Game UK Could Lose $4 Million on Mass Effect 3

Hevva

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Game UK Could Lose $4 Million on Mass Effect 3



A financial analyst has tallied up how much profit the struggling British game retailer stands to lose over not stocking Mass Effect 3.

Game (and subsidiary Gamestation) locations are the biggest and most visible game retail stores in the United Kingdom. When British gamers heard that these franchises wouldn't be stocking copies of inevitable mega-hit Mass Effect 3 [http://www.escapistmagazine.com/news/view/116079-U-K-Retailer-GAME-Loses-Mass-Effect-3] on its European launch day next Friday, one of the first questions to strike many was just how much cash the ailing retailer stands to lose. A financial analyst has now provided a figure to answer that question: By not stocking Mass Effect 3 for the foreseeable future, Game UK stands to lose almost $4 million in potential profit.

Speaking to The Guardian [http://www.guardian.co.uk/business/marketforceslive/2012/mar/01/game-falls-further-mass-effect-dispute], analyst Mark Photiades from city firm Singer Capital Markets laid out the numbers. "Working on the assumption that a decent triple-A title sells 0.8m-1m titles in the first few weeks of release in the UK and assuming GAME has around 20 per cent share, we calculate that by not stocking Mass Effect 3, GAME is potentially missing out on around £6m-£7m ($9.5m - $11.1m) of revenues in the UK given the title will retail for £39.99 ($63)," he said.

"It is also worth noting that margins will suffer as a result of the reward card points being offered in compensation [for cancelled pre-orders]," Photiades continued. "We estimate this could amount to another £0.3m ($.475m) of forgone gross profit as typically pre-orders account for around 30 per cent of initial sales."

"So in total there could be £2m-£2.5m ($3.2m -$3.96m) of lost UK profit in a year where we are already forecasting losses of £8m ($12.7m)," added Photiades.

Truth be told, most UK gamers and international onlookers will have been able to guess that the numbers would look this bad. Game has been clinging to the edge of a massive debt-shaped cliff ever since it lost its credit insurance a few weeks ago, a loss which led to it being unable to stock [http://www.escapistmagazine.com/news/view/115976-UK-Retailer-Kind-of-Explains-Shrinking-Game-Selection] a wide variety of new titles, of which Mass Effect 3 is only the latest (and so far, the most prominent). As Photiades notes, "[Game's] focus very much remains on pure survival as opposed to revival at this stage."

Rumors are also circling that GameStop (debt-free and clean) may be considering buying up Game's operations [http://www.escapistmagazine.com/news/view/116082-Australia-Hampers-Potential-GAME-Takeover] in the United Kingdom and other parts of Europe. However, GameStop isn't keen on the idea of purchasing the company outright as doing so would involve taking over stores in Australia, where GameStop already operates two successful game retail franchises.

The smart money is on more sharp-intake-of-breath news relating to Game UK appearing in the near future, it seems. In the meantime, Eurogamer has compiled a handy list [http://www.eurogamer.net/articles/2012-03-02-where-can-you-buy-mass-effect-3-in-the-uk] of alternative retailers selling Mass Effect 3 for British fans.


Source: The Guardian [http://www.guardian.co.uk/business/marketforceslive/2012/mar/01/game-falls-further-mass-effect-dispute]




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DigitalSushi

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Its a shame because while I know its fashionable to hate on big faceless corporations all the Game shops I've been in have had superb customer service, there's one near me where a girl I call Red (she's had dyed red hair since forever) has worked there for 7 years and all the staff are outstanding.

DVS BSTrD said:
Why Blockbuster, is that you?
You'd be surprised, they seem to be enjoying a resurgence in London one near me got hit by the riots but still had cheery staff in there, because its a big premises you don't get the feel of good customer service but they match any sale and trade in price.
 

Dogstile

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Its a shame. Overheard the GAME employees trying to explain to a few people that EA were being dicks and that was why they couldn't stock it.
 

Alexchaser

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This is really annoying i can't actually get mass effect 3 now as i don't have enough money to buy online (i'm 15) and so can't drive somewhere new.

bugger
 

Hevva

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dogstile said:
Its a shame. Overheard the GAME employees trying to explain to a few people that EA were being dicks and that was why they couldn't stock it.
Which is a blatant lie.

Also: yay the Guardian! It's nice when the Escapist's churnalism comes from my newspaper of choice.
 

Dogstile

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Hookah said:
dogstile said:
Its a shame. Overheard the GAME employees trying to explain to a few people that EA were being dicks and that was why they couldn't stock it.
Which is a blatant lie.
Care to elaborate? I'm curious
 

Hevva

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dogstile said:
Hookah said:
dogstile said:
Its a shame. Overheard the GAME employees trying to explain to a few people that EA were being dicks and that was why they couldn't stock it.
Which is a blatant lie.
Care to elaborate? I'm curious
Well, from what we know, GAME had a poor Christmas period and is saddled with lots of debt. This lead to them losing there credit insurance.

Game distribution works like this: the distributors will sell the stock to the store on credit (i.e. we give you the games, you pay us back when you've sold them). Credit insurance protects this deal, so if the store goes bankrupt or is unable to pay the distributor back for whatever reason the distributor still recoups their expenditure.

GAME lost this insurance, and is also saddled with debt and is cutting jobs and closing stores in a desperate effort to balance the books.

Considering the apparent likely hood that GAME will go under, and the lack of credit insurance, it is a prudent financial decision to not sell stock to GAME. Since it would seem that you won't make your money back. EA aren't being dicks, they are just being a sensible business, you can't fault them for that.
 

antipunt

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Wait, didn't a past thread say this was a 'choice' of theirs or something 'for the long run'. Me confuzzled
 
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Hookah said:
dogstile said:
Its a shame. Overheard the GAME employees trying to explain to a few people that EA were being dicks and that was why they couldn't stock it.
Which is a blatant lie.

Also: yay the Guardian! It's nice when the Escapist's churnalism comes from my newspaper of choice.
Not that far off the mark, though. In the US at least, the profit for new games is absurdly low. Like, low single-digits. If GAME was getting the same deal, there would be no way for them to be able to stock it unless EA (and Ubisoft, for that matter, since they're not stocking Ubisoft games anymore either) gave them a better deal on new games. They even offered to share used sale profits if EA and other publishers cut them a better deal on new games a while back, but that was before their current trouble I believe.
 

Hevva

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Irridium said:
Hookah said:
dogstile said:
Its a shame. Overheard the GAME employees trying to explain to a few people that EA were being dicks and that was why they couldn't stock it.
Which is a blatant lie.

Also: yay the Guardian! It's nice when the Escapist's churnalism comes from my newspaper of choice.
Not that far off the mark, though. In the US at least, the profit for new games is absurdly low. Like, low single-digits. If GAME was getting the same deal, there would be no way for them to be able to stock it unless EA (and Ubisoft, for that matter, since they're not stocking Ubisoft games anymore either) gave them a better deal on new games. They even offered to share used sale profits if EA and other publishers cut them a better deal on new games a while back, but that was before their current trouble I believe.
Bullshit. That's the way the games market has always worked. EA are not being extra-special dicks just to piss people off, GAME isn't financially viable, why lose money on a bad deal.
 

Eiv

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Was in gamestation today, and the bloke behind the desk was calling EA for everything. From what he said, EA want £1,000,000 before they will give them any games. How dare they ask a credit risk company for money for there games! what an outrage. -.-
 

EMFCRACKSHOT

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If GAME was to buy Mass Effect 3 at the price EA wanted for it, it would most likely go out of business almost immediately. They would make no profit from it at all (this comes from inside GAME senior management, not an analyst who's claim of a 20% share is spurious at best, the actual figure is much much lower right now due to the company's financial problems).
Of course, this is likely going to hurt EA as well. According a regional manager GAME is respsponsible for something like 56% of EA's UK sales. This is probably going to lower ME3 sales figures quite extensively in the UK.
Also, apparently Tesco has shown an interest in buying GAME as well. NOw that could prove interesting
Edit: To further discredit this guy, if the game sells 0.8-1 million copies in the UK, only about 50% of those would be sold through GAME, cutting his figure in half, and apparently game would only make about 3% profit from it. When you consider that its not garunteed that the game will sell so many copies, and GAME lost their credit insurance so they cant get games on credit anymore, it does make sense from a business point of view not to stock Mass Effect right now.
As to the guys figure of 30% for pre-orders, thats complete bollocks. GAME took 802 pre-orders for the collectors edition (including online pre-orders) and less than thousand for the regular edition (excluding online pre-oders)
 

cookyy2k

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I don't get why GAME didn't just ask all the pre-order guys to pay full upfront then use that money to buy the coppies of ME3 ready for release date. Only order ME3 for definate sales (already payed) and no credit needed because they have the money. It doesn't help pay for staff, rent and so on but it makes more sense than this. They'd get some profit from game sales and the customers wouldn't be pissed.
 

Crazy Zaul

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I was wondering if Gamestop would buy them out. As long as they're not in debt it would be almost too tempting not to snatch them up cheap and be the only retailer.
 

cookyy2k

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Zaul2010 said:
I was wondering if Gamestop would buy them out. As long as they're not in debt it would be almost too tempting not to snatch them up cheap and be the only retailer.
It would appear that way only there must be a reason they're in such big debt, poor management may be it or maybe there just isn't the market the same here. My local Game always seems deserted and everyone I know goes amazon/play for games so that's a good reason. Maybe online purchases have taken off more in the UK or something, I know the last 2 christmases here more has been spent online that in stores.

Maybe they could turn it around or maybe it'll turn out to be poison to their business. There are a lot of stored going under here currently, ones you wouldn't expect to are falling off a cliff, UK retail has a massive problem currently.
 

Jodah

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This whole GAME thing really irritates me as an American. GAME has been known to force publishers to delay Steam releases so as to prevent competition. This is one of the things, at least in my opinion, that caused the lackluster launch of Space Marine. They use underhanded tactics (IMO) and yet still end up failing spectacularly. I hope they completely collapse and I rarely say that about any company.
 

Crazy Zaul

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cookyy2k said:
Pretty much the only people who shop at Game/station anymore are the casual COD and FIFA people who make on the spot decision purchases because they don't know any better and everyone else buys online.

Incidentally I looked at play.com a few days ago and it got taken over by some Germans called the 'Rakutan group'. Don't know how long ago that happened.
 

cookyy2k

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Zaul2010 said:
cookyy2k said:
Pretty much the only people who shop at Game/station anymore are the casual COD and FIFA people who make on the spot decision purchases because they don't know any better and everyone else buys online.
Exactly so the company would not be a sound investment, it'd probably be a huge money sink for anyone who buys it. I think it's destined for liquidation. It's a pity really because I have many friends who work at game and yeah, they're gonna get screwed here.
 

wooty

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Aug 1, 2009
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I hope it doesnt go, either GAME or GS, theres always something a little special about actually going to town and buying a new release over the counter. Online is too impersonal for me, I often get screwed by Royal Snail and I can get a subway on the way home.

Its like a mini day out.