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Sports Direct and GAME: Is this the future of games retail?

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When Sports Direct picked up over a quarter of GAME last summer, there was a lot of chin-stroking over why owner Mike Ashley might want to invest in a games retailer in an increasingly digital industry.

There were certainly some similarities between the two companies, at least in terms of target audience. And most major sports companies currently have one eye on the growing esports industry - an industry GAME has been investing heavily in.

But really, it looked more like an opportunistic move by Sports Direct. GAME's share price had fallen to around 20p a share, which meant Sports Direct took a major stake in the company for less than 10 million. Sports Direct has a vision to build large department stores around the UK, including gyms and other concessions (Mike Ashley wants Sports Direct to become 'the Selfridges of Sport'). GAME could well fit within that format.

That was six months ago now. GAME's situation has stabilised slightly, buoyed by improved stock of Nintendo Switch and strong sales of Call of Duty: WWII. Although it reported a 10m loss for its last financial year, it's since revealed that its Christmas sales were up by 5.2 per cent.

Meanwhile, its new Belong business - in-store areas where consumers pay to play competitive esports games - is showing promise, despite not being profitable quite yet. As a result, GAME's share price has doubled since the middle of last year (that shares have actually performed better than that, but it's recently taken a hit following the news that CFO Mark Gifford is leaving the company).

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The future of games retail?

Sports Direct's new investment of 3.2m, giving it a stake in Belong, plus the cash injection in the form of a 55m loan, is a far more considered move. As is the news that GAME - and particularly Belong - would soon be appearing in Sports Direct shops. Mike Ashley's team has spent six months with GAME, understood its vision and its potential, and now worked out what part of the retailer it wants. And it's the in-store esports part.

That's not a surprise. Traditional sports broadcasters, team owners, leagues and even football clubs have invested in esports in recent years, to ensure it has some presence in the area. Even sports clothings companies have developed and started selling esports ware.

So it was inevitable that one of the UK's most prominent sports retailers would want to get involved. GAME's Belong arenas are the closest the UK has to a chain of esports shops, and Sports Direct wants them within their world.

"Sports Direct involvement with GAME is precisely what the retailer needs in an industry where digital game sales are increasing faster than initially expected"

Of course, there's a sense that GAME is giving away a chunk of its future for a short-term cash injection. Coupled with the recent sale of Multiplay's Digital business, GAME has brought in 22.2m by selling growing segments of its business. It feels a bit similar to when HMV sold Mama Group - its live music division - back in 2012 to prop up it struggling retail division. It kept the wolves from the door, but at the cost of its future vision.

Yet this feels different. GAME CEO Martyn Gibbs stated that this Sports Direct deal will allow it to "accelerate the implementation of a key element of our transformational strategy to move from a seller of physical products to providing gaming experiences." This isn't selling its future to secure the present, but finding a partner to help realise the plan.

Sports Direct involvement with GAME is precisely what the retailer needs in an industry where digital game sales are increasing faster than initially expected. The challenge with all business transitions is making sure your new ventures grow at the same rate (or, ideally, faster) than your old business declines. It's a delicate balancing act. Go too quickly and you risk accelerating the demise of the biggest area of your business, but move too slowly, and you can find yourself without a business at all. Belong - the headline part of GAME's bold esports strategy - is growing strongly, but right now it's costing money not making it.

Sports Direct hasn't just given GAME 3.2m for a stake in its future, it's also given the firm a sizeable loan to accelerate that Belong roll-out (and help prop up that physical retail part, too). That's good news for GAME as it tries to navigate the volatile and unpredictable video games market.

Sports Direct and GAME's future directions are now linked. The sports retailer is already rolling out more big department stores featuring gyms, and it won't be long before those gyms are joined by gaming areas, too. Keyboards stocked alongside tennis rackets, and graphics cards next to goalposts. The chance to play Rocket League with your mates, before going for a run or a swim. It's an odd vision, for sure, but the sort of experiential retailing that most major shops are looking to develop.

You never know, it might just be the future of games retail.

Related stories

Sports Direct buys 50% of GAME's esports arenas in 3.2m deal

Belong arenas to appear in Sports Direct stores, with additional 55m in loans

By Christopher Dring

GAME CFO Mark Gifford resigns

He will leave at the end of March

By Christopher Dring

Latest comments (8)

Iain McNulty Software / Game Developer, Yanxen5 days ago
Let us all hope it is not the future, considering Sports Direct have been widely known to treat their staff like utter shite.

https://www.theguardian.com/commentisfree/2016/jun/08/inhumane-sports-direct-mike-ashley-workforce
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Richard Browne Partner & Head of Interactive, Many Rivers Productions5 days ago
I thought you were talking about Rafa Benitez for a minute there Iain.
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Klaus Preisinger Freelance Writing 5 days ago
its new Belong business - in-store areas where consumers pay to play competitive esports games - is showing promise, despite not being profitable quite yet.
When at home playing games, I always wondered, gosh, what if there was a place where I could pay money to do what I am doing now without paying money. I blanked out staring at the TV and then it hit me. Those big football leagues are doing it all wrong. Why are they charging the audience, when they could charge the players? They earn more money, so there is more money earned from them, right? I smiled and heard a voice, 'look at you smiling, you know it is time for your medication and medication is good for you.' Home is a mental hospital in an abandoned arcade after all.

Edited 1 times. Last edit by Klaus Preisinger on 13th February 2018 12:49pm

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@Klaus Preisinger: I pay to go to five-a-side football pitches all the time. And to go to the gym. And to go swimming. And to go to tennis. And...
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@Iain McNulty: Sports Direct doesn't own GAME
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Klaus Preisinger Freelance Writing 4 days ago
@Christopher
I am taking a wild guess assuming you do not have a football pitch, a gym and a swimming pool at home, but you do have an Internet connection and a PC, or game console.

Here is a thought, what if GAME had a really dope kitchen where you could cook and you did not have to clean it up yourself? I already can hear your thoughts assuming things about my kitchen and lack of personal staff, which raises the one true question in all of this. What the hell should we assume about the people who came up with GAME's plan?
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@Klaus Preisinger: No, I don't have a football pitch at home. But I do over the road in that park. And about 30 minutes away there's the sea, with plenty of free water to swim in.

This isn't new Klaus, either. GAME's top Belong store brings in 200,000 a year. A typical large Belong brings 133,000 a year. And the margin on that (once you've spent the initial outlay) is pretty good.

This isn't even a new strategy. HMV operated a series of stores called Gamerbase, which was one of the only profitable areas of its business when it first fell into administration initially.

The idea of a Lan-based gaming area, with top-end PCs and VR kits for people to come along and play, is not unheard of. Community based gaming is a thing.

The question is whether there is a large enough potential audience to sustain it.

Edited 1 times. Last edit by Christopher Dring on 14th February 2018 12:53pm

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Elliot Jones Assistant Manager, Rogue Factor4 days ago
@Klaus Preisinger: not everyone can afford a 2000$ GPU, let alone the rest of the components to experience high PC end gaming. A business is offering the gaming community something new and people are immediately shaming it for monetizing also.

May I also just point out, the reason a huge percentage of competitive gaming fans, including those that mainly watch esports etc, do not attempt to get involved with teams, leagues and cups etc because they feel they are not good enough. Belong seems to offer a place where gamers of all skill levels can get together, compete, learn, engage. I'm sure that behind a keyboard/webcam at home this isn't as effective as in person. I for one, love the idea and I'm really excited to see how it evolves.
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