their area to make that back up - used sales - have been marginalized by the increased focus on online passes and the like. Plus, GAME has no market digitally; they're basically, at best, Amazon.co.uk, with much less stock and fewer deals if I'm not mistaken.

So there's no reason I can see why GameStop would enter this market. Why not let them collapse, and try to pick at the carcass?

Posted:2 years ago

#10

John Bye
Senior Game Designer

477 434 0.9
Jim, as you pointed out yourself, comparing games to other items is spurious. Waterstones don't sell second hand books, HMV don't sell second hand CDs and DVDs, TopShop don't sell second hand clothes, Currys don't sell second hand TVs, and H Samuels don't sell second hand jewelry and watches.

It's only videogames where major high street retailers sell new and used stock side by side, and even stock, display and push at the till second hand goods in preference to new ones.

Sure, car dealerships sell second hand cars, but in most cases they're linked to a particular manufacturer, so you trade in your used Honda to buy a new Honda, and then the garage sells the old Honda to someone who couldn't afford a new one. Also, cars deteriorate with age, whereas a second hand game (unless the disc is scratched to hell) is indistinguishable from a new copy.

Edited 1 times. Last edit by John Bye on 6th March 2012 2:14pm

Posted:2 years ago

#11

Ian Brown
IT Developer / IT Infrastructure

107 26 0.2
Well after receiving yet ANOTHER cancellation letter from Game i can't see it hanging round for long. I tried to use up my points & that 5 voucher they gave me for not stocking ME3 on Street fighter Vs Tekken. Well thats now been cancelled! So what is the point in shopping there if they don't even have anything to sell? Guess amazon's winning my custom back...

Posted:2 years ago

#12

Dominic Jakube
Student

92 13 0.1
GAME get a lot of flak for selling second hand games but without that revenue stream they would have gone belly up years ago.The profit margin on new games is just to small to base a retail store with high overheads.The big publishers will miss then when "generic modern war shooter" dosnt break first day sales records for the third year in a row and so will you when you find sainsburys dont have Demon souls to pick up when you do your weekly shopping.

Posted:2 years ago

#13

Morville O'Driscoll
Games Blogger & Journalist

1,371 1,017 0.7
Oh, yes, I always look for videogames in the supermarket. Ah, wait, no I don't. :)

(Actually, that isn't quite true - When I shop at the local Morrisons, I have a nosy to see if there's anything there that's cheap. Other than a couple of games, mostly they're the same price as Amazon, with less of a selection than Amazon. Waste of my time, tbh.)

Posted:2 years ago

#14

Joe Bognar
PR Account Executive / Journalist

99 2 0.0
True, but the video games industry is different from all the other industries. Also, let's just mention the music industry. Piracy ruined it and it was forced to change. Now, I'm one of those people who likes the hard copies of products but inevitably, this is the age of the digital and online versions of music, games and movies. At the time when iTunes and digital sales came into the picture, GAME failed to react even a year later... Bad decisions on the top can really hurt companies like that.

Maybe trying new things like sharing pre-owned sales profits, could've worked for everyone and helped revolutionise the industry.

Posted:2 years ago

#15

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