An interesting industry story has been developing over the past few days, which could potentially affect PlayStation 5’s store presence compared to the Xbox Series S|X in GameStop shops. Microsoft has signed a partnership with the retailer, which will see its 5,000 outlets across the United States equipped with Microsoft Surface tablets and the like.
But there’s more: “GameStop and Microsoft will both benefit from the customer acquisition and lifetime revenue value of each gamer brought into the Xbox ecosystem.” So what does this mean exactly? Michael Pachter of Wedbush Securities explained: “If a customer signs up for the $15 monthly Xbox Game Pass Ultimate at a GameStop store, we would expect GameStop to receive $1.50 or so from that monthly revenue stream for as long as the customer continues to subscribe.”
According to DOMO Capital Management, this expands to all downstream revenue, including digital game purchases, DLC, and microtransactions. In theory, then, if GameStop sells you an Xbox Series S|X, it stands to earn a share of the revenue from all digital purchases made on that box for the lifetime of the console.
This is, of course, how the GameStop business model has historically worked. For example, while it profited very little from, say, PlayStation 2 hardware sales, its revenue came from subsequent software sales – both pre-owned and new. But as the industry has switched to digital, it’s losing out on a chunk of that income, hence initiatives like this emerging.
So what does this all mean for the PlayStation 5? Well, in theory, it gives GameStop a great incentive to sell Xbox Series S|X consoles over Sony’s system, which could result in smaller retailer presence and even “gentle persuasion” away from the PlayStation console. In reality, Sony will probably ink a similar relationship with the store.
In fact, while the company’s never got into specifics, boss Jim Ryan did recognise recently the importance of physical retailers, and how it’s involving them in its increasingly digital business: “I don't want to get into the back and forth of the margin discussions between ourselves and our retailers, but we think we've found a way to make that work together,” he said of the sale of PSN credit in physical stores as part of an interview with Games Industry.biz.
It’s interesting, isn’t it? Retail presence is importance for the overall health of the industry, but the business is slowly transitioning online. It’s a balancing act that companies like Sony are having to walk, and this move from Microsoft may temporarily give it a leg up in GameStop stores – assuming the Japanese giant is slow to respond.
[source globenewswire.com, via streetinsider.com, seekingalpha.com, seekingalpha.com]
Comments 68
I haven't set foot in a gamestop in two years. Nothing about it is worth the hassle anymore.
I'm surprised their isn't an issue with conflict of interest.
How would that work in practice? Surely most people decide what console they're going to buy themselves. I know what my response would be if I went to buy a PS5 and they tried selling me an Xbox (or vice versa) and it wouldn't be polite 😅
@carlos82 Maybe they see this as more for undecided people or parents? Although I would assume that the kids know what system they want as well.
Series SIX is playing with a huge pocket of cash and cash is being thrown at everyone from everywhere.
This is going to encourage dodgy practices at GameStop.
I watched some videos on YouTube of how GameStop employees were taught to sign people up to subscriptions without the customer even knowing that they were signing up (kind of like how places get you to sign up for insurance or whatever).
Game Pass is clearly great value though and most XBox owners would benefit from it. But still, I didn’t like what I saw about GameStop.
none of this will change anything MS could buy GameStop it won't affect anything. Playstation is on fire MS is not. who walks into a store that much with how the world is now anyways.
@jorel262 possibly but surely if you're going to make a near $500 purchase then you have some idea what it is you want
@carlos82 Ultimately, they're still going to be more than eager to sell you a PS5. But if this works as it's being described, they'd definitely be encouraged to ask whether you'd considered the alternative.
@carlos82 the amount of times a clueless parent asks an employee for advise you’ll be surprised how many times they can push a specific product.
Not all gamers are as clued in as we are.
Better start thinking about their own situation rather than microsoft's
That’s an interesting approach. Similar to how Costa ask you if you want to try their house blend. I rarely do but there’ll be people who just say sure.
So MS acquired a giant game developer and is now paying a game retailer to push their console?
In three to five years they will be giving us a salary to play on their platform or something ...
@get2sammyb 😀-My friend of 26 years is a Store Manager for GameStop(A Long Time) and he immediately sent me a copy of a link when it was (First) announced to the Store Managers in detail of what they were to expect from the deal, him and the other Managers in his district aren't all that happy about pushing MS products and services on top of ALL the OTHER quotas that the company makes them push(subs for pre-oder include games, Pro cards, Pre-owned for hardware and games, trade ins for phones,tablets,games...ect.
And GameStops upper management's synergy or internal mantra is basically F**k Y** pay me, if you don't meet those predetermined quotas. So needless to say my buddy ain't to happy in having the load increased😣.
@carlos82 you'd be surprised how many people at ps4 XBO launch came in asking which one to get. Gotta remember that very few people buying these consoles do any research beforehand.
I'd spuz in their face if they tried to sell me an Xbox S A/X
Brrr, egg box. Just saying it feels like a dirty word and gives me the shivers.
i just don't believe that that many people are basing their decision on what some disinterested GameStop employee has to say. of course there will always be that odd "which one is better?" parent or grandparent, but for the most part, people know what they're there for when they walk in...
I don't get it. MS is spear-heading the drive to all digital / subscription, and GameStop is all about physical retail games. It seems like GameStop pushing MS consoles is just hastening their own demise.
I don't really know how much it has changed, but I remember back in the early days of Game Informer (GameStop's gaming magazine), it was a thinly disguised Xbox magazine that grudgingly talked about Sony and Nintendo products.
PS5 for me thanks all the way.
@thedevilsjester GameStop may be able to use this as leverage against Sony and Nintendo to get the same kind of deal out of them. Which would completely change the dynamics of their business!
Honestly, I don't know. It's far too early to know how any of this will shake out.
Its not a bad idea on paper . As someone who worked for the company for 5 years I can say this is one that at least seems more of self preservation deal then anything else .
That being said the company has a way of turning something seemingly harmless into bad business practice . Its one thing to make a deal with a company its an other to "force" your deal onto your customers . If they allow the staff to operate normally without pushing one product or an other this should be fine but if bad business gets in the way it could potentially hurt both Microsoft as Gamestop .
@thedevilsjester 😀Right? I told my buddy that's a manager there the same exact thing, that they signed a deal with the devil 👹, that's in it to cut them out(physical media) and Ultimately change everything to digital and streaming services.
😕Speculating, how much cash money does it take to poison yourself first and then ultimately blow your own head off ( business-wise)? 😳-Because MS found that Magic GameStop Number...💲💲💲
Or the analyst in question might just be trying to drive up game stops stock price in order to make a quick profit on his own shares.
Game stop might well get a recurring cut from subscriptions they sell. But there’s no way they will get money when someone makes a direct purchase on Xbox with a credit card.
Sony are in a different position as they’re not trying to push consoles on credit and they’re less focused on subscriptions.
GameStop and Microsoft deserve each other.
@nessisonett I tried their house blend once and was very disappointed. Especially considering it cost more!
I wonder if this will trickle down to the Gamestop-owned Gameinformer, and have influence on the ratio of Xbox-to-Playstation articles in the future. Time will tell.
It’s an interesting strategy but this article is all pure speculation. Could GameStop employees recommend an Xbox instead of a PS5 now yes, do they still sell PS5’s and it’s games, yes. At the end of the day they’ll want to sell anything that makes them money including the PS5 and its hardware, this won’t affect anything in the grand scheme of things, you may just get asked if you want to sign up to gamepass more often by annoying staff lol.
@Dodoo each to their own, I tried the last one they offered me (can’t remember the name) and thought it was quite delightful.
I just noticed when getting a notification about replies in this topic that, S|X in some contexts/fonts can look like SIX which is clearly higher than 5. A coincidence, or clever marketing?
I have both consoles preordered at Gamestop...hopefully Microsoft doesn't have some shady presence where the PS5 preorders get delayed for a week because they knocked the shipments off the truck.
@AdamNovice
My thoughts exactly. I know this is business and in business you do what you can to get a leg up. However, and maybe I'm missing something, unlesss MS is outright buying Gamestop I don't see how this wouldn't raise a few eyebrows. And I'd be saying the same if Sony or Nintendo inked a similar deal.
seriously xbox , PS and the switch are miles behine the crappy funko poops in gamestop
🤣-I personally think it would be funny if the majority of people who are in the market for ALL Things PlayStation, went to shop solely at GameStop, while the other Lot who want ALL Things Xbox went everywhere else...lol.
Talk about reverse manipulation occurring on both sides of their profits margins....(won't happen)...but still funny to think about😂.
@Kienda I remember being in GameStop’s back in the day, cringing, over the recommendations I would hear employees give parents on what they should purchase.
@Fenbops My friend that's the store manager for a GameStop, said that "They Are Going to Have to Push" MS products and services.
People who know what they want walking in, probably won't change, but little Timmy's mom who doesn't know squat about anything gaming wise, might.
@carlos82 not necessarily. I've heard stories of people queuing to buy an xb1 and seeing how much longer the queue for ps4 was and deciding to switch queues and then others following them. Herd mentality is stronger than one may imagine.
@RicksReflection I wouldn't think this would have much impact. Little Timmy's mom is likely there because little Timmy asked/pestered her for a specific console to play a specific game or to get the system that their friends have. It's not likely that she is going in there blind to spend $500.
@naruball That is likely from people that were undecided, or were going to get both but not sure on which one first.
@thedevilsjester I totally agree, but she might get convinced to buy an Xbox on a payment plan instead😳.
@RicksReflection If little timmy says mum I want a PS5 she ain’t going to go in and buy an Xbox id guess. This will have less of an impact than people think, it’s being overblown.
@Fenbops (Same comment to thedevilsjester), I totally agree, but she might get convinced(pushed) to buy an Xbox on a cheap payment plan instead😳
@Dodoo Yeah, it’s just worse. Tried it once and never would again.
@Fenbops @thedevilsjester I think MS is doing "A Whole Lot" of things that will have a very LARGE "cumulative effect" and this is one of them.
I'm in the U.S not U.K but I'm sure you've heard a similar saying- "Pinch your pennies and the Dollars will take care of themselves", well from ALL the angles that MS are cutting this Gen, it's gonna add up to a "Whole lotta Dollars". Their pull'n out the wallet on ALL fronts and their getting pretty medieval about their "Deals and Purchases".
The last time someone tried to push a brand or product onto me it just turned me of the product. From experience anything pushed onto me has been a con or bad or I could had purchased for cheaper if I chose myself. We might be slaves to work and a salary... But outta work we are masters of what to choose and buy right guys!! Power to the gamer!!
@get2sammyb Off topic question. Do you guys prefer to link sources from outside Nintendolife/PureXbox? I've noticed a good amount of your topics that overlap link to outside resources. Sites like GlobeNewsWire come off as "not secure" on my computer so I wasn't sure what the process was. Hope it doesn't come off as an insult. Just curious.
I'm glad I don't base my decision on which console to buy on what a failing retail chain wants 😁
Hmmmmmm.... this smells like the beginning of an anti-trust suit....
If someone does not know which console they want to buy, an Xbox with gamepass is probably the better choice anyways
@get2sammyb 😒-Unless in fine print in the deal signed with Microsoft it states that while under this multi-year contract, no other similar deals are allowed with competitors.
😕-I personally wouldn't think that Microsoft's lawyers would leave something like that out of the deal with GameStop.
But well see, but it would be funny to see my friend use one of the "Free Surface Pro's" (that Microsoft is providing to all the stores) while having a similar signed deal with Sony, and then use that Surface Pro tablet to ring up Sony products....lol.😂 (But I doubt that'll happen.)
Dirty, cheap, disgusting tactic. Just like ms
@nessisonett ironically sometimes I do if I want my caramel mocha to taste a little different. Rather not pay the extra for the blend though
It’s be good for GS if they got similar with Sony. We need GS as a retail gaming store. Mine has great service and I always buy my PSN credit there, so they get a cut for my digital purchases too.
They’re shipping a PS3 Eye to my store from another. It’ll be $2, as opposed to $15 online which is the cheapest I found there.
People need to get over being asked to pre-order in a way that doesn’t take more time. I’ve only had once where it got pushed too much.
This is almost how most phone carriers work in the US. Every manufacturer (except Apple) offers commissions to sales reps. So they are heavily incentiviced to sell Android phones. iPhone just sell on their own because they are iPhones, but it's hard for anyone else to enter and compete.
Its one of the many things that prevented the takeoff of the modern Windows Phones, Nokia just didn't pay these commissions, not did Microsoft, and, well... They were not iPhones.
On a podcast recently I heard that other retailers in European countries (think mostly non-English speaking ones) do similar deals with Sony, one of the many reasons why Xbox sells terribly outside of English speaking countries, the stores themselves push PlayStation to any customer that enters a store undecided.
Yeah this is total BS, Sony removed the ability to for GameStop to sell digital downloads and keeps reducing their presence in the store themselves. GameStop has always been pushing pre-owned, warranties, and pre-orders. They don't care what console you have unless they have a personal beef over the console.
@carlos82 I worked in a game store back in the late 90s and a surprisingly large number of people needed to be walked through the differences between PlayStation, N64 and the Dreamcast. Maybe general awareness of consoles is higher now compared to then but I think there are still plenty of first time buyers, lapsed gamers, parents, relatives and even spouses who would need an assist. Case in point, my wife enjoys games and has been with me since the PS2 era doesn't really know (or care) about the differences between PlayStation and Xbox and I'm sure she'd need some help if she were to buy something for me in a game shop.
I really don't know how Microsoft will turn a profit with this business model. They spend $7,500,000,000 buying a company and then will give away the games in hopes that the subscription model makes up for game development costs. Now they are going to give 10% of profits to GameStop?
Alternative model - make good games that people want to buy.
@AJDarkstar for once we agree. He likes to pretend he knows what he’s talking about.
GameStop is a dying business and MS are getting desperate. I don’t see this changing a thing. Who buys their games at full RRP anyway? Gullible parents and no one else.
@DrJames you might be right. But the discerning gamer, those who will be repeat customers across many generations will always go where the best exclusive games are.
Which is Sony or Nintendo at the present time.
Microsoft’s strategy seems to be sling money everywhere to capture the casual gamer. This might work in the short term.
Retail and manufacturers have always made deals to push products. Along with incentives to do so. Of course Game Stop would take to deal to earn a extra profit share.
@get2sammyb
'I don't want to get into the back and forth of the margin discussions between ourselves and our retailers, but we think we've found a way to make that work together,”
I'm sorry, my brain maybe slow this morning. Could you explain in what way you find the quote interesting in this context?
I was interested to see what you think of that mess (definitely not good for Sony or consumers) and only saw the article now.
@Kienda correct. I was in the BB game section and some guy was asking me what game system he should buy for his kid. I asked what his kids friends played on and he had no clue. Seemed like a weekend dad, I felt bad for him. Told him to get more information before buying but a salesman would have been able to sell him anything.
And here I was thinking Microsoft was leading the charge in wiping GameStop out, they throw them a lifeline. They shouldn't have closed their stores then they wouldn't have even needed to do this (I don't think it's bad but I actively trying to avoid game stop), but I suppose covid and not actually being in physical retail for most of its existence had a big role in that.
This is interesting and somewhat frightening, not so much the "they're pushing MS over SonTendo" angle, as a partnership is a partnership and aligning as a premier vendor for one brand isn't that unusual a move, really - MS closed their retail operations after COVID, partnered with a dying retailer to kind of indirectly replace that operation - fair play as long as it's not clandestine (I.E. if they put MS banners up as a partner of some sort you know you're walking into an MS salesroom.)
The worrying angle is moving console sales into a space that works like cell phones. An industry Gamestop is also already in. Cellphone retailers selling plans get a cut of the plan and any sales on the plan for life which is why there's a cell phone store on every side of every street corner and we all wonder "who buys that many cell phones?"
Moving consoles into a space where your SN is tied to your account and then tied to a retailer getting lifetime kickbacks is off-putting. On one hand I'm sure some are thinking of this as "MS sucks!" move, but in a broader sense I think it's more an omen of how the whole industry wants to move or already did without telling us because it wasn't part of a full partnership where the outside vendor is taking over their POS and web operations.
OTOH it could lead to greater competition in hardware/subscription sales if vendors are climbing over each other to get a piece of the pie (and the sales history of their customers.....)
@naruball Yeah, it reminds me of when there's a traffic backup and people are waiting - you can't see what the obstruction is. You see one impatient jerk worm his way out of line, and turn around in the other lane and go somewhere else. Guaranteed within 1 minute you'll see 3 others do it. Then in 6 minutes most of the line does it. And then 40 seconds later the obstruction is gone or the light changes and traffic moves normally with no sign of any particular problem having existed, while the herd is chasing some unknown path of winding backroads that take an extra 15 minutes in the wrong direction.
I find herd mentality terrifying, and I find it's taking stronger and stronger hold on people's behavior in the past, say, 10 years than ever before.
They always did anyway in the USA(and UK with GAME shops) :-/ They are a bunch of...Well I'll stop there
😄- My friend that Manages a GameStop that I keep referencing just sent me this pitch that there using- "Sir have you heard of the gamepass experience with Microsoft Xbox series X. You get over 100 games added to your library. Why don't you bring in your playstation and trade it towards a new and exciting Xbox series X".
😕-What do you think?
Why am I not surprise Microsoft pulled this move haha ^^;.
I haven't been inside a GameStop for many years and I plan to keep it that way.
Most gamers know what they want. The sheep that gets swayed are the parents and the naivete kids that "borrow" mommies credit cards. I use gamestop if i forget to preorder a game online and hope to score a extra copy a store may have in stock or looking to buy a game used if i was on the fence of a day 1 buy. I honestly hate gamestop and when i go into their store it looks like a comic book store than a game store cause of the comic book figures apparels and the damn funco pops. Somehow they got microsoft to carry them i guess cause the microsoft stores havent been doing well. So gamestop gets a cut of the potential sales and microsoft gets a distribution center thru gamestop.
Makes me want to support microsoft less but im gettin both consoles so i dont care.
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