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Best Buy sees "double digit declines" for games

US retail chain reports $8.4 billion revenue for December

Electronics retailer Best Buy has reported a comparable stores sales decline of 1.2 percent for the December financial period, and admitted to a decline in gaming sales.

The revenue summary for December saw $8.4 billion in revenue, with $1.9 billion coming from international sales.

While the company didn't release specifics regarding revenue for its game division, the official statement did reveal a significant decline.

"Gaming and digital imaging both experienced low double-digit declines in comparable store sales."

In the domestic market consumer electronics were responsible for 40 per cent of the revenue, with computing and mobile at 35 per cent, and entertainment at 16 per cent. Online the domestic channel saw a 26 per cent increase in revenue compared to the previous year.

In the international market computing an mobile phones took the lead with 48 per cent, followed by consumer electronics at 29 per cent and entertainment at just 9 per cent.

"We built off of share gains in the third quarter to deliver December sales that we believe compared favourably to the retail CE industry," said CEO Brian J Dunn.

"Based on our performance in December we continue to expect to achieve our annual guidance, despite customer traffic that was lower than expected until the last week before Christmas, which resulted in December revenue that was slightly lower than our expectations."

Analysts Cowen & Company responded to the figures, calling concerns over the decline "overblown."

It cites competition from Amazon and dedicated gaming retailers like GameStop as factors in Best Buy's declining share, and a tendency from some retailers to rely on Wii and handheld gaming.

"Historically holiday periods have overindexed towards the Wii and handheld platforms because there is a lot of gift giving to kids," explained the report.

"We believe these games are often bought by parents at the big box retailers (we believe the big box retailers overindex towards the Wii/handheld markets relative to, say, GameStop). However, the Wii and handheld segments of the gaming market are in serious decline, we believe due to competition from mobile and social gaming."

They also note that the Xbox and PlayStation market remains strong.

In the UK, the Morrison's supermarket chain is currently in talks to acquire former Best Buy retail sites, according to the Financial Times. The 11 UK stores were closed in November after annual losses of £62 million.

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Latest comments (8)

David Spender Lead Programmer 9 years ago
The Wii is a big factor here. It has accounted for serious growth in the total gaming population over the last few Decembers. Nintendo's intention was always to target audiences outside of the normal scope of gamers. What seems to have happened is that the Wii 'fad' has finally dropped off this past December and a large number of those new gamers became disillusioned with what the Wii actually offers and have stopped buying games. This coupled with a drop off of Wii game purchasing from normal gamers due the lack of high quality games for the Wii also contributed to a decline.

Just a theory.
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Richard Gardner Artist, Crytek9 years ago
As a consumer and developer I honestly have no sympathy for retail. The sooner we move to digital the better, the draw was literally drawn this weekend when again. I went into a store to buy a new game (New Release, Uncharted 3), only to find they didn't sell it new. Not only that but I couldn't even find the new game section.

Even worst, some retailers rent out retail space to publishers to promote there games on stands, only to fill it will used copy's. Oh and to top it all off the new game I went in to buy was being sold second hand for 2 less than the retail price...

Talk about biting the hand the feeds you...

I honestly wonder how much second hand game sales eat into revenues. Not only that but it completely destroys any sort of long term sales plans and revenue generation over a long period of time. In this climate if your game doesn't sell well in the opening weeks, it will struggle to make back the numbers with second hand circulation.
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Kenneth Bruton Producer 9 years ago
I do not understand the mindset of selling games @ 60 dollars nowadays, knowing you are no longer getting a "finished" product. in the end, you end up spending upwards of anywhere from 25-80 dollars on some sort of subscription, then, you still have to pay for bonus downloads, which is anywhere from 5 to 10 dollars, so that 60 dollar game really costs over 100...it used to be when you beat the game, you beat the whole game. now, publishers have no problem releasing a buggy product, or incomplete game, because we are suckers for "lost content"...talk about being fleeced! Then, they make you pay for getting used copies! Both sides of the industry are insane, if you ask me...but I can understand them getting their due. Game makers do not get paid enough. innovation gives way to tradition, and we all end up losing...Sad!
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Show all comments (8)
Meelad Sadat [a]list daily editorial director, Ayzenberg Group9 years ago
"Gaming and digital imaging both experienced low double-digit declines in comparable store sales."

Bit by Apple. And screwed by Android.
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Richard Gardner Artist, Crytek9 years ago
@Kenneth Bruton I honestly can't think of any example of a core game that doesn't justify its $60 price tag, considering how much replay value you get from products and not to mention the quality bar. I completely agree with you that 'Pony Trekking 5' will be a rip off. But as a core gamer your probably not playing it.

Games will move more and more towards a service to the consumer, but the consumer has never had it so good when it comes to quality of products. The competition to be on top is fierce and the gains are massive. This drives everyone out there to make the very best products.

Being a gamer has never been so good as it is today.
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James Ingrams Writer 9 years ago
I Will say it again when games in stores disappear, so will many current gamers and future gamers won't appear.

Only hardcore gamers are willing to search Steam and Amazon, etc to find a game they might like and then research it before purchasing it. But paradoxically, these hardcore gamers are much more likely to be in the 50% that want a boxed item to add to their collection than in the other 50% that are willing to pay full price for downloading data and pdf manuals, etc.
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Dave Knudson Sr. Technology Manager, Electronic Arts9 years ago
Part of the problem is that there seems to be less and less need for consumers to go to Best Buy. 8-10 years ago you'd buy a TV there unless you wanted to pay $200 for one to be shipped via ground and arrive 7-10 days later. Likewise people would go there to buy reasonably priced DVDs on release day since there wasn't any On-demand or even HD content to watch on their new $2500 HDTVs.

I used to shop there all the time, say once every couple weeks. Now I maybe go there 5 times a year. The only purchase I've made in the last couple years was a laptop that was maybe $200 cheaper than anywhere online. Oh I guess I did also buy a cheap microwave after mine broke. I tend to go to Fry's more now since they have more PC and miscellaneous electronics on top of whatever Best Buy usually stocks.
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Richard Gardner Artist, Crytek9 years ago
They said the same thing about music, about... six to eight years ago? Now look at it, once HMV is gone (they don't make profit from music any more, hence there technology restructure) there will be no main stream retailer in the UK to purchase music. But you don't see the music industry on the verge of collapse.

Its all about an evolving market, just look at how music is advertised and how the word gets out. Games and development will become about servicing your customers, building a community and a reputation.

Retail game sales have been in decline yet overall sales remain strong, if retail suddenly disappeared I agree we would have a problem. But its being happening for years and slowly but surely retail will disappear.

Another thing to mention is as a developer, when cutting out the middle man (publisher) and selling straight to the source (paying the digital distribution percentage) your overall gains are much larger. Meaning you could potentially half the amount of sales you would need before you begin to turn a profit.

In the future you will see much more franchise building, its currently all about spending as much as you can to try and rush straight to the top, a gamble. Yet no one is testing the market with smaller games, building a community and franchise and slowly but surely working your way up the scale of development until you find a profitable sweat spot.

Anyway, I'm rambling.
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