The Rise And Fall (And Rise) Of GameStop

[Music] gamestop has been a key player in the video game industry for over two decades born at a time when brick and mortar retail reigned supreme the store emerged as the go-to destination for all things games thanksgiving game stop worrying about your game this is stephen i may help you since then the company's struggle to go digital and some questionable investments have brought it to the verge of collapse people download all their games now so we're kind of like i don't know what do you call it uh a dying business yeah that's it that is until traders on the reddit forum wall street bets decided to gamble on the ailing video game retailer and raise its stock 1700 in january alone but will the sudden surge be enough to save gamestop [Music] what started out as a software retailer called babbages etc in the 1980s had become a video game hub by the late 90s and as the industry grew the company established gamestop a brand entirely dedicated to gaming in this era of malls the store thrived it served as a cultural touch point before there was an internet before there were forums or reddit or whatever else to interact with other people who played games gamestop became not only a place to buy the latest releases but also to hang out with fellow gamers it was a really important place for that uh however brief even if it was just like arguing with the clerk about the latest new games how did you even know i'd be here oh a guy at gamestop told me within a year bookstore giant barnes and noble acquired babbages etc and funko inc in two deals totaling 350 million dollars you stay at funko land and i'll be back in five minutes [Music] and over time the 400 remaining funko land stores turned into game stops the brand grew further with the launch of a trade-in program which allowed customers to sell back old games for credit get more than you ever imagined when you trade your games for something new at gamestop by the end of 2001 gamestop had surpassed 1 000 stores that was shortly after sony and microsoft had released the ps2 and the xbox the video game war heats up on thursday when microsoft xbox goes on sale in the us and gamestop rode the wave the company finally went public in 2002 and raised 325 million dollars in its initial public offering from then on the company's fortunes would be dependent on console releases you can look at their stock across the last 20 something years and see the rises and fall with the launch of different game console generations gamestop became an independent company in 2004 and used its newfound freedom to buy rival eb games for 1.44 billion dollars officially making itself the biggest game store chain in the world by 2005 the two businesses had over 4 400 locations worldwide it makes choosing video games easier no matter what their age soon stores began regularly hosting major events to coincide with new releases halo 3 for a lot of people i think is thought of as one of the biggest ones there was so much hype there were celebrities and it was very exciting and there's people lined up for days or weeks ahead of time i have friends from out of town and i want to show them a good time but i'll probably end up getting sucked into the world of halo and lose all my friends [Music] the year was 2007. gamestop was thriving and its stock closed at an all-time high the company continued to expand its international presence the following year by acquiring micromania france's leading video game vendor for 700 million dollars but the tides began to turn in the early 2010s when competition surged amazon best buy and other retailers introduced their own trade-in offers as the industry began shifting to digital gamestop started selling downloadable content in stores making it the only brick and mortar retailer to do so what we want to do is use our stores use our expertise to help drive us into the digital space but those efforts fell flat as more game makers launched their own digital download services removing gamestop as the middleman people who like to play handheld games and don't really want to invest hundreds of dollars and hours into hardcore consoles are going to the internet they're playing on their phones they're playing on tablets online competition continued to grow when a developer called zynga launched games like farmville and cityville directly on facebook gamestop investors saw them as a threat well zynga due to gamestop what netflix did to blockbuster then in 2013 when the playstation 4 and xbox one launched with improved digital storefronts and faster download speeds gamestop strategy was exposed even further it was like oh this is clearly the future is downloading this stuff and gamestop didn't respond to that instead it bought two new retail businesses spring mobile and simply mac the brick-and-mortar gaming retailer proving it's anything but an aging dinosaur with big successes in the very lucrative mobile market now but that soon became an expensive liability instead of investing in what would have been a good idea at the time investing in digital services and having a digital platform they instead invested in businesses that had really nothing to do with video games the launch of the nintendo switch in 2017 wasn't enough to stop the fall of gamestop which closed more than 150 locations that year alone another game changer was the arrival of free multiplayer games like fortnite it amassed 125 million players in under a year and gamestop could do little to monetize this phenomenon apart from the sale of headsets and controllers it was clear the gaming market had moved away from malls and gamestop's shares dropped to a low of 15.85 by the end of the fiscal year the sale of spring mobile in 2018 failed to turn gamestop's fortunes around and instead left it drowning in debt and after failing to find a private buyer its stock price crashed at this point gamestop still had over 5800 stores across 14 countries by april 2019 the company announced a record-breaking net loss of 673 million dollars despite appointing a new board of directors share prices continued to slide into 2020 until they hit a new low of 3.18 just before covid19 rocked the us as a bunch of competitors had been moving to online gamestop was sort of languishing especially once the pandemic hit gamestop announced it would close a thousand stores within the year but online sales surged over 1500 in april shortly after lockdowns began because of just people being at home and playing way more games and also two consoles launched last year the highly anticipated release of the playstation 5 and xbox series x was the shot gamestop desperately needed it had just come under fire for deeming itself an essential business and staying open amid the pandemic reportedly telling employees to tape plastic bags to their hands as protection by the fall reports surfaced that the company's biggest individual investor ryan cohen the co-founder of chewie had ambitious plans to rival amazon he sent a letter to gamestop's board of directors saying hey i think this is a great company i think it could be much much better cohen's desire to move away from a brick and mortar retail model boosted stock prices but soon the company's value would spiral out of anyone's control in january after a group of amateur traders on reddit noticed that big institutional investors were betting on gamestop's stock price falling known as a short sell they started buying shares encouraging others to do the same the plan worked shares skyrocketed to an incredible 483 dollars you know for them that was that was a victory and they've shown that they can beat wall street its own game but while investors may have made some quick money gamestop itself wasn't able to benefit from the rally the bubbles soon burst but then in late february another trading frenzy saw share prices jump once again even monitoring wall street bets it's hard to tell where people's heads are at as far as game stops long long term trajectory but if they can pull off this turnaround gamestop can be worth way more than it's worth right now and maybe this can revitalize the company gamestop still has nearly half a billion dollars in debt and over 5 000 stores around the world the company is hopeful that by hiring amazon's matt francis as chief technology officer it may finally have a roadmap for survival in a digital world [Music] [Music] you

Channel: Insider Business

Views: 220,596

Keywords: Business Insider, Business News, game stop, video games, stock market, money, retail, reddit, wall street bets, nintendo, play station, xbox

Id: FhtYbqUsVoY

Length: 9min 52sec (592 seconds)

Published: Wed Mar 03 2021