Downloadable Game Content Not Living Up to Full Potential, GameStop Says

Less than 15 percent of gamers have bought downloadable content and the cost of the average downloadable game purchase is less than the average iPhone application, Bartel said in a keynote, pointing to independent studies. There’s too much “friction” involved in the downloadable content purchase process and more education of consumers is required, he said. GameStop is “very poised to be involved” with improvements in those areas, he said.

Bartel again touted the benefits of GameStop’s trade-in program in which customers sell the chain used games for cash or in-store credits. In fiscal 2008 ended Jan. 31, 2009, 86.5 million game units were traded in at GameStop stores and the retailer is “on track” to top 100 million units in fiscal 2010, he said. It refurbishes almost 90 percent of the game products traded in, he said. Those items are then resold as used. Only 10 percent of the products traded in need to be sent to unspecified recyclers who he said keep the product out of landfills. Recycling of used game products has significant benefits to customers, GameStop, and developers, as well as the environment, said Bartel, though some game makers oppose the sale of used games. About 220,000 tons of game products have been recycled through GameStop’s trade-in program since 2002, Bartel said. Only a small single-digit percentage of customers who trade in used products at GameStop take cash back instead of in-store credit, he said. The amount of money that GameStop gives customers back in cash is lower than the amount of store credit they receive. Most store credit is used by customers to buy more game products and the program spurs new game sales and GameStop’s market share on new titles, Bartel said.

Like others, Bartel said 2009 was a challenging year for the game industry. Hurting GameStop’s software revenue were the economic crisis, the delay of various major game releases and a drop from 2008 of nearly 50 percent in music game sales, he said. December sales were helped, however, by a 40 percent increase in Wii hardware sales and a 37 percent increase in PS3 hardware sales from December 2008, he said. But Wii console supplies were “in short supply” in late December, he said.

Console games still account for the majority of total game industry sales, at about $30 billion, said Bartel, citing a 2009 PricewaterhouseCoopers study. Online games account only for about $8 billion, wireless games $7 billion, PC games $4 billion and videogame ads $1 billion, he said. One area seeing huge growth is social gaming, he said, telling the conference more than 65 million people play games on Facebook alone. E-commerce is also continuing to drive growth, he said.

Bartel called cloud computing a “very interesting” concept and predicted it will become a significant force in gaming. But he said it now faces latency and bandwidth issues and asked, “What is the business model that is going to allow this to be monetized?” Apple, meanwhile, has “disrupted” mobile gaming, he said. But he said the “low barrier to entry” has resulted in a glut of content, and there’s a lack of effective merchandising in the sector.

Almost 50 percent of new gamers are now 35 and older, and 49 percent of gaming parents are women, Bartel said. Nintendo has helped increase those numbers, he said. A challenge facing the game industry is figuring out how to continue appealing to those new consumers while also appealing to core gamers, he said. The Hispanic audience is also a growing customer base that the industry needs to appeal to, he said. One way in which GameStop hopes to keep its customers coming back is through its loyalty program, which it is significantly expanding, he said. Supply chain challenges, meanwhile, include same-day delivery and achieving efficiency in overnight delivery of products, Bartel said.