During the first three months of 2010, GameStop (NYSE: GME) made $2.08 billion. That’s an astronomical sum of money for a company that sells videogames and nothing else. Of course, GameStop made all that money by getting you to pay almost full retail price for used products. GameStop has found success in the retail videogame world by convincing you that you’re saving a few dollars by giving them your old games, for a fraction of their resale price, while simultaneously convincing you to buy another customers ‘pre-loved’ merchandise.
It’s ingenious, and it’s going to keep working. That is, until videogames stop coming on discs and Blu-rays and go digital. The purely digital age is coming soon too; the NPD Group reported just last week that 48% of all PC games sold in 2009 were download only. How is GameStop going to make $2.08 billion when they don’t have any games to sell you? By getting into the web browser game market and, rather than build their own cut-rate imitation, GameStop has decided to aim for the top. Today, they acquired Kongregate.
For anyone unfamiliar, Kongregate.com is a website that hosts thousands of games built in Adobe Flash, letting users the world over play the games right in their web browser. Kongregate hosts games made by established web game publishers and independent game designers alike, catering to a massive community of players and game designers who freely interact with one another. Kongregate’s revenue model also takes its cues from almost every type of web game portal out there. They have a healthy base of advertisers — Stride gum recently sponsored an event for the site — in addition to selling virtual currency called “Kreds” that let players purchase new items in games they can play for free. There’s also the “Tip Jar” that lets users pay game designers directly for their work.
Jim and Emily Greer, the founders of Kongregate, represent some of the finest, forward-thinking minds in the videogames, on both the business and the creative ends of the industry. With videogames becoming an increasingly social endeavor free of physical products, they represent the future while GameStop and their seamy business model represent the quickly fading past. This acquisition, which goes into effect August 1, will either mark a promising new future for the retail giant or the end of one of videogames’ great outlets on the world wide web.
As of this writing, Anthony Agnello did not own a position in any of the stocks named here.
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