Digital Game Sales Continue Killing Off GameStop, Analyst Says

Image: David Cardinez / Inked Pixels / Kotaku (Shutterstock)
Image: David Cardinez / Inked Pixels / Kotaku (Shutterstock)

Video game and nerd culture retailer GameStop appears to be floundering once more. According to a Reuters report, the company recently laid off an unspecified number of employees after reporting a decline in earnings in the fourth quarter as physical sales fall and digital purchases rise.

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As Reuters reported on March 26, GameStop said earlier this week that its earnings in 2023's fourth quarter—from October 1 to December 31—totaled just $1.79 billion. For comparison, the company’s 2022 earnings during the same period were $2.23 billion, which equals a staggering 80 percent decline in overall sales. Wedbush Securities analyst Michael Pachter, who spoke to Reuters, attributed this drop to the rise of e-commerce.

“An increasing mix of digital downloads is hurting physical retail, and there is simply no reason to go to the store if a consumer can just order a game and download it immediately,” Pachter said. “Revenues are highly unlikely to rebound unless management figures out a way to drive store traffic. I suspect that they will keep trimming costs to generate breakeven or better, but it is inevitable that their sales will decline to an unsustainable level.”

IGN corroborated Reuters’ report in a March 27 story, saying that net income across the board for GameStop saw a two percent decline, going from $313.1 million in 2022 to $6.7 million in 2023. Another factor hurting the company is the job cuts, which have been reduced to about 8,000 full-time staff and between 13,000 and 18,000 part-time staff as of February 3. For comparison, the company had roughly 11,000 full-time staff and between 14,000 and 27,000 part-time staff in 2023. According to IGN, GameStop CEO Ryan Cohen has not commented on the news yet and, apparently, the company hasn’t held an earnings call to discuss all of this. It appears Reuters learned most of this information through a press release on GameStop’s official website.

Kotaku has reached out to GameStop for comment.

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This is the latest blow to the brick-and-mortar retailer, which has been going through it for a few years now. The company tried getting into cryptocurrency and NFTs in 2022, only to shutter its entire marketplace after just two years. Stores have closed, employees have quit, and its chief financial officer, Diana Saadeh-Jajeh, resigned after pushing hard for crypto initiatives.

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