Microsoft Wants to Keep GameStop Around a Little Longer

Microsoft Wants to Keep GameStop Around a Little Longer

THIS WEEK IN BUSINESS | A new deal raises big questions about the present console generation and the future of gaming retail.

This Week in Business is a collection of stats and quotes from our sister site GamesIndustry.biz that sheds light on console sales, new trends, and more. Check back every Friday for a new entry!

This is supposed to be a business column, so let's talk business. This week it was confirmed that Microsoft completed a deal with GameStop whereby the retailer will receive of a cut of the money for every piece of digital content sold through an Xbox Series X or S console that was purchased at its stores.

We don't know how significant the GameStop share of those revenues is, but this is a wild reversal from last generation. Before the Xbox One launch in 2013, Microsoft was looking to undercut GameStop and its key used gaming business by any means possible, to the point that it allowed Sony to maintain the status quo and turn that into a thundering NBA Jam-style dunk on the Xbox One in its big E3 conference.

But now the writing on the wall is clear. The industry shift to digital is in full swing. The second-hand market has evaporated to the point that GameStop no longer even reports it separately. There's no shortage of titles with massive budgets releasing as free-to-play on the knowledge that the real money is in microtransactions, not upfront purchases (Call of Duty: Warzone, Apex Legends, Genshin Impact, etc.).

Used games are not the threat they once were, so a platform holder like Microsoft can look at GameStop as a partner rather than a parasite. And in that context, GameStop is a partner Microsoft might like to have around for a while longer.

I've written before about how I don't think the retailer's demise is an immediate concern, but I wouldn't have necessarily considered it a shoe-in to see the end of the Xbox Series X|S generation, either. The industry is inexorably headed to a place fundamentally incompatible with GameStop's traditional business model, and if it can't figure out how to adapt, it won't be viable much longer.

Microsoft no doubt sees this too, which might explain why it was willing to cut this unprecedented deal with GameStop. GameStop is unique among North American gaming specialty retailers, in large part because it still exists. There are regional chains and smaller outfits, but when it comes to nationwide chains in the US, it's basically just GameStop (and in Canada, GameStop-owned EB Games).

There are other stores to buy an Xbox—Walmart, Best Buy, and so on—but GameStop is the only place that specializes in games, that spotlights them 365 days a year, that has a business utterly dependent on the continued health of console platforms. So I get why Microsoft might be more interested in reframing their relationship.

That said, I wonder how other retailers will take this; whether Amazon and Walmart and the like insist on similar arrangements, and if Microsoft complies rather than lose the sizable chunks of the market they still command. I wonder if Sony and Nintendo will follow suit or risk having GameStop and its associates trying to sell Xboxes over PlayStations and Switches. I wonder if the Xbox fanbase and Microsoft's Game Pass strategy (where there simply aren't game sales to split proceeds from) made this move necessary for Microsoft to get retail support at all.

Maybe it's the years I've spent writing for a B2B trade website talking, but the next-gen console wars just got significantly more interesting.

STAT | 0 - The number of games in the Xbox Series X|S launch line-up which aren't appearing in some form on the Xbox One.

QUOTE | "Indeed, Sony, Nintendo and Microsoft all operate similar walled gardens or closed platform models as Apple, whereby the hardware, operating system, digital marketplace, and IAPs are all exclusive to the platform owner. As such, a final decision should be better informed regarding the impact of the walled garden model given the potential for significant and serious ramifications for Sony, Nintendo and Microsoft and their video game platforms." - In a response to Epic's arguments in its case against Apple, Judge Yvonne Gonzales Rogers points out an Epic victory here could lead to console makers having to radically reshape their own businesses.

STAT | 6 - The number of new releases in the NPD Group's September Top 10 Best-Seller chart. Marvel's Avengers took the top spot in a month that saw industry sales up 10% year-over-year to $4.31 billion.

QUOTE | "Indeed, FIFA 21 has the lowest critical average of any game in the franchise since Metacritic started keeping track with FIFA 06. The days of the series consistently rating around 90—as it did from FIFA 10 to FIFA 13—have long since passed, and this apparent dwindling of goodwill among both critics and players should be of great concern to any publisher." - GamesIndustry.biz editor-in-chief Matthew Handrahan takes a closer look at FIFA 21's reviews and the concerning critical decline of the series.

QUOTE | "We're in year one, so we'll be supporting it for some time. But yeah, it does have its own 10-year life cycle. All of our platforms do... it's a marathon, not a sprint. We expect long-term success from all our platforms." - Sony's John Koller, talking in 2012 about the Vita, which launched that year, died an ignoble death with embarrassingly little support from Sony, and is so dead just eight years later that Sony is removing the option to even buy Vita digital content through the PC and mobile PlayStation Store.

QUOTE | "Alliance co-owner and CEO Jeff Walker will hold those same roles at GameFly going forward, even though Alliance has said the rental service will continue operating independently." - A line in this story about rental-by-mail service GameFly being acquired that baffled me when I wrote it and continues to baffle me now.

QUOTE | "We try to deliver for what's [possible] today, and that's really important from a games standpoint because the fantasy of the future is irrelevant to a person wanting to play a game." - Velan Studios co-founder Guha Bala talks about the company's approach to augmented reality in Mario Kart Live: Home Circuit.

QUOTE | "We believe it's important in an industry to have knowledge be accessible and not locked up in vaults in certain countries and behind ticket prices. That kind of gatekeeping cuts a lot of people that could most benefit from that access to knowledge, and making knowledge accessible to the many instead of the few will make our industry more diverse and inclusive." - Myriame Lachapelle explains why she is working with Rami Ismail to produce Keycard Workshops, a cheaper alternative to the Game Developers Conference's Masterclass courses, which the company announced this week will cost attendees $999 plus tax.

QUOTE | "..." - Yo-Kai Watch and Ni No Kuni developer Level-5, which ignored multiple attempts to confirm the news that it had virtually halted operations in North America.

QUOTE | "I experienced a moment of clarity. Either they couldn't see what was in front of them or wanted me to feel bad because it's the only way they knew how to manage." - In a thread about seeing a 2012 prototype he worked on for a Golden Axe game suddenly released on Steam, former Sega Studios Australia developer and WitchBeam co-founder Tim Dawson shares a story about one of the many kinds of terrible leadership we see in the games industry.

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Brendan Sinclair

North American Editor

Brendan joined GamesIndustry International in 2012. Based in Toronto, Ontario, he was previously senior news editor at CBS-owned GameSpot in the US.

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