GameStop Revenue Declines, But Shifting Business Model Holds Hope for the Future

While you were at home, busy playing your cocktail arcade machine, GameStop executives were desperately wishing you would visit their store and spend liberally. Their second quarter 2016 earnings dropped significantly, coming in lower than their predictions and falling below sales figures from last year at this time. Even though GameStop’s numbers didn’t come through for the company, the corporation isn’t losing hope yet. With a changing business model to adapt to modern gaming, they still have hope for the future.

Why the Drop in Revenue?

In the second quarter of 2015, GameStop’s revenue hit $1.76 billion. In the second quarter of 2016, revenues only reached $1.63 billion. For a company whose revenue is largely based on new games and consoles, GameStop’s revenue is heavily dependent on new developments in the gaming industry. One reason for the significant drop in revenue has been attributed to the fact that neither Activision Blizzard nor Entertainment Arts, two major game publishers, have released any recent blockbuster titles.

Also, since new consoles recently announced such as the Nintendo NX and Xbox Two set to release next year, gamers may be holding off on purchasing new titles and new consoles until the upcoming release dates.

Finally, game sales are believed to have dropped off because of the popularity of Nintendo’s Pokémon Go, boosting mobile game activity and reducing the need for a new console game purchase.

What Does It Mean?

GameStop has been preparing for this day for some time. The increasing popularity of mobile games comes as no surprise, and that’s why the company is working on steering their business model in a different direction, one that is not as dependent on physical game and console sales for success.

GameStop is diversifying by focusing on tech-brand sales, collectible sales and more. Slowly but surely, the revenue stream is shifting. Today, more than half of GameStop’s sales come from non-physical gaming products.

Still, will GameStop be able to shift as quickly as they need to in order to stay abreast of the dynamic and fast-moving gaming industry, or will they continue to suffer in decreasing sales over the next year? Only time will tell.