Things are still looking bad for the struggling physical game retailer GameStop. This week, the company announced that Q3 2019 comparable store sales fell 23.2 percent year-on-year. It’s a decline led by a whopping 45.8 percent decline in hardware sales and a 32.6 percent decline in software sales.
Those are hard numbers to turn around, especially if they lead to company layoffs and hundreds of store closures (including the newly announced closure of all GameStop stores in Denmark, Finland, Norway and Sweden by the end of 2020). But GameStop CEO George Sherman tried to put a good face on the results in a profit call this week. There, he argued that GameStop’s current problems are a predictable result of the end of the current generation of consoles — and consumer anticipation of upcoming consoles from Sony and Microsoft — just as much as anything else.
“With ‘generation nine’ consoles on the horizon that will bring excitement and significant innovation to the video game space, expected releases in late 2020 will put pressure on the current generation of consoles and related games as consumers wait for new technology and publishers to accelerate their software delivery plans. get it,” Sherman said.
GameStop CFO Jim Bell echoed the sentiment during the call, predicting that “the cyclicality of the console business” will continue to hurt GameStop’s sales performance in the coming quarters.[s] robust sales gains at the end of 2020, led by Generation Nine hardware and software.”
There’s some merit to the argument that GameStop is just experiencing a temporary downturn at the end of its cycle at this point. As Sherman points out, NPD reported “significant double-digit industry declines in new hardware” [sales] for September and October” in the US game industry, suggesting that gamers are largely waiting for new consoles until new hardware arrives late next year. And while hardware sales are a pretty low margin for GameStop, new consoles are getting people knocking on the door. and can renew the interest in buying high-margin software and accessories for their beautiful new purchases.
But there are signs that the end of the generations of doldrums is hurting GameStop’s core businesses more than other parts of the video game market. As NPD noted in its own third-quarter report on the overall US game market, spending on “digital console content” increased while spending on “physical console content” fell. That’s just a single quarter, but it reflects long-standing trends in the US gaming market since 2010, as consumers have moved from physical discs and cartridges to purely digital gaming.