Hello there, sorry for the haphazardness of this one. My original idea turned out to be a bit trickier to write about than I had expected, so I've spent the weekend looking for something to write about that might have enough interest and worth to the internet to really consider discussing. It's a relatively slow news day and I've not got any relevant topics to really discuss.
Then of course I read the news about how Game Group Ltd's has had 95% of its stock value completely wiped out, primarily because of how damaging the fact it will not be stocking some of the biggest selling games of this year, including Mass Effect III, Street Fighter X Tekken and Mario Party 9. Because of the largely confidential nature of business and finance, I will try to avoid going the straightforward route and calling Game allergic to money. Because some facts need to be made clear before we lunge at Game with the sporks and runcible spoons.
First of all, their argument is that negotiations with EA have soured due to “unreasonable credit negotiations” which in layman's terms means EA was trying to flog them wholesale for a price they'd never be able to profit on. I've heard in the ballpark of £40 or £45 for Mass Effect III but I'm not entirely sure whether that means for the vanilla version or for the limited N7 Edition. In any case, it would have led to Game ending up in an even tighter pinch than they already were last year, already being tightly pincered in between online suppliers (who can sell them cheaper due to not having to pay for shops etc) and supermarkers (who have such massive profit margins they can get away with selling them for chicken feed as loss leaders to get people into the shops) so they declined, pissing off EA who refused to supply any of EA's March releases (which included Max Payne 3 and Mass Effect III), so that wiped 20% off their stock value; this was followed by Nintendo refusing to stock Mario Party 9 for similar reasons and later Capcom joined the group.
Now, for non-gamers, this is like a music store pissing off Warner, EMI and Sony music in one go, or a book shop pissing off Penguin, Routledge and Scholastic. It's not inherently fatal, but your profitability is going to suffer invariably, not just in terms of losing a vast swathe of very lucrative sales; even if the companies were going to force the games to be loss leaders, the amount of merchandise, strategy guides and whatever else would help to balance the gap. In fact, Game has worked hard to modify their business model in favour of enhancing the profitability of a single purchase (also known as the Bobby Kotick business model after he had the gall to boast that he'd turned a single $40 purchase into a $200 one) and so while still feeling the pinch, the company might still get through with various rethinks. Instead, it made the choice to annoy one of its main suppliers and is paying through the nose for it: their stocks have nosedived, the company's a pariah to the gaming community (who never liked the way it treated them as idiots to begin with) and without the latest stock of games chances are they'll easily lose the casual market they tried so desperately to court. More importantly it'll shatter the myth that just because you have a monopoly you're here to stay.
The Game we know and loathe formed from the purchase by Electronics Boutique (the name licensed from the American company EB Games) buying out its competitor at the time (the Game that wasn't actually that bad if you got to know it). This led to a monolithic Game store that pretty much had two or three stores in every town you could think of. The purchase of various overseas game retailers also helped balloon the relatively small fish's ego and led to a business model that essentially consisted of buying out any potential competitors, leaving only the small independents left. With the purchase of Gamestation before it could really get going, it looked like nothing could stop Game from buying out any other potential national competitors. With a bigger company came bigger hubris, and it seemed for a long time that nothing could go wrong with the company. Until of course a lot of competitors snuck around it, and Game with it's antiquated business model and predatory tactics, couldn't adapt when the tide turns.
The real tragedy of course (along with the poor employees losing their jobs) is the loss of the dedicated games shop you could walk in and have a discussion about games with. Online stores won't quite have that and I somehow doubt you'd be able to talk games with too many of the staff at Tesco unless you know them out of hours. Hopefully the lessons learned from this and the countless other casualties of old guard corporations; a company can go from perfectly healthy to on the brink of collapse on the basis on one critically bad decision.
Stay safe and hug it out!
Huggy Dave
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