GameStop buys EB

Dram writes "Business Week, among others, is reporting that GameStop will buy Electronics Boutique for $1.4 billion. Hopefully this will allow both chains to better compete with Wal-Mart and Best Buy for our gaming dollars."

Comments

Sounds backwards

[MBraynard]

EB has a higher market capitalization (1.354bil to 1.185bil), double the earnings per share, and from a consumer's point of view, a much better retail operation.

So I wonder why it was Gamestop that took the initiative to issue a bunch of debt to buy EB?

Given the co-operation of the EB people in the vote, it seems more like a merger than an acquasition.

I really hope that EB doesn't get it's great service dilluted by GS's management.

Debunking a few things

[Da Rabid Duckie]

I'd like to address some of the concerns people are having with this merger.

1) Their customer service is going to change.
- Not entirely true. I've worked at both EB and Gamestop, and EB has a strong and well-developed program in customer service and sales training while Gamestop has almost none (as of 2000). Once both companies sit down and analyze each other's practices it'd be logical to assume that EB's method of training will be incorporated. This is also backed by the fact that EB employees make more annually than Gamestop employees, and EB still turned a higher profit last year.

As for the matter of the return policy, it changed because of copyright laws, not some corporate mandate.

2) It's going to affect the used games market.
- It should affect it at all, honestly. Rather, it should help stabilize it. There is a huge glut on the market as far as used product goes. Trade in prices are dictated by the amount the company has already vs the rate at which it's selling. That's why sports games trade in at such a low rate: once the current version comes out, previous versions get traded in at a huge rate and it devalues. Both companies rely on trades, so if trades stifled they would definitely addresss it, therefore it's safe to assume the prices would drop too.

Btw, the $44.99 game likely had a trade in price of $25 to $35. This is how retailers like EB and Gamestop make profit. Average cost of a game is around $47. Companies like this can't keep their lights on just by selling hardware (which they sometimes lose money on) and new software. The profit margins from preowned is what keeps these companies afloat.

Plus, with discount programs available, a preowned version of a new release being priced at $40 is actually a good deal sometimes (especially with BOGO sales).

3) Gamestop is going to close stores in malls with multiple locations.
- Again, this is not entirely true. Right now, an EB is open because it's getting business. If Gamestop closes a store because it is too close to another, it's a perfect opportunity for a competitor, say... Gamecrazy to move right in because they know that store gets traffic. As it stands, there are actually malls in America that have three EB stores in them, and they all get good traffic. I know there will be closings, but there will be many more openings.

4) Prices will go up.
- But they may go down. Prices are dictated by cost vs profits. Right now, the bulk quantity that EB and Gamestop purchase at gets a resulting cost of about $47 a game, as I mentioned earlier. Now, with some 3000+ stores in the US (more in Europe and Asia) Gamestop can now purchase games in a higher quantity, meaning a higher bulk discount and more profit from the $49.99 price point. If anything, it'd be an incentive for prices to stay where they are and more incentive to have sales on games.

As an EB employee, I'm very optimistic about this merger. If nothing else, I at least made a quick 1k off of stock sales ;)

It's the employees

[M.C. Hampster]

Everytime I go into any of these little gaming specialty stores (GameStop, EB, GameCrazy), there's always the dude in there who has to bash my system. If I'm in there looking at Nintendo stuff, they'll tell me that Nintendo is dead. The other day I was in there just playing a demo and the two employees were talking loudly back and forth about how the Nintendo DS stood for "Nintendo Dead System". I kept thinking, "Wow, this really makes me want to buy my DS games here!".

Perhaps they need to be screen out the fanboy's in their hiring process.