Revenue Strategy

for
GameStop
NYU ADC Team
New York University
Argha Mondal
Daniel Yates
Yuantao Li
Alex Martin
Debapriya Basu 1
Problem Statement Solutions
Generate $4.5b in revenue within 5 Repurpose the physical stores
years to offset declining division

Strengthen online presence

AR/VR based gaming service

2
SWOT Analysis of GameStop

Weakness
• Dependence on few
Strengths Suppliers
• Extensive retail presence • Vulnerable to disruptive
• Strong distribution network market
• Strong brand name
• Liquidity position
Threats
• Expansion by Competitors
• Government Regulations
Opportunities • Currency Translation
• Focus on Video Game Industry
• Growth of Web-Based Stores
• Partnership Initiatives

3
GameStop: Current Annual Revenue
New video game software Pre-owned video game products
Video game accessories Digital
Technology Brands Collectibles
Other 3.1% 2.1%
6.9% New
9000
8.5%
28% Pre-owned
8000
Net sales in million U.S. dollars

7000 8.7% New hardware

6000
19.4% 23.3% Technology
5000 Brands
4000 Accessories
Source: Statista estimates
3000

2000

1000 • GameStop’s 70.7% annual revenue source is

0
video game hardware and software
2010 2011 2012 2013 2014 2015 2016 2017 divisions, which are forecast to cease
Source: GameStop 2017 10-K. ID 568893
operations in 5-10 years.

4
 Strategy

Maximize Reach
Diversify into new markets while retaining
loyal customers

Global Services
Provide world-class gaming experience

Business Relationship
Strategic initiative with our partners

5
5
Global Market 1000 912

Number of gamers in
800

millions
600
392
400 338

200

0
Asia America EU
Pacific

Asia (Largest market)

USA

Europe

6
Market Behavior
25
22.4
Value in billions of U.S. dollars

Digital Physical
20 18.4
16.3 3000 6000 5,524

Number of gamers in

Revenue in million U.S.

15 2500 5000
15 12.9 12.4 13.2
11.7 2000 4000
10.9 2,618

millions
10.3 9.9 9.6 1500 3000
1,7941,682 1,670

dollars
10 8.7 9.3 9
1000 2000
7.1 7.4 547
500 1000
5.3
5 0 0

2017*
2015
2014

2016

2018*

2020*
2019*

2021*
0 Source: PwC; Best The News ID 246888

2011 2012 2013 2014 2015 2016 2017* 2018* 2019* Source: Akamai Technologies; TechValidate; Applause (ARC) ID 608933

Source: Capcom; International Development Group ID 292460

• Hardware and software market sustained an average 6.6% loss in annual revenue
• Digital market maintained 11.3% increase in annual revenue over last 5 years.

• Number of video gamer is expanding 5.5% every year

• 39.9% global annual revenue in gaming industry comes from Mobile games
• Console based gaming is the source of 18.9% global annual revenue
7
Current Market in AR/VR Gaming
Global revenue US market revenue
25 10000

Revenue in million U.S.

Revenue in billion U.S.

19.5 Software Hardware

20 8000 11.76%
15.9
37.25%
15 12.9 6000 21.57%
dollars

dollars
10.6
10 8.6 4000
7.1
4.6 5.7 29.41%
5 3.1 3.8 2000 Europe North America
1.261.52
0 0 Asia Rest of World

2022*

2022*
2015

2015
2014

2016

2014

2016
2017*
2018*

2020*

2017*
2018*

2020*
2019*

2023*

2025*

2019*

2023*

2025*
2024*
2021*

2021*

2024*
Source: SuperData Research; IGN ID 499698

Source: Merrill Lynch; Bank of America; Statista estimates ID 685704 Source: Statista estimates; Grand View Research ID 784126

Share of shipments
0.0% 20.0% 40.0%
• The AR/VR gaming market is expected to grow at a robust CAGR Sony
of 10.9% during the forecast period of 2018-2025 Oculus (facebook)
• Currently the market is concentrated and major 4 firms control HTC
80% of the market Microsoft
Others
Source: TrendForce ID 755645

8
Consumer Interest in AR/VR
Share of respondents
Share of respondents
OVERALL 11% 24% 23% 35% 6% 0.0% 20.0% 40.0%
ALL GAMERS 17% 32% 23% 21% 6% The feeling of entering… 47%
CONSOLE GAMERS 27% 37% 18% 11% 7% The technology 36%
Trying something completely… 31%
PS4/XBOX ONE GAMERS 37% 35% 13% 8% 7% Intense gaming experience 26%
SMARTPHONE/TABLET GAMERS
Possibility to be 'part of the… 21%
22% 33% 22% 17% 5%
New possibilities for… 16%
PC GAMERS 18% 33% 22% 21% 6% Don't know 16%
Source: Statista Survey ID 790471
Very interested Somewhat interested Not very interested
100.0%
Not at all interested Don't know Source: gamesindustry.biz; Ipsos ID 529951
78%

Share of respondents
80.0%
57%
60.0%
• Major AR/VR wearables available in the market
40.0% 30%
cost >$350 13%
20.0%
• 18% of the gamers are willing to spend >$200 to 0.0%
1% 2% 4%

spend on AR related hardware and software

Source: Activate ID 795155

9
Acquisition of AR/VR Company

• Multi-platform access
• Incredibly fast
• Project North-Star
• Aesthetic
Market evaluation: $515M
Source: JP Morgan Chase (2018)

Revenue in billion $
2.2

Partnership for software development

1.8

1.4

10
Fading in-store sales
Avg sales per square foot 8000
11704.4 12034.1
12000
10378.2

Total gross square feet (million)

1000 $906.68 7535
$880.26 9421 9559.6 10000
$840.12 7500
7276

Number of Stores
800
$684.73 $673.93 7117 8000
600 7000
6000
6675 6690
400
4000
6500
200 2000

0 6000 0
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Source: eMarketer Inc.

• Profitability of stores is decreasing rapidly.

• The number of stores is decreasing recently.
• Smaller stores are replaced by fewer larger stores.

11
Three-Tranche Development Program

Scope Cost Value Added

Brand recognition
Flagship 20 Stores Exceptional customer experience
High
Stores (major markets) Support for digital offerings
Events and competition streaming

Technology Diversification into growing markets

2000 Stores Mid Promising revenue
Stores Leverage existing partnership

New Look Overhaul customer experience

4026 Stores Low Virtual reality market
GameStop Game development training

12
Changing stores into experience centers
GameStop opened its “store of the future” in Palo Alto and other
24 other flagship stores in 2010.

These stores feature larger area for walking and watching demos,
as well as buying and selling.

To move further, stores focusing on ”experiencing” rather

than selling could attract more customers and boost online
and in-store sale.

13
Key features of modern experience centers

Superior interior design Friendly and interactive State of art technologies

environment

Located in a busy tourist or Cozy and convenient Featuring the product

14
business area
Improve interior design
Renovating flagship stores in major cities

• Work with major interior designer firms, to create

a modernistic and artistic space
• Create spaces that exhibits on trend games

Cost:
Design fee $10,000
Construction materials fee $200,000
Furniture fee $150,000
Labor cost (10 members) $200,000
Total cost per store $660,000
15
16
Timeline

2019 2021 2023

Repurpose 25 Release new AR/VR Expand business into
physical stores games to public other tech industry

Start e-streaming Introduce VR Cafe in

service the major storefronts

2020 2022 17
Thank You
18
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•Simplest game for VR/AR – $5 000 – $8 000;
•Online shop in virtual or augmented reality –
$15 000 – $25 000;
•Horror game – $20 000 – $80 000;
•3Ds Max in VR – $50 000 – $200 000;
•MMORPG – from $100 000

24