George Sherman was recently hired as the new CEO of GameStop, and already he’s ready to completely change everything. In his initial statement as new CEO, he told the world that the company is “in a tough place and needs some serious changes” in order to keep up with the vastly competitive and growing video game industry.
According to CNN Business, GameStop’s sales reached $1.3 billion in the second quarter of 2019, which may seem like a lot, but is a 14.3% drop compared to the first quarter’s earnings. Physical hardware sales also declined 41.1%, while software sales dropped 5.3%. The total net loss for the quarter was $415.3 million. Sherman blames the growing at home purchasing market that Nintendo Switch is popularizing with it’s devices.
“We’re at the end of the console cycle, gaming as an industry could not be stronger … it’s us that needs to pivot. It’s GameStop that needs to make some changes,” Sherman told CNN Business.
The video game industry as a whole is thriving. New gaming systems and equipment are released annually, keeping the industry fresh and diverse in product, which keeps consumers ultimately engaged, as there literally is a game for everyone. Physical game sales, however, are declining rapidly, and they have been for the past decade. Physical sales is what made GameStop so popular when video games first entered the entertainment world, however, with the internet being as powerful and fast as it is now, retail companies all over are suffering, especially third party video game retailers.
One way GameStop is going to regain some financial traction is by closing up to 200 store locations by the end of the fiscal year (February 2020). The company will be closing the stores that bring in the least amount of money quarterly. On a corporate level, the company has already fired 120 employees and six journalists for their online publication “Game Informer”. Sherman stated that these position eliminations were already planned before he became CEO, and he followed through because it was the right move to help save the company from complete financial devastation.
“If you look at the trend of sales over the last several years, selling general administrative costs didn’t move with sales. So we had a cost structure we had to address, we found [it] unpleasant but we needed to do it.”
Sherman got his CEO experience from holding major executive roles in companies like Target and Best Buy previously. He plans on using his past experience to expand the business of what GameStop is, in hopes of increasing overall foot traffic. Right now, the only time the company has seen increases in physical store purchases are during a major game release date. During these days, stores normally hold gaming events so customers can be fully engaged in the game, and play it once or twice before taking it home.
Sherman wants to take this to the next level, he told CNN. “The gaming business is a bit of a hits business. We get traffic in our stores when there’s a new release. We’re trying new store formats like competitive gaming inside stores…that’s not seasonal. That’s not driven by game releases. We’re going to lean into turning our stores into a social and cultural hub for gaming. That could mean bringing gamer’s into the stores to compete together in e-sports.”
Obviously hosting gaming events isn’t going to single-handedly save the company, but tech experts everywhere haven’t given up hope on GameStop. Joe Feldman, a senior managing director of research and analyst with brokerage firm Telsey Advisory Group, also spoke to CNN business and said that as “video game companies continue to improve their graphics and higher resolution games are introduced, the digital file sizes will be so massive that physical copies will be preferable.”
The physical game market is dwindling, but as technology advances, traditional gaming will also advance, which doesn’t happen very often. In total, physical game sales make up 22% of the profit GameStop attempts to bring in every quarter, if that number were to increase, the company has a fighting chance.
Eric Mastrota is a Contributing Editor at The National Digest based in New York. A graduate of SUNY New Paltz, he reports on world news, culture, and lifestyle. You can reach him at email@example.com.