How the Xbox One and PlayStation 4 Could Save These Retailers
The headline of this year's NPD Holiday Spending Survey includes the phrase "Consumers Plan to Spend More," but that's a bit over the top. The survey revealed that 12% said they would spend more while 21% said they would spend less. If that nets out to overall more spending I'd be surprised, but some retailers might have a green Christmas nonetheless. Best Buy and GameStop are both getting ready for a customer onslaught, as two new consoles are being released this month. That's going to keep the companies flying through the holiday season, and should end the year on a high note.
GameStop and Best Buy, brothers in battle
While the two companies are effectively rivals, this year they're both hoping for the same thing: gamers in stores. Amazon.com has been the bane of both brands, and it's already stolen some of this year's thunder. The online giant announced it's sold out of both the Microsoft Xbox One and the Sony PlayStation 4. That's good news for GameStop and Best Buy, as some locations still have availability, which will drive more customers into the stores.
Both brands will be happy for the business, as slow sales have continued to plague the industry while the world waits for the new machines. Comparable-store sales at GameStop were down 10.7% last quarter, with much of the decline due to a 19% drop in new hardware sales. Similarly, Best Buy took a 30% hit in its entertainment category sales in the last quarter.
Things are looking up
There's a meaningful debate to be had about the long-term viability of the current gaming model. For now, though, that's put to one side. This generation of consoles is launching with high-demand physical titles, just like the consoles that came before it. That means that GameStop and Best Buy are both going to play a big role in the launch.
Estimates have put sales of both consoles in the millions by the end of the year, which is a bright spot for both of the traditional retailers -- and Amazon. The biggest winner may end up being GameStop, which is already turning its focus to the huge set of used games and consoles that consumers could be looking to replace. During the launch period, the company is offering Xbox 360 and PlayStation 3 deals to try to increase the user base for used games.
The end might be in sight
Even if things go well for Best Buy and GameStop, it doesn't mean that the businesses are out of the woods. While both have been the default location for game purchases in the past, they need to make major changes in order to thrive after launch. Best Buy is already making the shift to more mobile sales, which should help it slim down its business and return to some semblance of growth. GameStop is going to have to crack digital delivery, and prepare for an end to used games, but hasn't hinted at how that would work, yet.
I'll be looking for good things out of both retailers in the next quarter, and GameStop, especially. The successful launch of these new consoles won't end either company's woes, but it might be the breathing room that they -- and investors -- need to transition into a better future.
Investing in entertainment
The console war is just one of the battles raging in your living room -- go look, I'll wait. See, everybody's fighting for your fun bucks. One of the biggest fights is actually happening behind the scenes, as television production companies face off with cable providers to try to shape the future of entertainment. This $2 trillion market is explained in a new video report from the Motley Fool's analysts. Investors interested in the future of popular media can click here to view this special report now.
The article How the Xbox One and PlayStation 4 Could Save These Retailers originally appeared on Fool.com.Fool contributor Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com, 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.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.