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GameStop will fund unique DLC, won't hinder creative process
GameStop CEO Paul Raines does not deny the company's plans to pay developers to create GameStop-exclusive content for their games, but he does point out that the retailer will not interfere with the artists, writers and designers building the core game content. "When you think about the business of gaming and the cost of developing games, we think there's an opportunity to put capital at risk with publishers and developers in exchange for exclusive content that would be distributed through our online platforms, in stores, our download business, et cetera," Raines explained to Time, before being asked about the immediate backlash against the idea of GameStop dictating a game's development once it's partially funding development. "I think we'd be foolish to tell developers how to develop games or publishers how to bring product to market. That's what they do extremely well. What we'll do well is put capital at risk and help distribute and connect with PowerUp Rewards customers." "I think the day you see us in the creative side is when you can tell me we've officially lost our minds," Raines added. [Image: Ubisoft]
Gamestop pondering a move into vintage games
GameStop CEO Paul Raines is planning on adding a vintage games store to the company's online offerings. The outlet has been amassing warehouses full of classic titles that were traded in over the years, and the chief sees a "sales opportunity" in going toe-to-toe with sites like eBay. There are still several problems to overcome, including conditioning, sourcing and refurbishing the hardware abused by our younger selves -- but at least we might be able to replace our busted SNES controllers without worrying about getting outbid at the last minute.
The Engadget Interview: GameStop CEO Paul Raines talks tablets, OUYA and the MVNO that never was
Looking to unload your unwanted gaming gear? You're probably on your way to GameStop. As the largest dedicated video game retailer in the world, it's hard to imagine a games enthusiast who hasn't browsed its wares a time or two. Over the last few years, however, the firm has been expanding outside of retail sales -- dipping its fingers into digital distribution, streaming and even phones and tablets. The brick-and-mortar store even seemed to be flirting with building a mobile network. With all these changes underfoot and a new console cycle just around the corner, it seemed like a good time to catch up with GameStop CEO Paul Raines to get some perspective.
GameStop details a bright (profitable) future with DLC
During today's presentations at the 18th Annual BMO Capital Markets Digital Entertainment Conference, GameStop head chairman Dan DeMatteo (alongside CEO Paul Raines, CFO Robert Lloyd, and investor relations director Matt Hodges) spoke to the future of the top video game retailer in North America. After detailing cannibalistic markets (terrifying!) and market share (isn't business about taking, not sharing?) for 25 minutes, the crew finally got to the Q & A session, where one audience member stood up and asked DeMatteo to clarify GameStop's DLC distribution agreements with Microsoft and Sony. "I won't get into the details of the agreements, but obviously we get paid for selling the digital content. We get paid less than what we would get paid for a typical new game [retail game], because we don't have inventory carrying costs, shipping costs, etc. But needless to say, we believe it will bring operating margins similar to new games," he responded, indicating a perhaps unsurprising low return on in-store DLC sales. Still, DeMatteo sees good reason for continued sales of digital content. "We see it as additive. It's additive for us. It's additive for Sony, for Microsoft, and it's additive to the publisher. The amount of add-on content now being developed for the big games is just phenomenal. You got a new level coming out for Halo: Reach in December, we have new Call of Duty map packs coming after launch, etc. We look at our ability to sell that to the original consumer -- given that we know who bought the original copy -- to be extremely strong," he explained, referring to his company's ability to track individual customer's purchases via the Power Up Rewards card. And in the coming years, GameStop intends on becoming a much larger player in the digital realm. We expect to have market share of DLC much like we have market share of boxed product," he assured attendees.
GameStop CEO: 'Users still want physical content'
While bullish on the subject of our impending digital future, GameStop CEO J. Paul Raines isn't totally blind to the new options available to consumers purchasing games. "The world won't be all digital tomorrow," he told TheStreet.com in a recent interview, "even though that's what people are claiming. In this business, users still want physical content." He does, however, offer up one initiative that GameStop has loosely detailed in the past: a new in-store download option, spawning from a partnership with Microsoft. "The strategy is to be a multi-channel aggregator for gaming. We want to be the destination for gamers, whether they are getting content via online, mobile, console or any other platform," he added, also championing the still nascent rewards card program as helping to keep customers returning to stores into the future. And just as Raines isn't worried about the disappearance of brick and mortar stores, he's similarly unphased by the competition in the used games space. "There is competition out there that likes to dabble in this segment, but I'd like to remind people that we have seen this many times before. Both Walmart and Best Buy have launched and canceled programs [TheStreet points out that Best Buy is still in the used games business]." But with the relatively dramatic increase in digital distribution over the past few years and enormous hard drives connected to most of our consoles (and even handhelds), not to mention a recent NPD report indicating a closing disparity gap between retail and digitally distributed PC games, we have to imagine that the company's digital efforts are expected sooner rather than later. If it will be soon enough remains to be seen.
GameStop's Zork 'customer acquisition engine' experiment was a success
The free-to-play browser game Legends of Zork has been a bit of an experiment for GameStop. The retailer has promoted the free-to-play browser game both in-store and online as the major title in its "Free2Play" service. It hasn't just been an experiment in offering online content to customers -- GameStop has also used it as a testing ground for promoting specific games. "Targeted customers received free in-game play cards with purchases at GameStop and they used the codes on cards to enter the game site online," explained COO J. Paul Raines in yesterday's investor call. "The results were that we added a large number of new game players to Legends of Zork, roughly doubling the audience of that game in four weeks. Our customer acquisition costs were significantly lower than advertising driven customer acquisition, and it is clear to us now that stores can efficiently convert online game players and provide a multi-channel gaming experience." Later, in response to a question about the growth of web-based games and its effect on GameStop, Raines called GameStop stores a "customer acquisition engine" for specific online games, as proven by Zork. GameStop's idea appears to be to earn revenue by promoting online games in stores -- and then possibly sell DLC cards. If it can do those things, it has nothing to fear from browser games.
GameStop isn't worried about Online Pass
EA and THQ are looking to slow used game sales with the EA Sports Online Pass and THQ's unnamed, similar program for UFC Undisputed 2010 -- codes included with new copies to unlock online play and other features, forcing buyers of used games to pay extra for that access. GameStop, the company who would stand to lose the most from this, doesn't seem upset at all. For one thing, CEO Dan DeMatteo offered a supportive quote in EA's announcement of Online Pass. COO J. Paul Raines explained why GameStop isn't worried about the Online Pass program in an investor conference call. "We support the creation of added downloadable content for popular franchises," he said, "as we see that as extending the life of titles and broadening the base of game players." He went on to explain that the proportion of used game buyers playing games online is low, and that "as it grows, our proprietary models will manage trade and sale pricing to reach margin goals." In other words, if used game sales drop, so will the prices. Raines then compared the Online Pass program to another recent high-profile download, the Modern Warfare 2 Stimulus Package, which "ave us an opportunity to promote DLC in-store on a popular franchise, and we are pleased with the results." Raines said that GameStop leads in market share on DLC cards, and experienced increased demand for points cards during the Stimulus Package launch. Basically, as long as people don't figure out that they can buy DLC and points from home more easily than from GameStop, the retailer's business is secure.
GameStop to offer in-store DLC purchases and new loyalty program this year
GameStop knows how sick you are of those silly, antiquated, digital ways of purchasing your downloadable content, and company COO J. Paul Raines has a solution: buy the content in stores! During today's quarterly earnings call for investors, Raines detailed the new system, as well as the previously discussed customer loyalty program. "We've been working on the technology for DLC for well over a year," Raines said, "and I think what's important to understand is that we've had to create proprietary point of sale technology in partnership with Microsoft to be able to show that DLC catalog at retail. We're also working on merchandising and marketing the DLC content in our stores. So this is something that we feel like the industry is moving our way, and our investments are starting to really be timely and publishers see us as the destination for sale of DLC in stores." Raines also noted that the in-store DLC program will be launching in 35 locations this spring with a "limited catalog," and then adding "select titles and SKUs over the course of the summer." A nationwide roll out is planned for the fall. Also launching nationwide this fall will be GameStop's new customer loyalty program, which will be tested in four regional US markets beginning in May. Raines declined to name the test markets, saying only that we'll "have to wait till May 28 to find out".
GameStop rewards program launching this May in 'four markets'
[The Master Shake Signal] Ever heard of a French gaming chain named Micromania? Yeah, neither had we until this morning's GameStop conference call, where the game retail giant's CEO J. Paul Raines specifically cited the (GameStop-owned since 2008) franchise for its member loyalty program ("MegaCart") and the success it's had in Europe. "We believe that the loyalty program at Micromania drove some of the highest sales per store in Europe that we've seen, so we think it's a very effective program, and that's the base for what we added to our existing loyalty program here at the Edge," Raines said, confirming the rumored plan to add a customer loyalty system at GameStop. When asked about when the new loyalty program would start rolling out, Raines stated that it'll be arriving this May in "four markets" (which could be anything from entire regions of the US to specific states or anything in-between -- we've followed up for clarification). So what can GameStop consumers expect from this new loyalty program? Not many details were given, but a few speculative ideas were offered. "Ours will have different rewards, it won't be purely a markdown program that gives you discounts once you reach a certain threshold," Raines said, adding, "It will also have unique rewards like tickets to shows and early entrance to midnight launch, etc." No mention was made of how this will effect those of you with current Edge card subscriptions, nor if this new rewards program will be separate altogether. We've contacted GameStop corporate for clarification and will update this post if we hear more, but for now you can read Raine's entire statement after the break.
