Game today reported a slump in UK retail sales but has a bold vision of a multiplay future in which it has a key role.
But, as Verdict retail lead analyst Andrew Stevens says: “The retailer appears enthusiastic in the face of dire trading”.
This could be because Game, which fell into administration in 2012 and was subsequently revived, already has a plan to improve its performance in the UK.
Game boss Martyn Gibbs asserts that the business is “well positioned to benefit from its exciting developments” and has “clear plans in place” to drive its operations forward.
As well as generating efficiencies and negotiating improved terms with key suppliers, Game’s plan includes piling investment into its e-sports and gaming events business, and developing uses for its newly acquired augmented reality business.
Why can’t Game rely on the console cycle?
Only a small margin is earned on the bulk sale of new consoles at the start of each product cycle, but games retailers boost their bottom lines with sales of pre-owned content, new games and accessories, which customers snap up in the years and months that follow.
Still, Game’s sales of pre-owned content in its second half were soft, and accessories revenues were insufficient to offset the inevitable decline of console sales mid-cycle.
Stevens says that over the next 12 months the launch of various kit and updates, such as the PlayStation VR, Oculus Rift, Xbox One S and new console Nintendo NX, “will indeed drive traffic into stores and result in a positive trajectory for sales”.
He points out, however, that “this will not result in the spike Game enjoyed” when the most recent generation of consoles launched in 2013.
According to Stevens, in order to reduce exposure to the volatility in the console cycle, which rotates every six to seven years, Game needs to concentrate on the development of its wider business, and counteract the increasing shift away from physical content towards digital, which Stevens says “evidenced by its own sales figures, are gathering pace”.
“This will be the only way for the retailer to have a long term future,” he says.
Multiplay and e-sports
Stevens says Game is developing detailed plans to exploit the growing e-sports and competitive gaming markets by launching in-store and locally based activities.
An example of Game’s investment is recently acquired Multiplay, which owns gaming events including the Insomnia festival in Coventry which attracts between 30,000 and 40,000 people over the space of a weekend.
YouTube has also helped the growth of e-sports, because game lovers can watch other gaming aficionados play - an increasingly popular activity.
E-sports is another area of gaming that is growing fast. Liberum maintains that Game can make use of its store space to capitalise on that by creating fanfare around events in-store and “bringing a community of gamers together”.
Game, once it has its template in place, plans to roll out more events and will have the opportunity to profit directly from sponsorship, as well as nurturing customer loyalty, Liberum says.
Another facet to Multiplay is its server-hosting business, through which Game can host competitive gaming events between friends in stores. Game has won a contract, for example, with the developer of Titan Fall to exclusively host Titan Fall 2 when it is released in October this year.
“Game has put a lot of investment into Multiplay and e-sports. The opportunity is there but it is in its early stages and we can’t predict what the outcome will be yet,” Liberum says.
Investment in this division of the business is not expected to bear fruit until 2018.
Ads Reality acquisition
Games snapped up visual recognition and augmented reality business Ads Reality earlier this year to explore its potential uses in-store and in marketing.
The success of Pokemon Go demonstrates the power of such technology, when used in an inventive way.
Liberum says that if Game can harness virtual reality in a similar way, the retailer could incorporate it across both its UK and Spanish businesses to drive footfall to stores and on mobile devices.
“Game has struggled because the retail market has been struggling,” Liberum says.
However if Game has played its digital cards right, it may have a healthy - if less traditionally retail-driven - future ahead of it.