GAME Changer: The Impact of the Collapsing High Street

Tipping points are a peculiar thing. They always seem obvious in hindsight - but it's next to impossible to see them coming in advance, or even to recognise them when they actually turn up. Yet almost every market transition - indeed, almost every transition of any description - has its tipping point, a moment where the various factors pushing in a certain direction become inexorable.

Because this is such an alluring concept for journalists, we've got a terrible habit of labelling all sorts of things as being tipping points, when they're almost certainly nothing of the sort. Every decent Android handset that comes out is the "tipping point" that'll swing the mobile market in Google's favour. Every attempt by Microsoft or Sony to appeal to a casual market is a "tipping point" that'll demolish all that Nintendo has wrought. "Is this the tipping point for social games?", we wonder aloud every time Facebook or Zynga makes a pronouncement, never entirely clear what's being tipped or what it's being tipped into.

All of which is a long-winded way of saying - when someone starts banging on about tipping points, unless they're talking in academic hindsight, they're probably best ignored. So, bearing in mind my own admonition on this matter, I'm not going to describe what's happening to UK retail right now as a "tipping point". It's more complex than that, and perhaps more worrying.

Customers who can't find a game they want in GAME will go elsewhere. They may never come back - and so, the decline continues.

For the benefit of those not following the saga, the UK's specialist retailer, GAME, is in trouble. How much trouble it's in depends on who you choose to ask, but after several tough years, the company finally seemed to hit the rocks with its creditors a few weeks ago and found itself unable to secure the lines of credit needed to acquire stock of new releases. After a few deeply uncomfortable days, the situation appeared to be remedied, at least temporarily - but even since then, signs out of the company have been less than encouraging.

This week, GAME held the official launch for Sony's PS Vita - but conspicuous by their absence were Ubisoft's launch titles, which aren't being stocked by the chain. The week before, the chain also failed to stock Nintendo-published 3DS title Tekken 3D Prime Edition, and most recently, customers who had pre-ordered Wii RPG title The Last Story had their money returned to them and pre-orders cancelled.

"We can't stock absolutely everything," was the explanation offered by the chain's marketing director - but pleading a lack of shelf space is unlikely to convince many people, given that this is the company which operates the UK's largest game stores, not to mention that these issues also extend to the firm's online retailing operation, where no such shelf space issues exist.

GAME isn't the only retailer in difficulty, of course. It's fair to say that the entire UK games retail sector is in a fairly sharp decline - far removed from its once legendary ability to grow strongly through a recession, boxed game sales are now dropping off at a startling rate. Even the overall decline in boxed sales doesn't tell the whole story of GAME's problems, since online retailers like Amazon have been grabbing an increasingly large slice of this steadily shrinking pie.

Rather, GAME is emblematic of the decline. The chain plans to shut around 10 per cent of its stores by Christmas this year, plans which will end up being the thin end of the wedge if it can't find a way to resuscitate consumer demand. The problem is that GAME has reached a stage where its decline is only likely to accelerate. Being unable to stock titles from major publishers or fulfil pre-orders is an extremely dangerous state for a specialist retailer to be in, as it draws the store's competence and usefulness into question for consumers. Customers who can't find a game they want in GAME will go elsewhere. They may never come back - and so, the decline continues.

Ten years ago, everyone was terrified of GAME. It was GAME which bullied the industry into accepting the removal of sales data from the weekly charts.

What happens next for GAME is in the lap of the creditors. It could end up bankrupt in a much shorter space of time than people like to imagine. It could find itself heavily stripped down and operating a diminished but profitable business. Equally, it could limp on as good money is thrown after bad, especially if publishers decide to rally around and support the most visible presence video games have on the British high street.

One possibility isn't on the table, though. GAME will never again be the force it once was in the videogames market in this country. Ten years ago, everyone was terrified of GAME. The whim of the retailer could make or break a game launch - anyone in the industry back then will recall, for example, that it was GAME which bullied the industry into accepting the removal of sales data from the weekly software charts.

That's, perhaps, why there's such an unusual mix of emotions among those in the industry I've spoken to about GAME and its present difficulties. Everyone feels for those who are likely to lose their jobs (or who already have) as the retailer downsizes, and nobody likes to see a major part of the games business face such tough times. Yet it's unarguable, if not popular to mention, that there's a certain grim satisfaction in some quarters at seeing the declawing of a firm which has always been so willing to throw its weight around - whether it was over the charts all those years ago, or more recently over the frankly shameless way in which second-hand merchandise was promoted over new products, to the detriment of the entire development and publishing industry.

Any such emotion, however - be it sadness at the potential job loss, or schadenfreude at the declawing of a once-vicious tiger - is overshadowed by the primary response to GAME's decline: fear. The traditional games business is very, very afraid of what's happening at GAME, because it represents an unwelcome acceleration towards a future which they have always accepted as an inevitability, but never quite believed was going to happen just yet.

The traditional games business is very afraid of what's happening at GAME, because it represents an unwelcome acceleration towards a future which they have always accepted as an inevitability, but never quite believed was going to happen just yet.

Digital distribution has never just been about switching from selling boxes to selling downloads, you see. It's got much more far-reaching implications than that. It moves us away from a world where you have huge shop windows on every high street holding posters and other point of sale marketing for your game. It takes away the ability to pay for premium shelf space in a retailer with a certain level of footfall, or the ability to leverage your relationship with a specialist retailer to ensure heavy promotion of a weaker title in order to guarantee first dibs on a bigger game in a few weeks' time. It ends casual browsing by Saturday afternoon shoppers, the culture of someone popping into GAME to pass time while their better half does more boring shopping elsewhere. Maybe these things seem small, but they've been the foundation of boxed game sales culture for decades, and now they're going away.

That's frightening, and no amount of conference speeches or editorials like this one pointing out the way that the wind is blowing make any difference to that. Most publishers just aren't ready. Digital distribution of console titles, in particular, is still a joke. Lacking the impetus provided by piracy on the PC, console publishing has rested on its laurels and made nothing but token efforts at online distribution - sticking carefully to price points engineered not to upset retailers, rather than to attract consumers. The death of retail was far off, we were told. It would happen, but not in this decade. Broadband wouldn't be fast enough. People would always want physical product.

Well, that turns out to have been so much nonsense, the smugness of those who uttered it being a cover for their fear and little else. Yes, some people still want physical product - but that's true of every medium, and it hasn't saved CD sales in music, where, hilariously, the music industry is now pointing to an uptick in sales of vinyl as vindication for the "physical stuff matters" claim (it does, but only to a minority group who aren't remotely numerous enough to support a global industry). Yes, broadband is rubbish in some areas, but again, those who can't or won't get a decent connection aren't numerous enough to justify a huge physical product market.

Moreover, it's happening now - not in ten years. Not in five years. Now, and faster than even the most ardent supporters of digital predicted. That's where the real meaning of the word "tipping point" becomes important. It doesn't take the entire country to stop buying physical product for digital to take over. Rather, it just needs a certain percentage to stop buying - a percentage big enough to make big retail chains unviable and to hammer profits from boxed sales of games elsewhere. That might not be a very big percentage. Margins are tight in many chains; a drop of 20 or 30 per cent in their game sales could be enough to make them abandon the sector. Then everyone, the whole 100 per cent, looks elsewhere - some to online retail, some to digital, and some, perhaps, out of the industry entirely.

Publishers can't afford for GAME to fail just yet. They don't all like the company, but they'd like its absence even less.

That can happen, and is happening, with lightning speed - and the fear palpable in the industry right now is an understanding that it's simply not ready for the transition. Many publishers just don't know how to sustain game sales without point of sale marketing. Many are completely deluding themselves about how digital distribution price points will work - and many simply aren't understanding that for all that many consumers are deeply committed to console gaming as a pastime, many others will find their entertainment (including gaming entertainment) elsewhere if the only alternative to a dying retail sector turns out to be a laughably overpriced, uncompetitive and under-serviced digital downloads market.

One consequence of this, though, is that it may well be life support for GAME for at least a while. Publishers can't afford for GAME to fail just yet. They don't all like the company - second hand sales, in particular, rankle - but they'd like its absence even less. The industry will bite its tongue and rally around GAME, because it's just not ready for what happens when GAME, and the rest of the high street retail sector, falls. Rally as it may, though, this is only a stay of execution. Consumers have the final say - and they are speaking in droves. Any company not ready for this transition to happen soon, and quickly, is a company that won't survive it.