GameStop & EB Games Merging (GameStop buys Electronics Boutique for $1.44 billion)

I just bought Ape Escape 2 for my in-laws at GameStop on Saturday and they tried to sell me their version of the Edge card. I was interested, until I found out it was like $15. WTF? I just hope that GS adopts most of EBs policies, but at this point I'm very skeptical.
 
[quote name='Indiana']I like Electronic Stop! Better. It describes the broken crap they will be selling! :)[/QUOTE]

This just in, the new company will be called Boutique Stop, stock symbol: BS.
 
[quote name='Mookyjooky']It all rolls down to this...the Gaming industry is a multi-billion dollar industry now.

You pay $50 (soon to be $60) for a game that took 6-10 million to make (And thats the really, expencive games only! [Halo 2, GT 4, etc]) and the games take 2-3 year development.

You can buy a Movie DVD that costs $20 at release and that movie cost them $100-120 million to make with 3-4 years development time.

Whats that mean to you? That means that when games were set at $50 bucks, no one played them (Except gamers) so they had to be $50 bucks to make any money. But now the industry is making hand over fist in cash, leading the industry to make only sequels and limiting innovation...Here's Mega man 84! and it hasnt been good since Mega man 2!! Why release crap? Because you (the consumer) eats it up. Even for $15 dollars they make profit.

Very rarely do games not "Break even".

So in 5 years enjoy having every EA game cost $70 dollars, when EA signs a contract with Gamestop to only release their games via Gamestop. Dont think it will happen? Maybe not, but if EA and Gamestop LOVE money (And it seems they do), then this is a possible future.

From what I hear, this is the "O" face game companies make when they fuck you in the ass with games that arent different from the last one and disapointments.

pi7face0sm.gif
[/QUOTE]

You're skipping over the little fact that the vast majority of DVD releases have already seen major revenue from previous distribution channels. Even a film that did poorly at the box office is rarely so far in the hole that the DVD release must shoulder the bulk of the production costs

Side note: Interesting article in yesterday's LA Times about the film industry's traditional accounting scams now being part of the DVD business.
http://www.latimes.com/news/printedition/la-et-dvdmoney17apr17,1,213056.story
(Don't buy that part about an actress getting tens of thousands of dollars in royalties for four lines in 'A Bug's Life.' If things really worked that way some people I know would be millionaires instead of having to do jobs in addition to acting.)

The current structure of game distribution puts the entire burden on one channel. It is very easy for a game to be a money loser. Production costs are only the beginning. Add up the media costs and royalties on every unit and you'll find the sunk costs are very high before a single unit has gone on store shelves. If a publisher order 500,000 units and only ever manages to sell less than 50K of those for full price you can be sure that is costing the publisher dearly. The retailers don't take the loss. The publisher has to make to offer them compensation in forms like writedown credits or they'll find themselves unable to get their later releases into the stores.

I would guarantee turkey's like Charlie's Angels (GC) are in negative revenues. Also, if you look at the charts the Mega Man games do good numbers. They score well with kids, a demographic renown for poor taste. They may crnge a few years later at their earlier enthusiasm but the money is long gone. If it made them happy at the time they cannot really complain. They keep making them because the audience keeps buying them. The series would languish like many other properties if it were otherwise.

The console industry has been a multi-billion dollar business for well over a decade. The whinig about limiting innovation is nonsense. There have been no end of new things attempted over the years. Most of them were miserable failure despite having a tiny audience that loved it. It is no different in any creative field. Certain structure become standards because the audience doesn't want to watch it twice because the first time the narrative structure was so strange to them they couldn't follow the story while trying to make head or tail of it. An artist may take great pride in his personal vision but is likely to starve if none can share it.

A immense portion of video games can be describe as 'shooting stuff' but most would see a vast gulf between Gradius V and Halo 2. I saw an article many years ago that made an argument that there were fewer genres than people realized. One example he offered was that platformers were only a subgenre of maze games. Rather than walls the maze is defined by open falls and gravity. Even so, most people would consider Lady Bug and Donkey Jr. to be extremely different games. It all depends on how the common narrative elements are applied.
 
I'm actually working on this merger. I don't mind telling you guys that I was going nuts knowing about this and not being able to say anything about it.

Of course, I still can't really say anything about it, what with attorney-client privilege and all. But it's interesting to read all your comments, anyway.
 
[quote name='CheapyD']Your numbers are way off...
High end games cost of game development/marketing is closer to $20 million.
Halo 2 cost $40 million to develop/market.

Also, most games do not "break even". Its a very low number percantage of games that make a profit. I believe its around 15%. Publishers make their money on the big franchises, just like record companies.

Learn more here:
http://www.businessweek.com/magazine/content/05_09/b3922094.htm[/QUOTE]

beat me to it...
 
[quote name='javeryh']Um, how about the shareholders of each company? You could see this coming a mile away - I'm actually surprised it took this long. Anytime you have two leading companies who compete against each other it makes sense to join forces in most cases but especially in this one. They really only compete against each other as video-game-only stores but they are each probably getting killed by other businesses in the area like Circuit City, Target, Walmart, etc. who can afford to take huge losses on inventory because they sell so much crap. Now maybe as one large company they will be able to compete on their level - who knows - this might actually lead to GameStop $5 clearance sales...[/QUOTE]

Not really. In terms of the primary profit centers, EB/GS are not in the same business as the video game sections of Wal-mart, Target, etc. The big net revenues at EB and GS are in used games, which the big chains mostly ignore. Without the used game business the dedicated game stores would likely have ceased to exist in the 90's. At least in the form of big chains. Mom & Pops can do alright on rentals by offering better choices than Blockbuster but it's one of those businesses you really have to like for its own sake to base your financial survival on it.

EB, GS, GR, GC, etc. exist to exploit a market in which many copies of recent games are in the hands of consumers who no longer want to play them when newer titles beckon. In this way they're structured to exploit the strength of the Wal-marts and Targets in the game business rather than try to compete directly.
 
I have the conference call up and going at the moment, so we'll see what happens. The 6-page Powerpoint slides are pretty interesting.
 
[quote name='shrike4242']I have the conference call up and going at the moment, so we'll see what happens. The 6-page Powerpoint slides are pretty interesting.[/QUOTE]

Jesus H., how many CAGers are working on this merger?
 
this is a mess....probably means less deals posted on this site.

If I were blockbuster, I would immediately order all blockbusters to convert to gamerush stores; at least the ones that are big enough to do so. Here in Dayton, we don't have a gamerush, which sucks, but one of the bb's within a few miles is a bigger store, so they can easily convert...

I don't know what the hold-up is :(
 
[quote name='evilmax17']Jesus H., how many CAGers are working on this merger?[/QUOTE]

I'm not working on it, just listening to the webcast. :D

The GS president keeps pronouncing EB as "Electronic Bo-tique", not "Electronic Boutique". :roll: :rofl:
 
NOOOOOOOO!!!!!!

I have to announce that this is obviously my fault for travelling 90 miles to my nearest EB Games just to buy a SAVER card to use online for CAG deals. This act undoubtedly caused the gods to laugh and smite me in the face, as they have done with some many other things I have loved.

That sucks. Allow me to pour out a bin of $5 Rygars for the dying.
 
This does suck, just the more reason to shop online elsewhere now. BTW i work at GS and doubt my job is in jeopardy, as if i really cared for my position, but i'll let you guys know.
 
Ok. my concerns:

EB still owes me about $115 in gift vouchers. (The store send these out for me, so corporate did not honor them. Now I have a DM working on it). What will happen here? How long will GS honor EB certificates?

EB and Gamestop were competitors. Ever notice how Gamestop would do a price drop and EB would copy the price? $4.99 Rygars, anyone. Kiss that goodbye.

My Gamestop started pricematching. EB still does an long as it's "Not Fry's" and "Not more that $5"... :(
 
The EB president has been stressing their international operations as 30% of their business, stressing their international presence multiple times.

Looking at the differences in the locations, EB has tons of locations in Canada, plus locations in Scandanavia, Australia and NZ, and other parts of Europe, where Gamestop has presence in UK & Ireland. GS doesn't seem to be overseas where EB is, and the reverse.

Interesting fitting into the places where the other isn't.
 
[quote name='CheapyD']Your numbers are way off...
High end games cost of game development/marketing is closer to $20 million.
Halo 2 cost $40 million to develop/market.

Also, most games do not "break even". Its a very low number percantage of games that make a profit. I believe its around 15%. Publishers make their money on the big franchises, just like record companies.

Learn more here:
http://www.businessweek.com/magazine/content/05_09/b3922094.htm[/QUOTE]

I found the info here http://news.pghtech.org/teq/teqstory.cfm?id=1276 a little bit later and let me tell you one thing. I'm man enough to admit my mistakes and I'll admit that you're right...in fact, it almost seems like the gaming industry could collapse at any moment... :bomb:


Sorry for talking out my ass, should of read the facts before jumping... :roll:

"The business model currently most widely in use (although there are exceptions) is based upon the music industry model. It involves the payment of development costs by a publisher and a back-end royalty payment once those development costs have been recouped from the royalty. Unfortunately for most developers, recoupment rarely happens. For example, assume a game cost $7,000,000 to develop (about average for a new console game) and a 20 percent royalty is to be paid to the developer. The retail price is $49 and the wholesale price is $32. The fees payable to the console manufacture, marketing and distribution average around $11. That leaves $20 to be split between the publisher and the developer. It would take a sale of 1.1 million units of the game to recoup and start paying royalties to the developer. While most developers are careful to build a profit margin into the "development costs" component, only a handful of game titles in any year will actually sell sufficiently to allow royalties to ever be paid to developers. Thus, at most, developers earn a modest profit. More often than not, however, developers are disappointed in the profitability of their game development efforts. "

Wow, thats pretty freaking scary, no wonder the only companies really getting sales anymore are EA, Ubi, and Capcom...freaking scary.
 
[quote name='shrike4242']I'm not working on it, just listening to the webcast. :D

The GS president keeps pronouncing EB as "Electronic Bo-tique", not "Electronic Boutique". :roll: :rofl:[/QUOTE]

Shrike2424, how do you see the slide presentation?
 
Less competition = bad for us. No good can come of this.

I just hope the new company takes mostly EB's policies for the website at least (stackable coupons, return .com purchases at the B&M, etc.) But keeping the GS name doesn't give me the warm fuzzies on that.

Hopefully GCs for either store will continue to work.
 
They aren't going to change the names of the stores until 2006 because they are going to take time to overview the numbers before making any big changes.
 
[quote name='cdeener']Shrike2424, how do you see the slide presentation?[/QUOTE]

It's on the right side of the window of the presentation, 6 Powerpoint slides. I'm using IE, which if you're not using, might be the issue.

Looks like I might've guessed right, looks like no real changes in 2005, theoretically, pending analysis. GS president keeps saying he'll try to find jobs for everyone, though as we all know, that doesn't happen too often.
 
[quote name='asaraa']I never buy used from GS, as they accept anything in any condition.[/QUOTE]
I've been denied by them a few times for scratches, though Gamerush accepts anything.
 
I always thought both stores were carbon copies of each other. I'm more interested in the Adobe/Macromedia merger which is in the news today. Thats too me is of a greater importance since I do a lot of graphics work.
 
Supposedly 175 stores in overlapping areas, with 52 of them with that have leases that should expire in 2005 and 1st half 2006.

I'm guessing those stores will probably get the axe, if I had to guess.

They just touched on used games, which they scooted by quickly.
 
[quote name='crystalklear64']How in the hell can a location be a swear word? :p Would you rather, "What the fuck!!! fucking no one is going to benefit from this!!!" :whistle2:#
[/QUOTE]

How the fuck can a procreational activity be a swear word?

The poster I was quoting was not referring to an actual vision of the afterlife.
 
They just said that they are going to look over the practices of each company and see how they can integrate these practices.
 
GS president said that they are "laser focused" on expansion in the US, though they may have been wrong in understating how much the international market can bring in.

With 214 EB stores in Canada, I think they're fixed there, as well as the other places where EB is at and GS isn't.
 
They're going to look at all the stores (not just the ones in overlap areas) and not do a "dramatic" amount of closings.

They don't expect any real price savings from the publishers, since they're both such big companies anyway.

They're saying that the publishers would look favorably on this as a broader platform for them to put their games into, in a nice synergistic fashion, with targeted marketing, such as the Hispanic market.

They also mentioned Gamer Group, a company that EB is affiliated with in UK & Europe, which supposedly is on the blocks, with EB & GS both looking at them for takeover potential. GS president is being evasive on talks of picking them up as a combined company, though it wouldn't surprise me if they did.
 
One guy asked about the combined company getting better pricing on selling, buying, or both, for used games, and they said not likely.

Gamerush and Gamecrazy were mentioned as competitors.

If they were going to be more aggressive on used games pricing vs. competitors, and they're saying that it's such a fluid market, they can't make any real concessions on pricing competition. They're thinking that the economies of scale on being a larger organization might help the pricing, though they're not looking at making any pricing changes.
 
I'm wondering how this will affect the online stores, because both stores have their strengths and weaknesses. For example...

DISCOUNT SHIPPING
EBGames has a SAVER coupon code that allows for free shipping on preplayed games only, while Gamestop has a FREESHIPALL code that allows for free shipping on used AND new games. Winner: Gamestop

CURRENT GENERATION PRE-PLAYED
EBGames guarantees a box and manual with their preplayed current generation console games (PS2, GC, Xbox), while Gamestop guarantees only the game disc. Winner: EBGames

COUPON CODES
EBGames lets you use your EDGE card to save 10%, and they have the coupon code PPLAY15 that takes an additional 15% off on preplayed games. These discounts are available every single day of the year. Gamestop offers no such discount except when they're having specials. Winner: EBGames

CLASSIC PRE-PLAYED
EBGames' classic games are reasonably priced at an average of about $5 each and updates their huge inventory on a daily basis. Gamestop charges about twice that and rarely has them In-Stock anyway. Winner: EBGames

OUT-OF-STOCK ITEMS
Gamestop lists all their games online, labeling some as In-Stock and others as Backordered. You can view prices on Backordered games, add them to your wishlist, and ask them to email you when a Backordered game comes back In-Stock. EBGames does not list Backordered games at all, which makes it impossible to view prices or add them to your wishlist. Winner: Gamestop

I hope Gamestop and EBGames can come with a winning formula for their new merged online store. As a customer who does most of his shopping online, I'd like to have the best of both worlds.
 
Maybe there will be a few sales coming our way with certain stores being closed down. There are 4 gamestop/eb stores in my mall so they'll have to liquidate some of that merchendise. That would be a good way to attract new customers and keep the old EB customers.
 
One very interesting question.

They were asked about showing how competitve their used game market is, and the GS president said that they weren't likely to do it, since they didn't seem to have competition in the market. Funny thing is that he just mentioned Gamerush and Gamecrazy, with Gamerush mentioned as having 9000 stores (!!!!!!) out there. 9000 Blockbuster/Hollywood Video stores, maybe?
 
Thanks, Shrike4242 for giving commentary of the conference call. It has ended. It lasts about 35 minutes. So any of you have 35 minutes to sit by the computer and have nothing else better to do listen to the conference call. Remember that this will be posted at the link until April of 2006.
 
[quote name='slidecage']Have they said what happens to people who have STORE CREDIT[/QUOTE]

Not a peep. And they're done with the call.

My gut guess is that nothing will change into the end of 2005, since I think it'll take them quite a while to get all the numbers reviewed, checked, and the like. I think the EB Edge Card and the EB Gift Card will be replaced by their GS counterparts, since the whole thing stressed GS well above EB on moving forward. I think the EB name is going to disappear and it'll be GS all the way.
 
[quote name='epobirs']Not really. In terms of the primary profit centers, EB/GS are not in the same business as the video game sections of Wal-mart, Target, etc. The big net revenues at EB and GS are in used games, which the big chains mostly ignore. Without the used game business the dedicated game stores would likely have ceased to exist in the 90's. At least in the form of big chains. Mom & Pops can do alright on rentals by offering better choices than Blockbuster but it's one of those businesses you really have to like for its own sake to base your financial survival on it.

EB, GS, GR, GC, etc. exist to exploit a market in which many copies of recent games are in the hands of consumers who no longer want to play them when newer titles beckon. In this way they're structured to exploit the strength of the Wal-marts and Targets in the game business rather than try to compete directly.[/QUOTE]

They are most definitely in competition with the Targets and Walmarts of the world and obviously, EB is the only other material competitor listed as a specialty store. Lifted right from their 10-K:

Competition

The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences and frequent new product introductions. We compete with mass merchants and regional chains, including Wal-Mart and Target; other video game and PC software specialty stores located in malls and other locations, including Electronics Boutique; toy retail chains, including Toys “R” Us; mail-order businesses; catalogs; direct sales by software publishers; online retailers; and computer product and consumer electronics stores, including Best Buy and Circuit City. In addition, video games are available for rental from many video stores, some of whom, like Hollywood Entertainment and Blockbuster, have increased the availability of video game products for sale.

I didn't see a breakdown of used v. new in relation to products sold (everything was lumped together) but I would think that if the sale of used games was their primary source of income they would call it out. In their Business Strategy section, the first thing mentioned is to be able to primarily focus on the electronic game enthusiast who demands the latest merchandise featuring the “hottest” technology immediately on the day of release. They definitely discuss selling used games but not as a majority money-maker for the company other than there is a greater profit margin for used games - but that one is obvious. They also have some forward-looking statements in there about wanting to grow their used games business but at this point in time I would doubt that it is the majority of revenue for the company.
 
[quote name='slidecage']Have they said what happens to people who have STORE CREDIT[/QUOTE]

Slidecage, you have up to 2006 to use up your store credit because they have decided to not combine stores until 2006. Now after that they didn't state in the call.

They will probably will honor it because at one point during the call they stated they were going to see how they could take the best practices from one and integrate it into the other.
 
This sucks, especially since I just started to buy games online.

But for B&M, Gamestop has been the better store in most cases.
 
[quote name='cdeener']Slidecage, you have up to 2006 to use up your store credit because they have decided to not combine stores until 2006. Now after that they didn't state in the call.

They will probably will honor it because at one point during the call they stated they were going to see how they could take the best practices from one and integrate it into the other.[/QUOTE]

The deal won't get confirmed/finished until Labor Day, anyway, according to the slides listed with the presentation. So, they realisitically couldn't do anything until 2006, easily. Maybe not even until mid-to-late 2006.
 
[quote name='shrike4242']The deal won't get confirmed/finished until Labor Day, anyway, according to the slides listed with the presentation. So, they realisitically couldn't do anything until 2006, easily. Maybe not even until mid-to-late 2006.[/QUOTE]

Thanks again, Shrike because I didn't have the slideshow viewed because of the settings on the Internet Explorer I use at work.
 
I'm sure they negotiated a win-win for both companies. No one can claim EB didn't gain anything out of this...watch their stock price jump today! The one thing I hate about the article is the GS rep claiming it's a win for customers. No way!!!! This blows for us big time. I guess we can just hope the new Gamestop had some good deals other than the 'Trade in 3 get an extra 10 Gamebucks' and the 'Buy 2 PO get 1 free'. Hopefully their trade in values don't drop off the face of the planet too. Thank goodness there is a FYE near me.
 
[quote name='javeryh']They are most definitely in competition with the Targets and Walmarts of the world and obviously, EB is the only other material competitor listed as a specialty store. Lifted right from their 10-K:

Competition

The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences and frequent new product introductions. We compete with mass merchants and regional chains, including Wal-Mart and Target; other video game and PC software specialty stores located in malls and other locations, including Electronics Boutique; toy retail chains, including Toys “R” Us; mail-order businesses; catalogs; direct sales by software publishers; online retailers; and computer product and consumer electronics stores, including Best Buy and Circuit City. In addition, video games are available for rental from many video stores, some of whom, like Hollywood Entertainment and Blockbuster, have increased the availability of video game products for sale.

I didn't see a breakdown of used v. new in relation to products sold (everything was lumped together) but I would think that if the sale of used games was their primary source of income they would call it out. In their Business Strategy section, the first thing mentioned is to be able to primarily focus on the electronic game enthusiast who demands the latest merchandise featuring the “hottest” technology immediately on the day of release. They definitely discuss selling used games but not as a majority money-maker for the company other than there is a greater profit margin for used games - but that one is obvious. They also have some forward-looking statements in there about wanting to grow their used games business but at this point in time I would doubt that it is the majority of revenue for the company.[/QUOTE]

Please, that is hardly the source for a company's honest self-assessment.

It isn't hard to works out. A new game selling for $50 has a profit measured in coinage after wholesale cost, location costs, utilities, and personnel are factored. Compare that to a game game purchased for $3 and sold for $15. Even after the operational costs you're still looking at a 400% margin vs. one of well under 10%. A fair stack of new games have to be sold to match the profits from a single used game sale.

The most profitable items in a highly competitive business can be surprising. The supermarket may push the haburger in their ad but the pack of gum picked up on whim at the counter can be the item with the highest margin on the receipt. Many eons ago, working in computer stores, we would have prices on printers that were competitive with the big chains and mail order advertisers. It was that or die. There were zero money in the printer sale. But the $3 box of paper we sold with the printer for $20 was very profitable, as was the cable. The big ticket item was there solely to make the customer need the other stuff, which is what made the business viable.

If EB and GS dealt solely in new games they'd have died in the 90's. There is a reason they started dealing in used games at that time. The pressure from big chain stores was overwhelming their strength in customer service. They noticed that many independents prospered solely on the used game market and saw the writing on the wall.

The problem is used products are regarded as a shabby business. If you ask a car dealer what business he's in, he'll show you his brand's flashiest new model. If you ask him where he makes his money he'll show you the used car section of the lot.
 
[quote name='the3rdkey']what the hell is the point of this merger and who the hell is it going to benefit?[/QUOTE]

That's what I'm wondering from the story, doesn't really tell who started the talks or who it'll benefit(although from the name, I'll say Gamestop). But this better not affect the 25% on preowned, otherwise I'll start shopping at Game Crazy.

It also better not affect EB selling SNES & NES games, cause I'll be pissed if they phase those out.

Those wondering that the stores might close, here's a weird one. When Gamestop bought Funcoland, which there was one of each in the mall I go to, they both stayed open. Check over the weekend and both are still open and the Funcoland store still has their name(supposedly they were supposed to switch to Gamestop), with Funcoland on the 2nd floor and Gamestop on the 1st.
 
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