GAME shrugs off Google Stadia threat

GAME boss Martyn Gibbs is "erring on the side of excitement" when it comes to Google's new Stadia streaming service.

Streaming services have been a major disruptive force in the television and film markets, with offerings such as Netflix significantly impacting sales of physical DVDs and downloads.

Google Stadia does feature accessories for retailers to sell, but the ability to access content instantly is a potential threat to businesses still built around buying and selling physical discs. Nevertheless, GAME feels that it can benefit from any significant investment in expanding the gaming audience.

"We believe that all of the major investment coming into gaming is welcomed," Gibbs tells us after the firm's latest financial results. "If Google can bring more people to play games more often, then obviously we believe we will benefit from that.

"I think that it will take some time to take hold. And then we've got, as every journalist has written, about 400 questions that aren't yet clear on any of the models, or how cross-play would work, what the games would be, the ownership model... There are so many unanswered questions, it is difficult to understand what the size of this would be. We'd err on the side of excitement that there is so much more development money being pumped into games."

Part of the reason GAME is perhaps optimistic about Google Stadia is that the firm is currently transitioning away from being, "a seller of physical product to providing gaming experiences, with retail as a key component part."

At the heart of this strategy is Belong, the pay-to-play areas of GAME stores that feature high-powered PCs and host esports tournaments. Belong has been developing for nearly three years, and during the last six months GAME has opened two new Belong arenas and increased its number of PC stations by 20%. However, the brand still isn't profitable.

"Retail is a pretty tough environment right now."

"We anticipate that it will break even this year," says chief financial officer Ray Kavanagh. "We won't have huge increases in central costs that we roll forward. And as we add scale and profitable locations, then we will make a significant move into profit over the course of the next year."

In the short-term, GAME continues to rely on its retail business. Gibbs says he wants to be, "really clear that retail is a pretty tough environment right now." The firm has seen a drop in hardware sales as the console cycle enters its sixth year, and pre-owned is seeing a structural decline that will only continue (although Gibbs says there may be a brief uptick in pre-owned around the expected launch of new hardware in 2020).

However, sales of physical and digital software remains strong, and the firm has been "relentlessly" cutting costs to ensure the business remains profitable.

Plus, there are a few areas of positive growth. The introduction of Belong has seen the company invest more in PC accessories and hardware, which is growing strongly. And GAME has also been capitalising on hugely popular digital hits, such as Fortnite and Apex Legends.

"You and I have been around a long, long time, but I don't think we'd have bet our house on 50 million people playing Apex Legends in three weeks," Gibbs says. "I think we are very well set on capitalising on the opportunities as they come up. Predicting what those opportunities will be will be quite difficult. But it doesn't really matter to us, because we have Fortnite and PUBG under our belts, and we know exactly how to create the opportunities as soon as the title becomes big enough.

"Apex Legends will be very similar to Fortnite, but a lot quicker. If you look at Season One, which launched a few days ago now, we're already selling the downloadable content for that through the stores and online. That's well in advance of how quickly we were up and running with V-bucks for Fortnite. If the title continues to perform, with it being EA we expect licensed merchandise to come a lot quicker as well."