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abulia (21.52)

Gamestop....

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April 04, 2013 – Comments (2) | RELATED TICKERS: GME

So, can someone explain to me the incredible (near 50%) short interest in Gamestop? I really don't understand.

 I saw this awesome chart in The Economist that showed the prevalence is digital downloading. It's something like 50% for all video games, whereas its about 20% for movies and TV shows.

Gamestop might be in for a big shift in where its revenues are derived, but I just can't see the comparison to Blockbuster. If Gamestop's Pre-owned game revenue went to zero today, a fair estimate for the stock would still be around $17 per share (which is why I bought it around $17). I think anyone who thinks that their storefronts will be a burden instead of an asset just doesn't understand how much some customers appreciate being able to bring their children to a store, have them choose a game and take it home. Even if it's just a card with a digital download code on it. 

It just looks like a bunch of people are asking to get squeezed.  

 

2 Comments – Post Your Own

#1) On April 04, 2013 at 6:08 PM, chk999 (99.97) wrote:

It looks like the next gen consoles (PS4 and xBox 720) will contain measures to prevent re-selling used games. This knocks a big hole in the Gamestop story, as Amazon has to have a lower cost structure for new games.

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#2) On April 08, 2013 at 2:34 PM, abulia (21.52) wrote:

I agree about the used game issue. Used games have a huge margin and they are decent chunk of Gamestop's revenue. They also help drive sales of new games because if you traded in some old games at Gamestop you arent going to buy the cheaper Amazon stuff. 

But people were saying Gamestop was doomed and shorting it at $17. There is more to the company than just used games...also...

There is no guarantee PS4 and Xbox will both decide to stop used game sales. If one system turns out weaker than the other, the weak system can easily get a big boost from allowing used games.

Its interesting that corporations have decided to do something that their customers explicitly do not want. It seems like a terrible long-term strategy. A competitor who can find a way to give customers what they want will eventually appear (assuming capitalism isn't a joke). 

 

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