GameStop Q1 Profit Declines 52%; Company Names Interim CEO

GameStop May 31 reported first-quarter (ended May 5) profit of $28.2 million, down 52% from profit of $59 million during the previous-year period. Revenue declined 5.4% to $1.9 billion from $2 billion last year.

The nation’s largest video game retail chain attributed the decline in large part to year-over-year comparisons with Nintendo’s bow of the Switch platform.

New hardware sales decreased 7.9%, while new software sales decreased 10.3%. Software sales were impacted by the strength of titles across platforms that launched in the prior fiscal year. Pre-owned sales declined 5.8% and worldwide omnichannel sales decreased 46% due to limited allocation of the Nintendo Switch at launch, which drove 93% increase in omnichannel sales in the first quarter of fiscal 2017.

Digital sales increased 29.6%, excluding the first quarter 2017 revenue from Kongregate, which was sold in July 2017. On a reported basis, digital sales decreased 2.5% to $43.0 million.

Collectibles sales increased 24.4% to $142.4 million, driven by continued expansion of licensed merchandise offerings and unique product offerings.

Technology Brands sales decreased 16.1% to $169.0 million, primarily due to less promotional activity and the overlap of the previously disclosed change in AT&T’s dealer compensation structure from the previous year. Technology Brands operating earnings reached $9.8 million. Technology Brands operating earnings, excluding store closure and other charges, were $11.2 million compared to $18.4 million in the prior-year quarter.

Separately, GameStop announced that Shane Kim, currently a board member and former Microsoft executive, will serve as interim CEO until a permanent CEO is named. Rob Lloydwas promoted to COO and CFO. Previous interim CEO Dan DeMatteo will continue serving as executive chairman of the board.

“We are fortunate to have Shane assume the role … and welcome his insight as a video game industry veteran,” DeMatteo said in a statement. “Shane has been an actively engaged member of the board since 2011, and will bring additional executive focus, energy and passion to the organization during this time of transition.”

Best Buy Delivers ‘Better-Than-Expected’ Q1 Results

In an age of e-commerce and Amazon, maintaining near positive year-over-year entertainment retail sales results can be a good thing.

That’s Best Buy’s mindset, which May 24 reported 0.8% decline in entertainment segment same-store sales for the first quarter, ended May 5.

Never mind the entertainment unit, which includes myriad products such as DVD/Blu-ray Disc movies, video game hardware and software, books, music CDs and computer software, generated 11.3% increase in same-store sales during the previous-year period.

That’s because entertainment produced 7% ($589 million) of Best Buy’s $8.4 billion in domestic revenue, which was up from $554 million, or 7% of $7.9 billion in domestic revenue last year.

When combined with comparable sales upticks in consumer electronics (2.9%), computing and mobile phones (10.2%), appliances (13%) and services (7.3%), entertainment’s softness can be ignored.

“We are happy to report better-than-expected top- and bottom-line results for the first quarter,” CEO Hubert Joly said in a statement.“This strong performance was broad-based, with positive comparable sales across all channels, geographies and most of our product categories.”

Joly said top-line strength was the result of continued “healthy consumer confidence” and product innovation in multiple areas of technology.

“Customers are responding positively to the unique experience we provide to them online, in stores and in their homes,” he said.

International entertainment results are a different matter. Same-store entertainment sales dropped 8.3%, compared to a near 15% increase last year.

Entertainment represented 6% ($41.8 million) of Best Buy’s $697 million in foreign revenue, which was down from $43.1 million (7%) in last year’s $616 million in sales.

 

Nintendo Reveals Details About Pending Switch Online Subscription Service

Nintendo late May 7 revealed details about its pending Switch Online subscription service enabling users to play games online compatible with Switch handheld device games.

The information follows news incoming CEO Shuntaro Furukawa wants to recapture the Pokémon Go smartphone game craze of 2016 with a new platform of smartphone apps.

The platform will also offer classic Nintendo Entertainment System (NES) games with added online functionality, back up save data for most games and use additional features for the Nintendo Switch Online smartphone app that will enhance the online experience for compatible games.

Individual monthly memberships will range from $3.99; three months for $7.99 and 12 months for $19.99. Family membership (12 months) costs $34.99, enabling up to eight account holders to use the Nintendo Switch Online service, even on different systems.

Classic NES games will initially include 20 games, with more added on a regular basis. At launch, previously announced games Balloon FightDr. Mario and Super Mario Bros. 3 will be joined by Donkey KongIce ClimberThe Legend of ZeldaMario Bros.SoccerSuper Mario Bros. and Tennis. An additional 10 launch games will be announced in the future.

Players for the first time will be able to access classic NES games online. Depending on the game, players can engage in online competitive or co-op multiplayer, or take turns controlling the action.

Multiple users even watch each other play single-player games online, and “pass the controller” at any time. Every classic NES game will support voice chat via the Nintendo Switch Online smartphone app. It will also be possible to play the games offline.

 

Analyst Calls Appeals Court’s Gambling Decision ‘Dangerous Precedent’ for Online Video Games

Last week, the Ninth Circuit Court of Appeals in San Francisco overturned a lower court ruling that found free-to-play online video games don’t constitute gambling under Washington state law.

Specifically, the appeals court ruled in favor of the plaintiff, who had spent $1,000 on “coins” on a virtual casino slot game to extend play. Players are provided a number of free coins daily but can purchase additional coins to extend play within a 24-hour period.

That payment option, according to the appeals court, held “intrinsic value,” and constituted gambling under state law.

To Michael Pachter, media analyst at Wedbush Securities in Los Angeles, the decision has ramifications for free-to-play online video games that allow players additional turns for a fee.

Activision’s King Casino generated nearly $2 billion in revenue in 2017, including a $1 billion in the U.S. Most of the revenue coming from the purchase of “boosters” in games, which accelerate the solving of the particular game or extending play.

Zynga generated $850 million in revenue, with an estimated $400 million coming from the purchase of time-saving options.

“Should the Circuit Court’s decision be applied in other states, these companies may face a series of lawsuits,” Pachter wrote in an April 2 note.

The analyst expects the latest decision to be appealed by a “more rationale” court that does not render value on virtual video game pieces.

“However, until that happens, there is some risk that Activision and Zynga will see increased legal risk to their ongoing operations in Washington state,” Pachter wrote. “Should other states decide to cite the [lower court] decision as precedent, we may see an uptick in legal activity elsewhere.”

Amazon Launches Online Video Game Development Service

Amazon March 19 announced the launch of Amazon GameOn, a cross-platform, competitive gaming service for developers. The launch comes just days after Microsoft bowed a cloud-based gaming unit.

The platform (developer.amazon.com/gameon) enables developers to integrate myriad features (leaderboards, leagues, multi-round competitions and prizes) into their games on mobile, PC, and console through a set of flexible APIs (application programing interface).

Using Amazon Web Service (AWS) cloud infrastructure, GameOn gives developers tools to drive engagement, increase monetization, and bring more players in on the action — and compete for prizes fulfilled by – you guessed it, Amazon – or other in-game rewards.

GameOn currently allows developers to create custom events such as local and regional competitions. Developers can also enable players and streamers to create their own user-generated competitions and invite participants, allowing players to connect with friends via social media and expand their gaming network.

“Game developers have consistently told us they are looking for ways to increase player engagement and retention,” Marja Koopmans, director, Amazon Competitive Gaming, said in a statement. “We built GameOn to give developers simple, yet powerful tools to foster community through competitive gameplay.”

nWay, developer of free-to-play mobile multiplayer games, integrates GameOn competitions into Saban’s Power Rangers: Legacy Wars.

“In-game tournaments drive player engagement, and prizing creates a stronger incentive for players to participate,” said Jesse Cherry, senior product lead, nWay. “Administering real-world rewards is complex and Amazon makes the logistics easy and seamless.”

Millennial Esports’ Eden Games uses GameOn to scale the size of the competitions they run in Gear.Club.

“GameOn has made it easy for us to add leaderboards and tournaments in-game,” said CMO Pascal Clarysse. “GameOn saved us months of development and a whole lot of maintenance and logistical overhead in the long run.”

Notably, while Amazon and Microsoft up stakes in online gaming, Sony last year scuttled game streaming to PS3, PS Vista, smart TVs and connected Blu-ray Disc players.

Developers can use GameOn APIs free until May 1. After that, the first 35,000 plays per month are free for a limited time, then developers will pay $0.003 per play. Real-world prizing fulfilled by Amazon is only available in the U.S. at launch.

 

Amazon Offering Free Video Games to Prime Members

Amazon, beginning March 15, will start giving Prime members free access to digital video games on a monthly basis through its Twitch.com subsidiary – acquired in 2014 for $940 million in cash.

In a blog post, Twitch said it is launching the promotional campaign in response to feedback from the “Twitch Prime Indie Amplifier” program touting new game titles members voted on.

Indeed, all eight titles from the Indie Amplifier program will be made available over the next few months.

“First up are the winner, Shadow Tactics, and strategy-RPG Tales from Candlekeep: Tomb of Annihilation,” wrote Joveth Gonzalez, who works in marketing at Twitch.

Other titles include Superhot, Oxenfree and Mr. Shifty. Coming April: Tales from the Borderlands, SteamWorld Dig 2, Kingsway, Tokyo 42 and Dubwars.

 

‘That’s Entertainment’ U.K. Retail Chain ‘Under Review’

The future of U.K. retail chain “That’s Entertainment,” which operates 29 stores selling DVD, Blu-ray Disc movies, music CDs and video games, reportedly is under review by corporate parent, Entertainment Magpie Ltd.

The chain was founded in 2007 and employs about 1,000 people with more than 4.5 million registered customers.

With the advent of Netflix and Amazon Prime Video, in addition to ecommerce, entertainment retail globally continues to take it on the chin.

“As a result, [corporate] is conducting an immediate review on the long-term viability of its ‘That’s Entertainment’ retail stores across the UK, which in the worst-case scenario would lead to the closure of all 29 current outlets by the end of May,” the company said in a statement last month.

Magpie said it continues to focus on ecommerce, which includes operating Decluttr.com in the United States enabling users to buy and sell packaged media and portable media devices online.

“Whilst online sales and our wholesale sales channels into both the U.K. and across the world have continued to grow, media sales through the retail estate have declined by circa 20% in the last year meaning the sizeable fixed cost base that comes with running a retail estate is something that is becoming increasingly difficult for the business to absorb,” said the company.

Citing the “huge impact” a shutdown of retail operations would have on staff, Magpie said any decision would be taken after “a great deal of consideration.”

“So, we are immediately entering into a period of group consultation to discuss next steps,” said the company.

 

Roll Over, Shakespeare! Brits Spend More on Home Entertainment Than Print

British love for the printed word is apparently over.

Consumers spent more on music, streaming video, movies and video games in 2017 than on books, magazines and newspapers, according to new data from the Entertainment Retailers Association. It is the first time revenue from home entertainment exceeded print media.

Key drivers included digital services such as Spotify, Steam, Netflix, Amazon Prime Video, Deezer, Sky, Apple and Google.

According to research prepared for ERA by the Leisure Industries Research Centre at Sheffield Hallam University, Britons spent £7.2bn ($9.91 billion) on music, video and games compared to £7.1bn ($9.77 billion) on books, magazines and newspapers.

“It is an extraordinary testament to the appeal and resonance of digital entertainment services that they have helped home entertainment to hit this milestone nearly 550 years since the invention of the printing press,” ERA CEO Kim Bayley said in a statement.

While entertainment sales reached an all-time-high for the third year, spending on print was stagnant and substantially down on its 2007 peak of £8.3bn ($11.4 billion).

The entertainment growth rate (8.8%) exceeded that of virtually every sector monitored by the Leisure Industries Research Centre, including dining (up 7.7%), alcohol (up 6%), foreign travel (up 4.4%) and gambling (up 1%). Total leisure spending was up 5.2%.

“The 2008-2009 recession hurt both the entertainment and reading markets,” said Dr. Themis Kokolakakis with Leisure Industries Research Centre. “Since 2012, the entertainment market has recovered very strongly producing record 2017 results. [Print] media is under pressure, partly because of the growth of streaming services, partly because there is so much competition for people’s time and attention. Entertainment has grown while reading has stagnated.”

Meanwhile, five years ago more than 80% of revenue was generated by buy-to-own formats such as discs or downloads. In 2017, 56% of revenue came from music and streaming video, transactional VOD or subscriptions to online multiplayer games, digital micro-transactions and in-app purchases on mobile devices.

“The success of the entertainment business is a testament to the power of innovation, creating new ways for people to enjoy the music, video and games they love,” Bayley said.

Notable packaged media growth included boxed software for consoles such as the new Nintendo Switch and Playstation 4, which generated their first growth in 10 years – up 5% to £750m ($1 billion); and vinyl albums, with sales up 34% to £87.7m ($120 million).

“Digital services may be grabbing the headlines, but physical retailers continue to identify new opportunities to showcase and drive sales of discs,” said Bayley. “Vinyl is a prime example of retailers nurturing demand for a product most people had long written off. It would be foolish to underestimate the consumers continuing affection for physical product.”

Finally, Ed Sheeran’s album Divide was the best-selling music, video or game title in the UK in 2017, achieving sales of more than 2.7 million units.

In 2017, 33 music, video or game titles sold over half a million units. Of these, 10 sold over 1 million units and three over 2 million. Of the Top 40 biggest sellers, seven were music albums, 10 were video games and 23 were videos, led by a trio of titles from Walt Disney Studios – Beauty & The BeastRogue One – A Star Wars Story and Moana.

 

ERA Entertainment Chart 2017
Position Category Title Artist Company Units sold
1 Albums Divide Ed Sheeran Warner Music 2,702,839
2 Video games FIFA 18 Electronic Arts 2,696,721
3 Video games Call of Duty: WWII Activision Blizzard 2,442,416
4 Video Beauty and The Beast (2017) Walt Disney Studios Home Entertainment 1,484,565
5 Video Rogue One – A Star Wars Story Walt Disney Studios Home Entertainment 1,380,402
6 Video Moana Walt Disney Studios Home Entertainment 1,293,787
7 Video Fantastic Beasts and Where to Find Them Warner Home Video 1,279,850
8 Video games Grand Theft Auto V Take 2 1,080,022
9 Video Bridget Jones’s Baby Universal Pictures Home Entertainment 1,052,753
10 Albums Human Rag’n’Bone Man Sony Music 1,001,913
11 Video Guardians of The Galaxy – Vol 2 Walt Disney Studios Home Entertainment 873,825
12 Video Trolls 20th Century Fox Home Entertainment 872,586
13 Video Sing Universal Pictures Home Entertainment 805,342
14 Video Dunkirk Warner Home Video 753,429
15 Video games Assassin’s Creed Origins Ubisoft 679,965
16 Video games Destiny 2 Activision Blizzard 673,551
17 Video games Star Wars Battlefront II Electronic Arts 658,814
18 Video games Crash Bandicoot N.Sane Trilogy Activision Blizzard 651,354
19 Video Despicable Me 3 Universal Pictures Home Entertainment 631,748
20 Video Logan 20th Century Fox Home Entertainment 614,631
21 Video Doctor Strange Walt Disney Studios Home Entertainment 612,745
22 Albums Now That’s What I Call Music 96 Various Artists Sony Music/Universal Music 601,906
23 Albums Now That’s What I Call Music 97 Various Artists Sony Music/Universal Music 595,547
24 Video Wonder Woman Warner Home Video 591,316
25 Video games Tom Clancey’s Ghost Recon: Wildlands UBISOFT 574,889
26 Albums Now That’s What I Call Music 96 Various Artists Sony Music/Universal Music 560,286
27 Video Spider-Man – Homecoming Sony Pictures Home Entertainment 551,227
28 Video Pirates of The Caribbean – Salazars Walt Disney Studios Home Entertainment 538,735
29 Video The Girl on The Train 20th Century Fox Home Entertainment 525,996
30 Video La La Land Elevation Sales 525,342
31 Albums The Thrill of It All Sam Smith Universal Music 501,952
32 Video The Boss Baby 20th Century Fox Home Entertainment 501,453
33 Video Fast & Furious 8 Universal Pictures 500,617
34 Video The Lego Batman Movie Warner Home Video 494,446
35 Video games Gran Turismo: Sport Sony Computer Ent. 484,933
36 Albums Glory Days Little Mix Sony Music 468,173
37 Video Fifty Shades Darker Universal Pictures 466,119
38 Video Hacksaw Ridge Elevation Sales 465,138
39 Video games Horizon Zero Dawn Sony Computer Ent. 456,374
40 Video War For The Planet Of The Apes 20th Century Fox Home Entertainment 435,440