GameStop's Strategic Transformation in the Face of Digital Disruption
GameStop, a gaming retail giant, faces challenges in a changing landscape. To adapt, it plans a digital streaming platform, store reduction, and customer-focused initiatives. Key issues like loss of licenses and mall closures drive recommendations like GameTube.com and experiential stores. Understanding customer needs for community, engagement, and personalization is crucial in remaining relevant amidst digital transformation and intense competition.
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GAMESTOP GAMESTOP: GAMING DARLING OR GAMING BLOCKBUSTER PRESENTING TO: GEORGE SHERMAN, JAMES BELL, FRANK HAMLIN
SITUATIONAL ANALYSIS Buy? Merge? Sell? Pivot? Preowned market a differentiator Rise of esports and gaming tournaments Strong and loyal customer base Retail Apocalypse How will GameStop remain relevant in the face of digital disruption in the Gaming industry?
VALUE PROMISE AND FUTURE STATE 4 Year Strategy to ensure future readiness through the launching of a digital streaming platform and a reduction in the physical footprint of GameStop. Welcome Home to GameHub, your One- Stop-Gaming Destination Revenue from New Sources 40% Decrease in Number of Stores 60% Subscription Base 60M To mitigate the seismic shift in industry, from both a retail and digitalization perspective.
KEY ISSUES Loss of licenses from publishers Revenue streams not keeping up with gaming trends Threat to Core Business Mall closures: physical footprint too large Consumer shift: demand for experiences Changing Retail Landscape Increasingly competitive landscape Cannot rely on scale any longer Lack of Competitive Advantage
RECOMMENDATIONS GameTube.com The YouTube of Gaming Subscription Model Reduce Physical Footprint Tier II cities end leased Convert Tier 1 city stores to Experiential Stores
ANALYSIS JANE
CUSTOMER NEED GameStop VP Customer need Part of a community Personalised experience Engaged customer base strong customer base Global reach Loyalty program Connection to Gaming influencers Curation Curated viewing Opportunity in collectibles (product advantage differentiator Age 35+ customer (need for customer segmentation) nostalgia GameStop needs to introduce centric centric initiatives and leverage big data and personalized experiences to target new customer segments
COMPETITIVE LANDSCAPE Experience focused Highly competitive market Growth in digital Steam Changing consumer behavior Uplay Retail Armageddon & Mall closures 92% stores in traditional malls GameStop Origin Bricks Clicks 5830 stores globally & large number of employees less operationally efficient Best Buy Gamefly (mail) Walmart Target Kmart Amazon Product focused GameStop needs to position itself as an omnichannel experiential-focused retailer to ensure sustainable growth amidst the changing retail landscape
ESPORTS TOURNAMENTS Growth in digital game content Esport 454 m viewers $1.1bn Up 27% Esports - $1.5bn USD prize money New revenue streams streaming subscription revenue, advertising and add-on s Mixer 20m users up 10m < 6months GameStop user base: GameStop <50m subscribers Game informer magazine 6.6m subscribers and high social media followership Twitch 15m users Powerup rewards 39.6m members Opportunity to introduce an Esports gaming platform as a new revenue stream leveraging its wide customer base
ALTERNATIVES AND PATH FORWARD SHIVANI
RECOMMENDATIONS GameTube.com The YouTube of Gaming Subscription Model Reduce Physical Footprint Tier II cities end leased Convert Tier 1 city stores to Experiential Stores
ALTERNATIVES Buy/Merge Downsizing Sale Brick & Mortar Publishers (UBSoft) Online Competition (Origin/UBPlay) Focus on: Hardware Software Collectibles Accessories Sell to Amazon/Microsoft/Online Competitor
DECISION CRITERIA New Revenue Streams Leverage Strengths Lower Fixed Costs Future Ready
DECISION MATRIX New Revenue Streams Leverages Strengths Lower Fixed Costs Future Ready GameTube.com Reduce Physical Footprint Buy/Merge (alt) Sale (alt) Downsizing (alt)
DECISION MATRIX New Revenue Streams Leverages Strengths Lower Fixed Costs Future Ready GameTube.com Reduce Physical Footprint Buy/Merge (alt) Sale (alt) Downsizing (alt)
REC 1: GAMETUBE.COM Why? Create Gaming Streaming Platform: Tiered Subscription model Future of gaming, new predictable revenue stream Why? Buy right to stream Gaming Tournaments $1.1B Industry, 27% increase last year Stream live games globally with influencers and monetize using click throughs to publisher websites Why? Click through revenue stream, sticky customers, leveraging data from our loyal members Curate and customize content using big data Outcome: GameStop ready for the future
REC 2: REDUCE PHYSICAL FOOTPRINT Reduce Physical Footprint Tier II cities end leased Convert Tier 1 city stores to Experiential Stores
IMPLEMENTATION KATE
IMPLEMENTATION 1: GAMETUBE.COM Discovery Range Selection CUSTOMER VALUE
IMPLEMENTATION 1: GAMETUBE.COM (THE PRODUCT) Think the Youtube of gaming More curated Geared to the desires of the gaming community 2 Tiered Streaming Service: Just tournaments pay per view Tournaments + extras Joining the GAMETUBE.COM community Mobile and desktop app Revenue: Streaming revenue subscription model Marketing revenue GAMEHUB / developers
IMPLEMENTATION 1: GAMETUBE.COM (THE PRODUCT) NOVIS Curation based on types of games Curate based on rank of players GAMERS Curation bases on searched Data from loyalty programs Platform Draw Cards: Exclusive rights to one major tournament (Per pay) Exclusive streaming of top 5 gamers (On payroll) Curation of customer preferences (From loyalty data)
IMPLEMENTATION 1: GAMETUBE.COM (LAUNCH) HOW DO WE GET REACH CUSTOMERS: First target 40 million users from loyalty Emails customized and constant In store 3 months free subscription / 1 month friends invited Sole distribution of major tournament advertised on previous games In store events for viewing of the major tournament
IMPLEMENTATION 1I: REDUCE RETAIL FOOTPRINT Reduce 60% of physical stores Reduce as the leases come to an end over period Remaining stores experiential Community feeling Monthly streaming events through invite Events for all big tournament Demo stock in store Reassess distribution centers based on online sales and shop loactions
IMPLEMENTATION : TIMELINE Y1 Y2 Y3 Y4 Hire platform team Hire additional marketing team Create platform Rights for streaming Rights for sole streaming Tech development Marketing campaigns Launch of platform Curation updates and improvements Termination of leases Conversion of experiential stores In store events
FINANCIALS VAN ZYL
COST BUDGET $mil 2020 2021 2022 2023 Total Dev team $ 100 $ 50 $ 50 $ 50 $ 250 HR & Ops Layoffs Store closures $ $ 30 15 $ $ 30 15 $ $ 20 10 $ $ 20 10 $ $ 100 50 Marketing Influencers Marketing Gaming tournament rights Launch $ $ $ $ 15 10 50 - $ $ $ $ 15 10 20 10 $ $ $ $ 15 10 20 - $ $ $ $ 15 10 20 - $ 60 $ $ 110 10 Total $ 220 $ 150 $ 125 $ 125 $ 580 Sources: Cut dividend Op Cash Flow Cash resources $157 mil $325 mil $1.6 bil
ASSUMPTIONS AND DRIVERS Drivers Assumptions Sale of game codes Continue for now (scale) Conversion rate of captive audience to subscribers 25% Subscription revenue $5 pm Clickthrough rate 2 games per user pa #Stores 5830 to 2332 #Employees 49,000 to 19,600
FINANCIAL FORECASTS $mil 2019 2020 2021 2022 2023 Total Revenue $ 8,285 $ 7,371 $ 7,191 $ 7,731 $ 8,980 Traditional Revenues Hardware Software Pre-Owned Other $ $ $ $ $ 8,285 1,768 2,450 1,866 2,202 $ $ $ $ $ 7,371 1,591 2,082 1,717 1,981 $ $ $ $ $ 6,564 1,432 1,770 1,579 1,783 $ $ $ $ $ 5,851 1,289 1,504 1,453 1,605 $ $ $ $ $ 5,220 1,160 1,279 1,337 1,444 New Revenues Users Subscription Click-through $ $ $ - - - - $ $ $ - - - - $ 10,000,000 $ $ 627 $ 30,000,000 $ $ 1,880 $ 60,000,000 $ $ 3,760 600 27 1,800 3,600 160 80 $ $ $ 2,237 2,237 - $ $ $ 1,843 1,843 - $ $ $ 1,829 1,641 188 $ $ $ 2,027 1,463 564 $ $ $ 2,433 1,305 1,128 Gross Profit Traditional 25% New 30% $ $ $ (1,888) (1,888) - $ $ $ (2,105) (1,605) (500) $ $ $ (2,122) (1,322) (800) $ $ $ (2,039) (1,039) (1,000) $ $ $ (1,805) (755) (1,050) Operating Costs Traditional New Operating Profit $ 349 $ (262) $ (293) $ (12) $ 628 5 Year Payback based on success of Y1-3
RISKS AND CONTINGENCIES Risks P I Contingencies Low conversion of loyalty customers to Gametube M H Halt investment return capital to shareholding Faster than anticipated block by developers (30% of revenue) L H Increased speed of store closures Bad press from lay-offs & closures impacts Gametube brand M M Start with part-time staged & re-deployment P: Probability I: Impact
CONCLUSION SHIVANI
CONCLUSION How will GameStop remain relevant in the face of digital disruption in the Gaming industry? Welcome Home to GameHub, your One- Stop-Gaming Destination Revenue from New Sources 40% Decrease in Number of Stores 60% Subscription Base 60M Future Aspirational State: With scale, negotiate game playing contracts on GameTube.com with major publishers
SWOT StrengthsEngaged customer base Loyalty program WeaknessesStock price decline segmentation and customization Slow to adapt to changing landscape OpportunitiesCollectibles Partnering with social media gamer influencers ThreatsShift toward online Digital disruption Game publishers prohibiting retailers from selling download codes Pre-owned and collectibles differentiator Strong balance sheet Global reach Decreasing profitability Store traffic decreasing Large Number of stores & employees Magazine subscribers Lack of customer Leveraging Big data Console sales segment growth eSports Targeting new customer segment Personalized and tailored engagement Mall closures Changing consumer behavior
