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Retail

What Does GAME's Administration Mean For You?

What Does GAME's Administration Mean For You?

Thu 22 Mar 2012 6:53am GMT / 2:53am EDT / 11:53pm PDT
BusinessRetail

How GAME'S collapse could affect creditors, employees, investors and consumers

Jas Purewal, an interactive entertainment lawyer at Osborne Clarke and writer of www.gamerlaw.co.uk explains how GAME's collapse could affect creditors, employees, investors and consumers.

Q: What has happened to The Game Group?

Game group is in the process of entering administration. Administration is a legal process which typically comes into play when a company finds itself in such financial difficulties that it is no longer able to pay its debts and continue as a going concern.

In those circumstances the creditors, directors or the company itself can appoint an administrator. An administrator is a licensed professional, usually an accountant, whose job it is to take over the trading of the company and essentially try to rescue the company as a going concern. However, if that's not possible, the administrator has a duty to try to achieve the maximum possible return for the creditors - which usually involves selling the valuable parts of the business and paying creditors out of the proceeds. In the worst case scenario this can turn into a fire sale in which the administrator sells the companies' assets to raise funds to pay the creditors.

Unfortunately in an administration consumers have very little rights and, in reality, cannot expect legally to receive much.

Although the situation is very fast changing at the moment, and if a 'White Knight' who buys the whole of Game group can't be found, it is possible that The Game Group may work with the administrator and interested third parties to spin the valuable assets of the company into a new business entity (which is essentially what happened with former high street retailer Zavvi back in 2008/2009), so that effectively The Game Group can continue to trade under a new guise. However, clearly this would raise issues for creditors who are owed money.

Q: How does a company decide when it's necessary to enter administration?

There are two key legal tests - the first is whether the company is able to pay its debts as they fall due (creditors, supply partners and so on); the other is whether its assets have become worth less than its liabilities. The Game Group has spent some time in negotiations with its banks and possible investors trying to comply with these tests but clearly it has now got to the stage where administration is the only option.

Q: In terms of timescale for wrapping up administration proceedings, are we talking days, weeks, months or years?

The law provides for an administration to take 12 months but this can really depends on the facts of the case. Sometimes you see administration transactions being turned around extremely quickly if there is a buyer who's standing by to take over the business. However, if there isn't already someone standing by then it can take quite some time - months or even years.

Q: What sort of rights do employees have in terms of unpaid wages or benefits? What about consumers?

There are certain legal minimum amounts that the employees will be entitled to, but that depends on their exact employment status, how long they've been with the company and factors like that. Those minimum amounts are protected by law: even if the company in administration isn't able to pay them then the employees will have a limited right to effectively seek those amounts from the State. But, beyond those minimum amounts, they will be unsecured creditors of the company and therefore unlikely to recover much back, unfortunately.

Unfortunately in an administration consumers have very little rights and, in reality, cannot expect legally to receive much. That said, in practice companies do still often try to help out consumers as much as possible, in order to preserve that relationship for the future.

Q: What should the Game Group's creditors or business partners do right now?

At the moment, The Game Group is under a 10 day moratorium while they work out what next steps to take with the administrator. This means no-one can take legal action against them without permission. It is critical for businesses affected by The Game Group's entry into administration that they use this time to get themselves ready:

  • They should review their contracts with Game, particularly to see if they have change of control provisions and/or the right to terminate if Game goes into administration. They should also check if they have security, insurance or other protections in place.
  • If they have stock in transit or at Game warehouses they should attempt to recall them (although that is complicated by the moratorium being in place, which heavily restricts what action can be taken against Game right now).
  • They should take professional advice about the impact of the administration on them - in particular, they should take legal advice about what options are available to them.
  • In the worst case scenario, they should analyse what unsecured debts they are owed by Game. In due course they will be able to submit a claim for the recovery of those amounts, but typically little or no payouts are received regarding unsecured debts.
  • They should look at their contracts and relationships with other partners (especially retail partners) more generally and ensure they have sufficient protection in place if those partners were to get into financial difficulty in the future.

15 Comments

Alfonso Sexto Lead Tester, Ubisoft Germany

837 671 0.8
And at the end this was the outcome...

Hope somebody will buy the company, at least for the shake of every worker inside.

Posted:2 years ago

#1

Terence Gage Freelance writer

1,288 120 0.1
I'd like to see someone buy the business, but I think they'd have to shed about half its stores as it's a ridiculous business model they're running at the moment. Heck, even if it's Wal-Mart (as has been rumoured) that's better than nothing, and then many/most of the staff can hopefully keep their jobs.

Weren't they about 90 million in profit a few years ago? Outrageous that it's come to this. Upon buying Gamestation they should have cherry-picked the best and most profitable stores across the whole group and set about closing the superfluous ones down. In fact, I still think the Competition Commission should never have allowed the Gamestation takeover, but that's obviously by-the-by now.

Posted:2 years ago

#2

Peter Dwyer Games Designer/Developer

482 293 0.6
Well not much to say. I suspect that at the very least it will curb my games buying somewhat as those impulse buys I had by walking into game will be gone.

Posted:2 years ago

#3

gi biz ;,pgc.eu

341 51 0.1
Honestly I don't understand why people (and even developers, from what I read) feel the urge to give their money to such stores. Sometimes you do find good bargains, like good games at 5 or new games at 10-15, but most of their crap is overpriced to death. Second hand at 40 and 50? Come on, go to ebay and you'll find the same thing, factory sealed, for less than that. And actually you have no guarantees that what you buy hasn't been owned and resold (and planed) multiple times. And the whole scam of giving 3 games for a price reduction...

I know independent stores where second hand is cheap as it should, is in limited quantity and they won't buy whatever you bring them. In those shops you also find the good recent titles as well as classics, such as Tekken and Dino Crisis. Try finding one of those at Game.

Posted:2 years ago

#4

Sandy Lobban Founder and Creative Director, Noise Me Up

315 208 0.7
In my own personal opinion...

You've just got to be unique and do something that no one else does when you're on the high street these days. Its got to be worth that trip into town, parking the car etc. Game just isn't as unique as it used to be and the high street isnt the path of least resistance to getting what you want anymore, unless thats the only place to get it. I guess its just a result of the games industry becoming more main stream and products becoming widely available elsewhere. All pretty obvious really. Things change. Im sure the stores in the larger conurbations will have enough passing traffic to still make an impact. Good luck to all the people whos jobs depend on it. The industry still needs a face in large populated areas.

Edited 1 times. Last edit by Sandy Lobban on 22nd March 2012 9:40am

Posted:2 years ago

#5

Morville O'Driscoll Blogger & Critic

1,613 1,476 0.9
@ Michele

It might just be down to how much money people have in their hands. In the past 2 years, I've bought one game from Game/Gamestation - Skate 3, just 2 days ago - and that was because the price was lower even than Amazon. Beyond that, I'm not rich, so I do tend to shop around a lot. Someone with a lot more money doesn't feel the need to shop around, though - if they see a game they like and it's 10 more expensive than anywhere else, they don't think "Ah, I'll wait 3 days to get it in the post", they'll just buy it straight off.

Posted:2 years ago

#6

Wesley Williams Quality Assurance

133 72 0.5
Apart from the people who've lost their jobs, I couldn't give a monkeys about GAME going down the toilet. I would never buy a new game from a bricks and mortar retail store anymore (even a supermarket), they're vastly overpriced. I hope this helps speed us along to an all digital future.

For anyone who wants the best price for new games, Cheap A** Gamer and Gamestracker are the way to go.

Posted:2 years ago

#7

Neil Young Programmer, Rebellion Developments

309 398 1.3
If game do come out the other side of this, they really need to sort their USP out - customers being able to physically enter the store is a powerful asset, but they filled their floor space up with racks of pre-owned.

They're never going to compete head on with online and digital, so they need to play the bricks and mortar card for all it's worth - demo stands, in store events, staff and layout designed to inform customers rather than just shift product. Game is laid out the same as a clintons inside - compare with mobile phone shops.

Posted:2 years ago

#8

Morville O'Driscoll Blogger & Critic

1,613 1,476 0.9
2 things struck me when I was in Game a couple of days ago:

1) They had a massive amount of second-hand PS2 games; probably about the same number as PC games. Which is just bizarre.

2) HMV has demo pods... But Game (a specialist store) does not. Surely having a PS3 and a 360 running the latest game is both a worthwhile use of space, and allows certain games to sell themselves? I stood for 10 minutes just watching Streefighter X Tekken in HMV, and if I had the cash, I would have bought it there and then.

Posted:2 years ago

#9

Terence Gage Freelance writer

1,288 120 0.1
I definitely agree with your comments there Neil - around the release of big games they should do stuff like an in-store FIFA, Street Fighter or COD tournament, and the winner gets say 50% off their purchase while the runner-up gets 20% off (obviously not in every store, but try and make these kind of promotions widespread). Perhaps charge 1 for entry, or alternately make it available to anyone who pre-orders said game. I mean, stuff like this would be a pain to set up and you'd need extra staff in-store while it took place, but on the other hand they need to provide a good service, play on the sense of community of like-minded folk being in the store together and create a good experience so customers are going to want to keep coming back.

In the last few years GAME has seemed to me to be about treating their customers like idiots, often stretching the truth and sometimes outright lying and generally fucking over everyone outside of the company for a few extra pounds per sale - which, as we see now, has spectacularly backfired.

Edited 2 times. Last edit by Terence Gage on 22nd March 2012 11:50am

Posted:2 years ago

#10

Ken Addeh

37 0 0.0
@Terrence:

Surprisingly enough, the HMV Gamerbase (in London Trocadero) does this already.
Upon the release of a new (most likely AAA) game, they have a chance to play it early and possibly enter into a tournament for prizes. Some prizes could be the game itself, or the game's limited/collectors edition, or some peripherals that work with the game.

I never saw GAME do this. I was shocked to see that the game I used to visit in my younger years actually took OUT their demo pods.

It seems as if GAME, as a specialist shop, was failing in conveying the "specialist" element.

Edited 1 times. Last edit by Ken Addeh on 22nd March 2012 12:32pm

Posted:2 years ago

#11

Ged McMillan Retail Manager

15 6 0.4
With regards the article above: Which valuable assets of Zavvi did the administrator spin into a new business entity? hmv bought about 14 stores initially & maybe another 10 or so further down the line & TheHut group bought the online brand. Large amounts of stock (and from EUK too) were bought by hmv & others at low low firesale prices but there was no new business entity though was there?

Posted:2 years ago

#12

Terence Gage Freelance writer

1,288 120 0.1
@ Ged

Presumably he means that Virgin Megastores became Zavvi.

Posted:2 years ago

#13
It would be cool if forbidden planet did games....

Posted:2 years ago

#14

Iain McNulty Software / Game Developer, Yanxen

35 42 1.2
The Forbidden Planet store in Manchester used to sell games.

Posted:2 years ago

#15

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