Has UK retailer, GAME, lost all its continues? Is it Game Over for buying video games offline altogether?

Tough Times

It's a tough economic time for everyone right now, and even though the videogames industry was initially labelled 'recession proof' due to the typically high disposable income of its primary market, that turned out to be far, far from the reality. Over the past years, we've watched great studios and publishers buckle and fade out of existence. Even Sony and Nintendo are facing massive losses on such a huge scale that Sony is having to rebuild its management and business strategies, while Nintendo made one of the most drastic cuts to a console's price tag in the history of the industry just a few months after the 3DS launched and face the prospect of having to rebrand and relaunch the Wii's successor in the wake of the 3DS's initial failures. 

Probably the worst hit of all, though, is the retail sector of the industry. In the UK, it's been a quietly ignored problem for a long while. Since the 90s, GAME have been consolidating a monopoly - buying up the competition of EB Games and Gamestation - to the point where, today, buying videogames on the British high street is effectively a choice between GAME or HMV. Both companies are in huge financial difficulty as the public moves to the cheaper arena of online sales and the reality is that sooner, rather than later, you may not be able to buy a new videogame on your high street at all. 

Today, the Playstation Vita launched in the UK, and GAME announced just hours ahead of the launch that they would not be stocking any of Ubisoft's launch titles in any of their stores - because they just can't afford the stock. Last week, at Tekken 3D's launch, GAME had to cancel pre-orders for the same reason. These are big name titles, and this is only the start of these troubles for the retailer. Could we even be seeing GAME in a position this year where they can't even secure stock of the next Call of Duty game? Could they survive that? 

How has it gotten so bad?

GAME owns an effective monopoly on specialist video game stores. There are a few smaller brands, and some independent stores - especially in the larger cities - but, for the most part, if you buy videogames in the UK from a specialist store, you are putting money in GAME's hands. So, why are they in so much trouble?

One major problem is used game sales. In reality, GAME makes far more money per sale on a pre-owned title than they do on a brand new game sold. Even at half the price of a new sale, that pre-owned title is likely still making double the profit. This has led to an increased prominence on preowned games in the stores, and for GAME to have gotten greedy. It's a well known secret that GAME pressures publishers into paying more money for more floor space in their shops. It's an understandable practice, but you also wouldn't struggle to understand the position of a company like Nintendo when it refuses to pay out while GAME are just going to push the pre-owned title over the new sale at the till anyway. This breeds a vicious cycle that has led us to the point we're at now - where most GAME stores feature a very thin selection of new titles for sale, but an awful lot of preowned titles.

This may seem like a perfect business model - hell, it's what makes Gamestop in the US tick over day to day - but publishers have begun fighting back. Collector's editions, online pass codes and bundled DLC codes all encourage consumers to make the extra effort to purchase new rather than preowned. We're not made of money, though, and if the onus is on us to not look to make our savings in buying preowned, then we'll look to make that saving elsewhere - and that's where the Internet comes in.

Getting around certain taxes by shipping from offshore warehouses, and being able to save costs in terms of storefronts and staff, websites like ShopTo.net, Amazon.co.uk and Play.com have not only managed to secure plenty of exclusive deals from publishers, but do so often at sometimes up to as much as £15 less than what GAME and HMV ask for - even on their own online stores. Combined with generally fast and safe delivery (to the point where it's not unusual to get pre-ordered titles days before their street launch date), gamers are flocking to the Internet to buy their wares. Especially in the UK, where a recent report determined that 77% of UK shoppers preferred to buy Books, CDs, DVDs and Games online, 12% more than the global average. 

GAME and HMV, however, are being squeezed on both sides. On the one hand, the online sector is proving as strong as anyone should reasonably expect in today's world. But on the other, in the land of the physical sales, the big supermarkets are clamping down on the entertainment sector by selling at a loss and recouping the costs from people spending their money elsewhere in the shop. This came to a head at last year's 3DS launch, when GAME were caught out buying 3DS bundles from Tesco to sell in store as pre-owned because it was so much cheaper than even just buying the stock directly.

One final note to consider is that both GAME and HMV were - prior to the global recession - enjoying a fantastic honeymoon period in the market. GAME built its monopoly by having the money to spend. They bought their competition and expanded across not only the UK, but throughout Europe and Australia as well. HMV were doing so well at one point that they even purchased Waterstones and built up their own monopoly in that market over the space of a decade. But then the credit crunch bit down hard. HMV had to sell off Waterstones and close down many of their stores - even at a time when they should have been doing well off the demise of their largest competitor Zavii.

GAME have been closing hundreds of stores over the past couple of years, there's talk about shutting down entire operations in certain countries (not the UK, but across Europe) and - the biggest of their troubles - last month, their credit insurance was declined, placing significant pressure on their ability to secure new stock as publishers begin asking them to pay up front with money they simply do not have. It's this problem that has led to GAME's failure to secure big name releases such as Tekken 3D and Ubisoft's Vita launch titles, and it's not a problem that's going to go away. 

Both HMV and GAME are facing hugely uncertain times. They made huge multi-million pound losses in the last quarter - the one quarter they should be doing the best in - and their stocks are tumbling. Some are claiming that both companies are circling the drain, with bookies offering 11/10 odds that HMV will fall into administration this year. 

Should we care?

In a sense, this is merely capitalism at work. GAME and HMV are failing to be competitive in terms of pricing, and new digital markets are overtaking them in a sector that's moving faster and faster towards 100% digital distribution anyway - threatening to make shops dedicated to selling any entertainment goods utterly obsolete. The market is evolving and the consumers are moving towards the best value deals and freshest offerings. 

Still, how many of us just automatically nip into GAME and HMV while in town purely for a browse, if nothing else? How many of us have impulsively bought a game or DVD that we didn't even realise we'd want - just 'cos it was there and we had the money in our hands? High street shopping is an experience and a past time as much as a perfunctionary activity. We're slowly losing that on all fronts to big supermarkets and online shopping - but something about losing it for video games just brings it home. GAME and HMV may not offer the best value for money, but they do provide a complete consumer experience that the industry will effectively completely lack in this country if they tumble.