Can Game Digital see off the online threat?

The retailer's profits just dove by almost a third.

by Jack Torrance
Last Updated: 12 Apr 2016

In some respects the video games industry is in good health. The Playstation 4 is Sony’s most popular videogame console ever (even if its rival the Xbox One isn’t doing so well). Smartphone games are attracting greater numbers of casual gamers. Professional gamers can earn eye-watering amounts of cash by playing ‘esports’ and new technologies like virtual reality mean there’s plenty of scope for future innovation.

Unfortunately things are looking less promising for video game retailers. Game Digital, Britain’s last remaining big, national chain of game shops (except perhaps Grainger Games, which has around 70) just published its latest interim results and they’re not looking pretty. Sales were down 6.3% to £549m in the six months to 23 January, including a 9.7% drop in its core UK market. Pre-tax profits slid more than 32% to £22.5m. And predictably its share price is down more than 10% this morning to just 113p, compared to its 2014 peak of 364p.

Credit: Yahoo Finance

Though online sales of physical games have been a threat for a fair while now, Game is facing an even bigger existential threat in the form of downloads. Consumers might value the convenience of buying a game from the shop down the road (and the customer service that comes with it) instead of waiting for one to be delivered. But getting them to come into a shop to buy a game they can download straight to their Playstation from the internet will be a much harder sell.

That’s why it’s diversifying. Though games still take up most of its shelf space it also sells second hand phones, merchandise and accessories and it has also been investing in esports. In January it launched a review of how it can turn around the fortunes of its UK business.

‘As well as pursuing commercial opportunities we are focussed on driving improvements in the consumer proposition and realising operational efficiencies to improve our performance,’ said CEO Martyn Gibbs. Just the kind of no-nonsense straight talking a business in trouble needs.

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