Power to the Players
GameStop Corp., or simply referred to as GameStop, is an American video game, consumer electronics, and wireless services retailer. The company is headquartered in Grapevine, Texas, United States, and operates 7,117 retail stores throughout the United States, Canada, Australia, New Zealand, and Europe. The company's retail stores primarily operate under the GameStop, EB Games, ThinkGeek, and Micromania brands.
In addition to retail stores, GameStop also owns Game Informer, a video game magazine; Simply Mac, an Apple products reseller; and Spring Mobile, an AT&T wireless reseller. It also operates Cricket Wireless branded retail stores as an authorized agent. Cricket is an AT&T brand pre-paid wireless retailer. J. Paul Raines is GameStop's chief executive officer, and Daniel DeMatteo serves as executive chairman.
GameStop is divided into two operating segments: Video Game Brands and Technology Brands. The Technology Brands was created during the fourth quarter of 2013, and houses the companies Simply Mac, Spring Mobile, and Cricket Wireless business. As of April 2014, the Technology Brands segment included 218 retail outlets. GameStop's Video Game Brands includes the company's other businesses such as video game and consumer electronics retail shops; Kongregate, a digital video game distribution site; and buymytronics.com, a consumer electronics marketplace. Pre-owned and value video games accounted for 47% of GameStop's gross revenue for the fiscal year ending February 2014.
GameStop traces its roots to Babbage's, a Dallas, Texas-based software retailer founded in 1984 by former Harvard Business School classmates James McCurry and Gary M. Kusin. The company was named after Charles Babbage and opened its first store in Dallas's North Park Center with the help of Ross Perot, an early investor in the company. The company quickly began to focus on video game sales for the then-dominant Atari 2600. Babbage's began selling Nintendo games in 1987. The company went public in 1988. By 1991, video games accounted for two-thirds of Babbage's sales.
Babbage's merged with Software Etc., an Edina, Minnesota-based retailer that specialized in personal computing software, to create NeoStar Retail Group in 1994. The merger was structured as a stock swap, where shareholders of Babbage's and Software Etc. received shares of NeoStar, a newly formed holding company. Babbage's and Software Etc. continued to operate as independent subsidiaries of NeoStar and retained their respective senior management teams. Babbage's founder and chairman James McCurry became chairman of NeoStar, while Babbage's president Gary Kusin and Software Etc. president Daniel DeMatteo retained their respective titles. Software Etc. chairman Leonard Riggio became chairman of NeoStar's executive committee.
Gary Kusin resigned as president of Babbage's in February 1995 to start a cosmetics company. Daniel DeMatto, formerly president of Software Etc., assumed Kusin's duties and was promoted to president and chief operating officer of NeoStar. NeoStar chairman James McCurry was also appointed to the newly created position of NeoStar CEO. The company relocated from its headquarters in Dallas to Grapevine later that year.
NeoStar merged its Babbage's and Software Etc. units into a single organization in May 1996 amid declining sales. Company president Daniel DeMatteo also resigned, and NeoStar chairman and CEO James McCurry assumed the title of president. In September of that year, after NeoStar was unable to secure the credit necessary to purchase inventory necessary for the holiday season, the company filed for Chapter 11 bankruptcy. With the filing, NeoStar board member Thomas G. Plaskett became chairman and James McCurry remained company chief executive and president.
The leadership changes were not enough and in November 1996 the assets of NeoStar were purchased for $58.5 million by Leonard Riggio, a founder of Software Etc. and chairman and principal stockholder of Barnes & Noble. Electronics Boutique had also bid to purchase NeoStar, but the judge presiding over NeoStar's bankruptcy accepted Riggio's bid because it kept open 108 stores more than Electronics Boutique's bid would have. Approximately 200 retail stores were not included in the transaction and were subsequently closed.
Following his purchase of NeoStar's assets, Leonard Riggio dissolved the holding company and created a new holding company named Babbage's Etc. He appointed Richard "Dick" Fontaine, previously Software Etc.'s chief executive during its expansion in the late 1980s and early 1990s, as Babbage Etc.'s chief executive. Daniel DeMatteo, previously the president of both Software Etc. and NeoStar, became company president and COO. Three years later, in 1999, Babbage's Etc. launched its GameStop brand with 30 stores located in strip malls. The company also launched gamestop.com, a website that allowed consumers to purchase video games online. GameStop.com was promoted in Babbage's and Software Etc. stores.
Barnes & Noble purchased Babbage's Etc. in October 1999 for $215 million. Because Babbage's Etc. was principally owned by Leonard Riggio, who was also Barnes & Noble's chairman and principal shareholder, a special committee of independent directors of Barnes & Noble evaluated and signed-off on the deal. A few months later, in May 2000, Barnes & Noble acquired Funco, an Eden Prairie, Minnesota-based video game retailer, for $160 million. Babbage's Etc., which had been previously operating as a direct subsidiary of Barnes & Noble, became a wholly owned subsidiary of Funco. With its acquisition of Funco, Barnes & Noble also acquired Game Informer, a video game magazine that was first published in 1991. Funco was renamed GameStop, Inc. in December 2000 in anticipation of holding an initial public offering for the company.
Barnes & Noble took GameStop public with a February 2002 initial public offering on the New York Stock Exchange. GameStop was listed under the ticker symbol GME. Barnes & Noble retained control over the newly public company with 67% of outstanding shares and 95% of voting shares. Barnes & Noble retained control over GameStop until October 2004, when it distributed its 59% stake in GameStop to stakeholders of Barnes & Noble, making it an independent company.
GameStop acquired EB Games (formerly Electronics Boutique) in 2005 for $1.44 billion. The acquisition expanded GameStop's operations into Europe, Canada, Australia, and New Zealand. Two years later, in 2007, GameStop acquired Rhino Video Games from Blockbuster for an undisclosed amount. Rhino Video Games operated 70 video game stores throughout the Southeastern United States.
GameStop purchased Free Record Shop's Norwegian stores in April 2008. The company acquired 49 stores and converted them into video game shops. Daniel DeMatteo replaced Richard Fontaine as GameStop CEO in August 2008. DeMatteo had served as company COO since 1996. Fontaine, who had been GameStop chairman and CEO since 1996, remained the company's chairman. J. Paul Raines, formerly executive vice president of Home Depot, became company COO in September. GameStop acquired Micromania, a French video game retailer, in October 2008 for $700 million. GameStop, which had previously owned no stores in France, now had 332 French video game stores. It also acquired a majority stake in Jolt Online Gaming, an Irish browser-based game studio, in November 2009. Jolt closed in 2012.
J. Paul Raines became GameStop CEO in June 2010. He replaced Daniel DeMatteo who was named executive chairman of the company. GameStop acquired Kongregate, a San Francisco, California-based website for browser-based games; terms of the deal were not disclosed.
GameStop acquired Spawn Labs and Impulse in separate transactions during 2011. Spawn Labs was a developer of technology that allowed users to play video games that were run remotely on machines in data centers rather than their personal computer or console. Impulse was a digital distribution and multiplayer gaming platform. GameStop closed Spawn Labs in 2014.
GameStop purchased BuyMyTronics, a Denver, Colorado-based online market place for consumer electronics, in 2012. Later that year, it acquired a minority interest in Simply Mac, a Utah-based authorized Apple reseller. GameStop acquired the remaining 50.1% interest in Simply Mac in November 2013. GameStop also acquired Spring Mobile, a Salt Lake City, Utah-based retailer of AT&T-branded wireless services, in November 2013. They obtained 163 RadioShack locations as of February 26, 2015, as well. All GameStop stores have been closed down in Puerto Rico at the end of March 2016, citing increased rates of government taxes. On August 3, 2016, it acquired 507 AT&T store chains in plans to diversify into new businesses and less dependant on the video game market.
The market for physical game media has been in a state of decline since online services such as Xbox Live, PlayStation Network, and Steam has taken foothold, and GameStop, whose business was long rooted in new and pre-owned software, has begun feeling the effects of the changing market. In 2017, GameStop reported a 16.4% drop in sales for the 2016 holiday season, but expressed optimism in its non-physical gaming businesses. Reasons cited for the decline in sales included industry weakness, promotional pricing pressure, and lower in-store traffic.
Shares of GameStop stock fell 16% throughout 2016. On February 28, 2017, shares dropped an additional 8% following Microsoft's announcement of its Xbox Game Pass service. Following these reports, GameStop announced it would close over 150 stores in 2017 and expand its nongaming business. On the same day, however, GameStop said it planned to open 65 new Technology Brand stores and 35 Collectibles stores due to a 44% and 28% increase in sales, respectively. GameStop expects a continued drop in operating income between 3% and 10% in 2017.
Game Informer is a magazine owned by GameStop, Inc. and primarily sold through subscriptions which can be purchased at GameStop locations. Purchasing a subscription to the magazine also gets the subscriber the PowerUp Rewards Pro card, a pro version of GameStop's customer appreciation card. This increases all store-credit trade values by 10%, discounts all used accessories and games by 10%, gives new PowerUp members a coupon for "Buy 2 Get 1 Free" on pre-owned games and accessories, enters them twice for the Epic Rewards Giveaway for each purchase, gives the cardholder opportunities to gain points with their purchases, and redeem them for rewards and gains them access to special content on the Game Informer website.
GameStop PC Downloads, formerly called Impulse, is a digital distribution service run and operated by GameStop. Originally known as Impulse when owned by Stardock, it was sold to GameStop in 2011 and rebranded as GameStop PC Downloads, with the Impulse client renamed as the GameStop App. Under the ownership of GameStop the service has had a redesign, and sells games that use other platforms such as Steam while also selling games that use its own proprietary DRM solution Impulse:Reactor.
GameStop sells games that are traded in for store credit. This practice has come under fire from game publishers and developers as they make no money from the transaction.
GameStop TV is the in-store television network run internally GameStop, with non-endemic sales in partnership with Playwire Media, Inc. GameStop TV features programming designed to speak to the consumers shopping in GameStop stores. Each month brings content segments about upcoming video game releases, exclusive developer interviews, product demonstrations and more.
Game publishers have begun to obtain more pre-orders by including exclusive in-game or physical bonuses, available only if the player pre-ordered the game. Bonuses typically include extras such as exclusive characters, weapons and maps. For example, GameStop included an additional avatar costume for Call of Duty: Black Ops when it was released in November 2010, and a pictorial Art-Folio for Metroid: Other M. Soundtracks, artbooks, plushies, figurines, posters, and T-shirts have also been special bonuses.
GameStop founded MovieStop in 2004 as a standalone store that focused on new and used movies. More than 40 locations were opened, which typically adjoined or were adjacent to GameStop locations. GameStop spun off MovieStop to private owners in 2012. In November 2014, Draw Another Circle LLC, a company controlled by merchandising executive Joel Weinshanker that also owns Hastings Entertainment, purchased MovieStop.
In October 2012 at Grapevine Mills in Dallas, GameStop introduced a new store concept known as GameStop Kids. The brand focus on children's products, and carried only games rated "Everyone" by the ESRB, along with merchandise of popular franchises aimed towards the demographic. The locations opened in 80 malls as pop-up stores for the holiday shopping season.
In January 2016, GameStop announced a partnership it had made with Insomniac Games with their 2016 title Song of the Deep. GameStop executive Mark Stanley said the concept was to help the chain have more direct communication with players, and would expect to expand out to other similar distribution deals with other developers if this one succeeds. Subsequently, in April 2016, GameStop announced that it was formally creating the GameTrust Games publishing division within the company to serve as a publisher for mid-sized developers. In addition to Insomniac Games, GameTrust Games is working with Ready At Dawn, Tequila Works, and Frozenbyte to prepare more titles to be published by the end of 2016.
In October 2012, GameStop acquired a 49.9% minority equity ownership interest in the Salt Lake City-based Apple authorized reseller and repairer Simply Mac. Simply Mac was founded in Salt Lake City in 2006. GameStop acquired the remaining 50.1% that it did not own in November 2013. GameStop tried to target areas for potential new Simply Mac locations in slight smaller markets that did not have an existing Apple Store within a reasonable driving distance.
In January 2017, GameStop closed a large number of Simply Mac locations. The chain had as many as 70 locations at the time of the announcement. After the closings, a few recently vacated Simply Mac locations were replaced by sister company ThinkGeek.
The company has a policy where some copies of new games upon release are "gutted". This means that while sealed copies of the new release are kept behind the counter, one copy is opened so the case can be put on display, with the game disc filed separately behind the counter. Consumers may reach for the opened copy and purchase at the counter, whereupon the consumer will receive a factory-sealed copy from behind the counter. If the opened copy is the last copy of the new game, it is sold at regular price.
GameStop's check-out policy allows employees "to check out one item of store merchandise for personal use for up to four days", with the intent being to allow the employee to evaluate the game and learn about its content. This check out policy does not apply to only used merchandise, which has been a hotly contested practice among the community.
GameStop came under fire from critics when customers discovered that content had been removed from the original packaging of Deus Ex: Human Revolution. GameStop had instructed employees to remove coupons for a free copy of Deus Ex: Human Revolution on OnLive, a cloud gaming service. GameStop stated that the coupon promoted a competitor of its subsidiaries, Spawn Labs and Impulse, which it had acquired in April 2011. Later, GameStop entirely removed the PC version of Deus Ex: Human Revolution from its stores. Square Enix, the publisher of Deus Ex, said that it "respects the right of GameStop to have final say over the contents of products it sells and to adjust them where they see fit in accordance with their policies".
GameStop has been criticized by game developers and publishers for the retailing of used game titles. By reselling used copies at a small discount on the same shelf space as new copies of the game, it is argued that GameStop is taking profits directly from organizations such as developers and publishers which are solely dependent on their intellectual property for revenue. In effect, this means that companies such as GameStop can resell used copies of a game within days of the title's release and keep all of the profit, thereby cutting directly into the critical initial sales which would otherwise go to publishers and developers. It has been suggested by industry insiders that this directly results in increases to the retail cost of new games.
It was revealed in early August 2014 that GameStop was required by the Philadelphia Police to provide fingerprint identifications when customers traded in games at Philadelphia GameStop locations. The policy had been in place since early July of that year and did not apply to the suburban areas of Philadelphia. This caused some heavy criticism from video gamers living in the affected area. Philadelphia Police asserted that the fingerprint identification would help track thieves. By August 4, 2014, the policy had been reversed in all Philadelphia-area GameStop stores.
In February 2017, it was revealed that GameStop enforced, on all of its retail employees, a program known as Circle of Life. The policy itself was made to ensure that each employee would allot a certain percentage of their sales to pre-orders, rewards cards, used games, or have a customer trade in a game. Upon revelation of the policy, many GameStop employees including current and former, brought up their stories of how the policy has led to them lying to customers. Many more claim that the policy had led to poor working conditions and emotional distress. Later into the month, GameStop reformed the program to solely focus on the store as a whole instead of the previous individual employee basis.