It’s no secret GameStop has been struggling as the gaming market has changed, and over the last few years, controversies about sales policies and worker treatment have found the company closing stores, even as the rise of digital distribution threatens its entire business model. The fact that Sony and Microsoft are increasingly edging in on its sales turf with digital distribution isn’t helping matters. So GameStop, or at least its executive suite, is reportedly looking for a parachute.
Reuters broke an exclusive that GameStop is shopping for somebody to buy it, and while there’s not a done deal yet, there is interest.
The company has hired a financial adviser to assist in these discussions, said the people, who asked not to be named because the matter is private. Sycamore Partners is one of the private equity firms that has expressed interest in GameStop, one of the people said. There is no guarantee the talks will result in GameStop deciding to sell itself, the people cautioned.
Unfortunately for the rank-and-file at GameStop and for gamers who still rely on the store to buy games in the absence of reliable internet, there’s no way this ends well for them. There are two ways a buyout like this goes: Either the buyer decides to create a short-term profit bump by borrowing heavily against the company’s assets and use that to flip the company, or they strip it for parts. Either way, stores are closed, jobs are lost, and often the only winners are the guys who got out while the getting was good. If this sounds familiar, it was what killed, most recently, Toys R’ Us.
The main question here is whether GameStop can be saved. The reality is the company is in a terrible position: It’s not only fighting the companies making their anchor products for new game sales, but also big-box stores with much deeper pockets like Best Buy and Wal-Mart and online retailers like Amazon, who are also horning in on GameStop’s used game sales action. In October the company announced an innovative idea that boiled down to becoming more of a game rental company, PowerPass, only to essentially cancel it in November. Now, GameStop needs to figure out some bold moves, and figure them out quickly.
(Via Reuters)