Last year was a quiet one of High Street retailer Gamestation. With the market going through a transition period, the specialist kept its head down and worked on refocusing the business internally. But while it did, the rumour-mongers worked overtime suggesting parent company Blockbuster would put Gamestation up for sale.
Although the acquisition talk hasn't completely gone away, the company announced at a recent conference that it was coming out fighting for market share in the battle for next-gen pounds and pence. With cash injection and renewed faith from Blockbuster, Gamestation has targeted an expansion of at least 80 stores across the UK within the next twelve months, as it defends its turf from other specialist retailers. At the start of a prosperous time for the game industry, it would be foolish to give up on what it has already established with the 230 plus stores across the country.
Last week the firm announced an initiative with Microsoft to dedicate an entire floor of its flagship store to Xbox 360 and Games for Windows. GamesIndustry.biz sat down with managing director Mike Logue to discuss expansion plans for 2007, its close partnerships with format holders and its views on the potential of next-gen formats.
GamesIndustry.biz: You parent company, Blockbuster, is reinvesting in Gamestation. Does that mean the rumours of an acquisition are dead?
Mike Logue: Well, my stance on it is this: The future of Gamestation is very, very bright. Our business plan for next year is to open a significant number of stores and Blockbuster is supporting that. Any company can be sold at any time, and I don't think you can say such a concrete thing that it won't happen. The team at Gamestation is totally focused on delivering its business plan, and I believe that we will execute it solidly. You can never say never. No major company can. The important thing for Gamestation is that the management team, store managers and sales staff are focused on Gamestation. And I believe we've got that.
If you're looking at opening another 80 stores next year, you must feel confident that the plan is water tight.
Two years ago we opened 73 stores, so this new push will be the most we've ever done. You've got to set your sights high. Would I be happy with 67? 75? As long as they're good stores and we've got great staff looking after the consumers, I'll be happy whatever the number. We've said we're going to open around 80 stores next year, but you know what? There's another 120, 150 shops available in the country we believe we can make successful.
We've had a year where we haven't opened any stores but we've done an awful lot of stuff - invested in our IT infrastructure, our distribution and we've recruited some great people so we're ready to push on again. With the stores that we've opened, particularly with the launch of the Xbox 360 and the performance of the DS, we're very excited. So there's opportunity for much more than 80 stores.
What are you hoping to achieve with this new Microsoft retail initiative?
When I was younger, I used to go into the major city at the weekend to buy vinyl records, and spend hours there. It was cool to be seen there. And that's what we're trying to do with Gamestation. We've got our local stores, 230 plus around the country, and we're developing major city stores. I would like to see this type of experience in several more cities, so we're going to monitor it and see what happens.
We've learnt more from this flagship store than we've learnt from fifty-odd stores around the country, because of the volume of customers that are coming in and telling us what they think about it. Why we've decided to do this retail experience is that we wanted to take it to the next level. Customers can come and check it out, the next-gen consoles are expensive products, but we believe it's value for money because of the technology and the quality of work that goes into making the games. Come and try it, give it a go, spend an hour here if you want.
Game shops have a reputation for being cramped and dingy. But clearly, Microsoft is really standing with you, in this store in particular, to create a nice retail experience. Is this something you'd like to see from other publishers and format holders as well?
Yes, and I think it's possible. We're stretching boundaries here, this has never been done before. We've spoken with Microsoft and they've grabbed the opportunity. I can see an opportunity for this type of thing with Sony, with Nintendo and even with specific publishers around big games releases. So, yeah, I'd love to see it. We'll wait and see how it works and how the customer reacts to it over the next six months. It is a huge investment from both businesses. For us, for our people, for the dedicated space, and Microsoft for the products and the screens that they've helped us out with here.
Do you think publishers realise that they need to do more to support their products once they've put them in store? Within a month of a games release you'll find it in the second hand bins with the price slashed.
Publishers do support their products fantastically well. They certainly launch products very well and we now see a lot of campaigns to keep the life of the product going longer and longer. The reality of the situation is that the gamer who is buying more than eight games per year needs to reinvest cash to buy more games. A lot of our customers would love to buy every new game every weekend without trading in some of their old games, but that's just not possible.
I think publishers do support their products really well, and give us the marketing support to get behind titles. They're also starting to relaunch products four and eight weeks after release. The reality though, is that a Â£50, Â£40 or a Â£30 product every Friday for key consumers is a lot of money. We believe that trade-ins are vital to grow the industry because there wouldn't be so many buying next-gen consoles if they couldn't trade-in old hardware.
How did you react to the delay of the PlayStation 3 in Europe, and how do you think other hardware will sell during the festive season?
We're disappointed that PlayStation 3 is not coming out before Christmas but it will still do fantastic when it comes out early next year, and it will probably get a lot more space in retail when it arrives. 360 has got a clearer Christmas than it was going to have so you've got to say Microsoft is going to have a huge success.
We are also huge fans of Nintendo, so we think Wii is going to be absolutely tremendous because it brings something new to gaming. And having played that, it's going to open the market up to family entertainment which is important for retail because we want to grow that market as well.
Do you think specialist retailers are in a better advantage than most to sell something like the Wii? Supermarkets, electrical and entertainment stores are all selling games and hardware, but how do they dedicate the space and time to sell something unique?
Oh, absolutely. We've got 1700 people around the country working at Gamestation that love games. The business was built by gamers, for gamers. Our guys will be able to tell a customer whether a game is good or not. We encourage that and tell the publishers and format holders the same thing.
If it isn't great, you won't find us forcing it to the customer. We've got staff who love the industry and love games and will enthusiastically and honestly tell you what a product is like, and with something like the Wii, how to use it. I can pretty much guarantee a large percentage of our pre-orders on launch day will be from staff. Tesco's and HMV do a great job of what they do, but somebody stuck behind a till who doesn't understand the product isn't going to have the same advantage we have.
What about the PSP - when I switch on the TV I see ads for DS content at any time of the day. But the PSP doesn't seem to have the same mainstream marketing support. Do you think this is the last Christmas for the PSP?
No, I don't. I think Sony has learnt an awful lot with the PSP. We are still selling good volumes of UMDs and good levels of software. It really surprises us that some retailers are thinking of dropping UMD movies, because we've got a good business there. We get strong results from PSP software. I think Nintendo has developed some superb software for the DS and marketed it really, really hard, but it's not the last Christmas for the PSP at all. The future for PSP, with the right software, can still be huge.
What are your thoughts on downloadable games and content? It's assumed that retailers don't make much money from hardware, and if you're not making any from downloadable games, is revenue from boxed products enough?
The development of game software, versus the size of a broadband pipe that you're going to need to get that content on your hardware, means that there's always going to be a place for a significant part of that content to be purchased in a retail store. Adding further downloadable content is definitely part of the future, but I still believe that customers want to own and buy a solid product, rather than having it on a hard-drive. It's definitely going to be part of the business and we're currently developing our online offering. But we wouldn't be investing in our stores if we didn't believe that the customer wants to come and buy, and trade, in store.
Mike Logue is managing director of Gamestation. Interview by Matt Martin.