Is GameStop Really Ready to Run?
If the Penny Arcade Report is to be believed, watching Sony's presentation at E3 was like watching the San Francisco 49ers take on a middle school football team. Sure, the kicker might be sick. Sure, you fumbled on your own one-yard line. And, sure, you've put in the ninth string QB, but you're still going to win. Jack Tretton, CEO of Sony Entertainment America, laid down the gauntlet.
The PlayStation 4 would let you lend and sell games easily, you didn't need to always be connected to the Internet, and you'll be able to get the PS4 for $100 less than Microsoft's Xbox One. While the implication for sales of the competing systems is yet to be determined, the market has already decided that Sony's move is a godsend for GameStop . The retailer's stock has jumped 12% over the last week. Is this really the savior GameStop has been looking for?
The continuing saga of used games
GameStop's problem has stemmed largely from the issue of used games. Last quarter, the company earned 31% of its revenue from used games, while new games made up another 38% of sales. The functionality of used games on the next generation of consoles has been up in the air, with Microsoft releasing an oddly worded statement earlier in the week.
Microsoft said that "[it] designed Xbox One so game publishers can enable you to trade in your games at participating retailers." The statement clarified that GameStop would likely remain in the picture, but didn't make it clear who the retailers were, if you had to use a retailer, or which publishers would allow such trade-ins.
Sony made things much more straightforward. The company summed its position up in one slide: "Trade games in at retail, sell it to another person, lend it to a friend, or keep it forever." GameStop investors loved that news, and it looks like Sony is all set to play ball.
Sony's announcement puts Microsoft on the back foot, and demands a clearer response from the company on its used-game policy. The best news for GameStop investors would be Microsoft's capitulation, opening its system up just as Sony has. While hard-core gamers may ultimately make a decision on system based on the lineup of games, many casual users will simply take the one that offers the best features. Right now, PlayStation is winning that war.
That means that GameStop is winning the war, too. I'm still hesitant about the company due to my natural risk aversion, but as I've said before, the whole system is too involved for used games to just dry up. GameStop provides huge sales figures for game publishers and hardware makers. Cutting them out of the loop wouldn't be good business -- at least, not right now.
For now, GameStop's prospects are looking very good. I'll be on the lookout for more good news once Microsoft comes back to clarify and tweak its position. Even if it doesn't, Sony may have just given GameStop the life raft it needs to get through the storm.
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The article Is GameStop Really Ready to Run? originally appeared on Fool.com.Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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