Late last week week saw the shocking news that GAME Group, owners of over 1300 GAME and Gamestation stores scattered throughout Europe and Australia, would not be stocking EA’s sci-fi epic Mass Effect 3, set for release on March 9th. While official word from GAME Group’s PR firm Red Consultancy was vague, noting an ambiguous “supply issue,” an internal memo was leaked to Eurogamer. It stated that the problem was apparently more serious, stating that GAME “were committed to only stocking products on which we could get the right credit terms.” Does this mean that GAME Group did not have enough credit with EA to purchase copies of Mass Effect 3? Or has EA made changes to the credit terms that GAME simply finds unacceptable, and are now taking a bold stand?
As the company continually declined to comment further, it was revealed that Mass Effect 3 would not be the only EA title that GAME would not have in stock. If the situation remains the same, sports titles FIFA Street, due for release on March 16th, and Tiger Woods PGA Tour 13, pegged for March 30th, will also be missing from GAME and Gamestation shelves. A GAME employee, who wished to remain anonymous, said, “FIFA Street could suffer the most because it’s a franchise that EA is trying to revive.” The employee also revealed that store managers were unsure if GAME would be stocking the Nintendo published Wii game Mario Party 9, which was released on March 2nd. Shortly after, it was confirmed that the store wouldn’t be stocking the title. The employee went on to comment that “the Nintendo situation is worse because it’s not just affecting games, it’s affecting stock of 3DS hardware as well.” While they were unable to verify that the same “credit term” problems that were impinging on the EA published titles was responsible for the Nintendo situation, given the circumstances it seems more than likely.
But how did the situation become so grave for the FTSE listed GAME Group? The history of the company dates back to 1991, known then as the Rhino Group, but it was not until a decade later that the GAME brand appeared. They spent the nineties acquiring various other retailers (including Virgin Games) before Electronics Boutique took part ownership after purchasing a 25% share of the company. After acquiring various other European operations, Electronics Boutique rebranded all their UK stores as GAME, creating the spin-off company GAME Group which finally appeared in 2002. Five years later, after expanding further into Europe and Australia and severing ties with Electronics Boutique, the GAME Group purchased Gamestation, and started their value point rewards system.
And yet, so soon after these far-reaching foundations were laid, it now seems as if the mighty gaming kingdom is crumbling, another addition to the long list of British high street entertainment stores that have floundered in the face of a global recession. Entertainment group Zavvi, formerly Virgin Megastores, plunged into administration (bankruptcy) in 2008, although The Hut group took over the brand as an internet-only operation. Another large high street chain, Woolworths, suffered a similar fate to Zavvi a year later, with the loss of 800 stores. The UK arm of book chain Borders also closed its doors in 2009. While they did not sell games directly, many flagship stores had GAME concessions stands within them. GAME’s major high street rival, HMV, almost bit the bullet too in 2010, were it not for an aggressive push into the music accessory market as well as cinema and live music venues.
Of course, all were competing with the cutthroat world of Internet shopping, but surprisingly their main rivals during the last decade came in the form of heavily discounted products from large supermarket chains. As one former employee of GAME recalls, “it was the supermarkets and (catalogue chain) Argos that did the damage; they were selling games for £25 down the road, or even in the same shopping centre, whereas GAME were selling them for £40… people would come in and ask if we had it and for how much, and then tell us it was cheaper elsewhere and walk off.” The former employee also revealed, with a note of irony, that EA used to pay GAME to have an EA tower filled exclusively with their titles, but that the profitability of a new game was marginal, with GAME paying only £7-£8 less than the RRP (Recommended Retail Price) for each unit.
However, this employee left his GAME store before the dominance of Amazon and Play in the UK’s online gaming retail market. As an aside, let us take a look at how GAME has priced itself out of what could possibly be the last EA-published game they sell – SSX for PS3 and Xbox 360:
- The Game Collection – £34.95
- The Hut / Zavvi – 36.85
- Amazon – £37.47
- Play – £38.89
- GAME – £39.99
There are two points of interest to note on the GAME webstore. The first is that they seem to be the only UK retailer selling the Limited Edition of the EA Sports title, which features Eddie Wachowski as a playable character and Mt. Fuji, Japan as a location (although early reports online suggest there have been problems receiving the Limited Edition codes with GAME and Gamestation purchases). Yet, they are selling it at exactly the same price as the normal version. The second point is that next to the game (and all games) is a box stating “Please note: prices in GAME Stores may differ.” Why add this confusion and inconsistency to the buying process? Is it possible that GAME’s potential demise could be partly their own fault?
But, as another ex-GAME employee stated, “Pre-owned games were always the moneymaker; the margins were much higher… I think this current approach by the publishers to stamp out pre-owned is the biggest problem.” Could the action against EA and Nintendo be in part about the sale of second-hand games? While the figures for the group’s used game profits were unavailable, their American counterpart, GameStop, reported $2 billion in sales from used games in the last year. Internet companies such as Amazon and Play have operated an eBay-esque used section for years where shoppers could sell their games, but this requires a lot more effort than simply taking it to a GAME or Gamestation store. While Amazon.com now has a used game system firmly in place, where you post it to them in exchange for credit for use on their website, their UK equivalent is still beta-testing its system. But this approach, while simpler and easier than selling it yourself, still requires time, postage and trust that the game will not get lost in transit. In short, the majority of gamers will still find it easier and less problematic to visit a GAME or Gamestation store than a post office box.
And this is the one advantage GAME has over the plethora of internet companies – they exist in the real world, and it could be this that offers them salvation. Just as rivals HMV branched out into live music events, GAME could launch live gaming events and challenges. While online multiplayer offers gamers the chance to compete with one another, it lacks the excitement of, for example, four people screaming at one another while playing the NG4 version of GoldenEye. While GAME already offers midnight launch events at their flagship store on London’s Oxford Street (where only last week hundreds of people queued all day and night for the midnight launch of the Sony Vita), the company could push this further, maybe even launch a Gaming Olympics to coincide with the 2012 games in Great Britain’s capital.
As their share prices fall on the stock exchange, I for one hope that this is only a stumbling block in the company’s 20-plus year history, not only for the thousands of employees, but for the community of gamers who prefer their retail experience on the street.