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No Reset Button for GameStop

GameStop NYSE:GMEBy Bryan Perry, Cash Machine

Video-game retailer GameStop’s (NYSE:GME) days are numbered. The causes are legion, but the result is the same: GME is going the way of the dodo.

First, one would expect holiday sales of a game retailer to be upbeat, with the release of a number of new game titles like Call of Duty: Black Ops II, Halo 4 and new game consoles like the Wii U. Not so. Sales for the holiday season fell 4.6% and the company said same-store sales will decline by 4%-7% going into 2013. Simply put, the industry is in a secular decline now as gamers adopt streaming. Those who are buying games are doing so from Amazon (NASDAQ:AMZN), the 800-pound game-over dominator.

It’s not that GameStop isn’t addressing the downloadable digital market. It is, but 70% of sales are still derived from new and used disc sales. In addition, game makers like Microsoft (NASDAQ:MSFT) and Electronic Arts (NASDAQ:EA) will likely shy away from paying a middleman to market new releases, preferring to sell directly to consumers.

Toss in the fresh new wave of anti-violence sentiment in video games following the Sandy Hook massacre, and the makings of a true casket company the likes of Blockbuster are in the offing.

Shares of GME may trade at $23 today, but by 2020 this company will be off the board.

At the time of publication, Perry had no positions in the securities mentioned.

Article printed from InvestorPlace Media,

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