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Retail

48 Hours That Saved GAME

48 Hours That Saved GAME

Tue 03 Apr 2012 6:45am GMT / 2:45am EDT / 11:45pm PDT
BusinessRetail

Johnny Minkley details how the deal was done - and what will happen next for the UK retailer

It was 22:11 on Saturday night when, in a somewhat refreshed state, I first heard about it, via a call from the BBC. After ending the conversation I checked my email. A message was waiting from a trusted source: "News is breaking now - been working behind the scenes for two weeks to get people together".

After weeks of bad news on a daily basis, culminating last week in the worst headline of all - administration - at last, a sudden change of fortune for GAME and game's retail.

The demise of GAME was probably two years in the making, but melted down quickly because of confidence

Andy Payne, Mastertronic

The OpCapita deal, as we're now aware, preserves over 300 stores and more than 3,000 jobs - little comfort, of course, to the 2,104 staff and 277 stores haemorrhaged days earlier, but salvation nonetheless. And an outcome which also sees the dramatic return to the frontline of Martyn Gibbs, erstwhile Gamestation boss and GAME's UK MD, as chief executive.

As details filtered through over the weekend, those involved in the secret negotiations also began to break cover, one of whom was Andy Payne.

Payne had two strong reasons for acting as a facilitator to the deal. As MD of Mastertronic, he was - and remains - owed a significant sum of money by GAME Group. But more to the point, as chairman of UKIE - of which GAME is a member - he was well placed to get the main parties together in order for them to secure a solution.

Round-the-clock deliberations pre- and post-administration came to a head last Friday evening, in surreal circumstances for Payne. "I'm upstairs in my t-shirt Hoovering and the phone rings. It's the managing partner of OpCapita wanting to get the deal nailed."

From this point, things moved quickly. "The idea was to get it nailed Friday evening, allowing Saturday and Sunday to pick up on the legals," Payne reveals. "So they got financial control late, late, late Friday night. They were still talking to Martyn [Gibbs] about his deal. And then they needed to get the final legal control, which happened on Sunday afternoon."

At 4pm the press release went out and the deal was done.

Given the speed with which it came together in administration, some - not least those now out of a job - will rightly wonder why it couldn't have come sooner, especially since OpCapita was known to have had an approach rebuffed just prior to last week's collapse.

It has to offer revenue share [for second-hand games]. If they don't, they need to remember that companies were already prepared for life without GAME

Publisher source

A source tells me it fell through first time because OpCapita went "behind the bank consortium's back" to speak directly to the industry about the level of support required in the event of a deal. The banks took umbrage at this tactic, egos got in the way, talks foundered. And we are left only to speculate on how many more stores and jobs could have been saved.

In the end, it was the extraordinary deterioration of supplier relations that pushed game over the edge. "The demise of GAME was probably two years in the making, but melted down quickly because of confidence," says Payne. "When the market starts to talk badly of a company, confidence seeps away".

He acknowledges that GAME was "slow to understand that the best way forward is to be open with people". A crisis meeting with suppliers, held in late February at BAFTA under strict NDAs, proved too little, too late. Rebuilding those relationships becomes a vital task for the new management team - and Gibbs' appointment could hold the key.

Well-liked and respected as the man who spearheaded Gamestation's success, there are few in the business who could claim to have a better understanding of specialist games retail.

As one industry executive put it to me: "The industry really likes Martyn - he's easy to deal with and will be good for morale internally. I'm much happier with him at GAME than him not being there - he was the lifeblood of Gamestation."

"Martyn was hyped about working with OpCapita, they really wanted it, and there was good desire on both sides," explains Payne, adding that the offer was "met with confidence amongst most publishers and format holders." It was Gibbs' CV, plus the "sheer enthusiasm" with which OpCapita pressed for the deal that convinced the banks in the end to accept.

So what does GAME need to do now not just to survive, but thrive? Above all Gibbs must first stabilise the business. At the same time, GAME needs quickly to identify who its customers are and what they want; it must further embrace digital; it should build on its reputation as the natural home for events - as no-one in their right mind would prefer the midnight launch 'buzz' of a dreary out-of-town supermarket.

Martyn Gibbs' appointment was met with confidence amongst most publishers and format holders

It also needs to ensure its stores, as Payne puts it, "become destinations", that offer a viable and appealing alternative to supermarkets and online-only retailers, a reason to walk through the door, sharing the knowledge and passion of staff and putting technology front and centre.

And what of GAMEfest, its fledgling consumer show? Should it continue or not? These, and many other decisions, have to be taken. Fast. And how Gibbs divides his time between stability and strategy will be crucial.

Asked what he wanted from the new GAME, one publishing exec told me simply: "To listen to publishers and not bang the table."

No longer the powerhouse retail Goliath, coldly dictating terms to the industry, while greedily gobbling up pre-owned profit, the enfeebled chain has little choice now but to listen. Its future - still very much uncertain - depends upon it. And the biggest change to come from this rebalancing of power could be in the controversial second-hand trade.

One source, close to the negotiations, characterised the position starkly: "It has to be revenue share. It won't be acceptable to big players for it not to be. If they don't, they need to remember that companies were already prepared for life without GAME. "

As if all that wasn't enough to keep Gibbs occupied, his troubles aren't limited to those he finds on GAME's books. He must also respond swiftly to a market in which physical sales are faltering more generally. Interest is waning in current generation platforms as next-gen rumours run riot across the media and consumer habits shift.

Consider this: when Xbox 360, Wii and PlayStation 3 launched, Apple hadn't even announced iPhone and there was no such thing as the App Store. Today, Angry Birds has been downloaded over 600 million times - while we're still playing games on the same consoles. The world has changed and GAME - like many others - has struggled to keep pace.

To be relegated to the bottom of a trolley under baked beans and toilet roll would represent a desperate failure for a medium far from ready to jump wholesale to digital

It's a massive, daunting challenge - and making a success of it is firmly in the interests of the industry and consumers alike.

An entertainment form as economically and culturally significant as video games plainly warrants a strong and visible present on the High Street. To be relegated to the bottom of a trolley under baked beans and toilet roll would represent a desperate failure for a medium far from ready to jump wholesale to digital.

The team need only look across the pond to Gamestop for proof that specialist retail can succeed. Having fended off the US giant with its purchase of Gamestation in 2007 - the excess bulk of which, in a painful irony, contributed to its downfall - it must now look to emulate its success.

Still wounded by the manner of his previous exit from the company Gibbs has, according to insiders, "a point to prove". Widely acknowledged as the right man for the job, now's his chance.

9 Comments

Rupert Loman
Founder & CEO

139 45 0.3
Great article. The only thing that surprises me is the talk of 'how many more stores/jobs would have been saved if a deal had been done earlier'. Whether the cuts were done by the administrators or the new owners, the chain clearly needed to be "right-sized" so I don't think there would have been the same buy-out interest in the full set of stores, and the job losses were inevitable.

Posted:2 years ago

#1

Antony Carter
Senior Programmer

85 47 0.6
@Rupert

Totally agree a company losing as much money as Game, clearly had to be down sized, before the closures there were 7 yes SEVEN outlets within 6 miles of my house!

Theres now only 3, im sure thats still enough for me!

Posted:2 years ago

#2
you really only need one . One proper neo-game store per 20 mil radius surely

Posted:2 years ago

#3

Joshua Rose
Executive Producer / Lead Designer

191 81 0.4
Good, I'm glad publishers are finally putting their foot down on preowned games.

The control over the market that preowned games has maintained over the years has gotten way out of hand.

They are right about publishers prepared to continue on without GAME in regards to revenue share from second hand game sales. This is becoming less and less of a market dominated by brick and mortar sales. B&M will still have a significant presence for at least the next 5-10 years, but that presence will slowly become less and less as publishers begin to take matters more into their own hands.

You know it's bad when the next Playstation console is rumored to not support used games. The only way I can see this being accomplished is for retail purchased games to come with a product key (like the BF3 multiplayer key) and it's linked to that person's account. Which is essentially no different than DRM schemes with PC games.

If this is so, I have this to say to console gamers on behalf of PC gamers regarding DRM... "One of us... one of us... we accept you one of us..." (gooble gobble gooble gobble)

Edited 1 times. Last edit by Joshua Rose on 3rd April 2012 2:51pm

Posted:2 years ago

#4
No Payne, No GAME

Posted:2 years ago

#5
@Mark - blimey. I am not sure that is the case - like the comment though ;-)
All in all Game were just too big in terms of the number of stores IMHO, but not in terms of size of store. When they bought Gamestation a few years back, they did it for the right busienss reasons, ie to prevent Gamestop buying Gamestation. Trouble was, they should have slimmed the numbers of stores down and sought bigger, 'destination' stores. Following the Apple model is not only aspirational it is expensive. With fewer stores and a fresh attitude to collaboration, I reckon less is more. And by the way, I was in my T-shirt and pants, just for the record.

Posted:2 years ago

#6

Ged McMillan
Retail Manager

15 6 0.4
But what does all this mean in terms of credit insurance?

Posted:2 years ago

#7

Ken Varley
Owner & Freelance Developer, Writer

40 30 0.8
They really need to start re-evaluating the pricing structure. GAME really did price themselves out of the market.

Posted:2 years ago

#8

Preet Basson
Studying Mathematics with Statistics

92 13 0.1
What is that I hear?
A life support machine.

Posted:2 years ago

#9

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