Game thrown a lifeline

Last week it was looking like game over for the electronic retailer. Yesterday turnaround firm OpCapita came to the rescue, but does Game have a future?

by Elizabeth Anderson
Last Updated: 01 Nov 2012
OpCapita, the investment firm which bought Comet last year and which specialises in acquiring stricken retailers, won’t disclose how much it paid for Game. However it’s thought the firm will spend around £50m keeping the business afloat.

OpCapita has confirmed it will keep Game’s remaining 333 UK stores open, saving some 3,200 jobs. The firm will also rehire a small number of staff who worked at Game’s head office and were made redundant last week.

Game collapsed into administration last Monday, 20 years after opening for business. PwC, handling the administration, closed 277 of Game’s poorest performing stores immediately, making more than 2,100 staff redundant. But it kept the remaining 333 stores open in the hope of finding a buyer.

OpCapita, taking on the business, will have a tough job on its hands. Game owed £85m to banks including the Royal Bank of Scotland when it went into administration last week. It’s likely the banks will have to take a writedown on those loans of about 55%, according to the Telegraph. Game’s balance sheets aren’t looking much better. The firm admitted last month that losses for the year ending January 2012 would be £18m, and suspended its shares soon after. Meanwhile it has a monthly wage bill of about £5m.

High street electronic retailers have struggled to compete with online shops offering cheaper prices. But analysts say some of Game’s problems were self inflicted. It undertook an ambitious expansion plan, sometimes opening more than one shop in a town centre. This was fine when the console market was strong. But after the console boom a few years ago, when the Wii and Xbox updates were released, the market has been relatively quiet, leaving Game struggling to afford its increased number of stores.

Game has also had difficulty with its suppliers. EA and Nintendo held back some of its big releases last month, including Mass Effect 3, after becoming nervous about the retailer’s future. Game never had particularly good relationships with its suppliers, upsetting them when it decided to go into the pre-owned market, Patrick O’Brien, a retail analyst at Verdict Research, told the BBC this morning. There is speculation that suppliers, owed around £40m, won’t get any money back after the takeover. If that’s the case, the relationship between the two is hardly likely to improve.

High street video game retailers also face a trend towards digital downloads. Like the fall of the CD, it’s predicted that people will soon download games, rather than buy a disc. Clearly OpCapita sees some future in Game, but it’ll probably involve a complete overhaul of its business model.
  

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