Parker Consulting analyst Nick Parker casts his eyes over GAME Group and looks at the reasons behind its initial fall into administration…

There are some commentators who argue that the migration of gamers to digital distribution has had an impact on bricks and mortar retail. This is not true. Digital distribution – download-to-own and video-streamed games on demand – are still nascent industries.

It is true to say that people’s gaming habits have changed. An important demographic of young and teenage gamers, who once dipped in and out of the market, now seek their casual gaming experiences on social networks using both their PCs and their mobile devices.

Furthermore, this demographic has adopted online communication among friends, again on social networks, as a major part of their free time, as well as viewing online media such as movies. These people may only buy one or two games a year, from the primary stable of IP.

Unfortunately, the PC-led evolution of online games does not touch the traditional packaged goods sector, with certain exceptions of course like Skyrim and Star Wars: The Old Republic. But retailers do offer PC gamers – who tend to be a bit older and more core – the opportunity to rub shoulders with like-minded gamers and speak to knowledgeable staff. That’s a worthy environment for true gamers.


Any media specialist retailer, whether it be games, movies or music, has had to deal with city investment institutions and their analysts, who don’t trust these markets and therefore only consider them on a short term basis. These analysts do not appreciate the typical lifecycles of home consoles or the way that the games market is hit driven.

Specialist retailers have their work cut out every year in explaining these market characteristics when describing year-on-year comparables to investors, which are usually in decline. The market has been in decline but the HD consoles of Xbox 360 and PS3 have performed better. However you can’t run a retail business the size of GAME?on two platforms, or three at a push if you include handheld or PC sales.

Unfortunately, GAME and HMV have been at the mercy of investors selling off their share holdings, which has driven down the market cap of the companies.


Market economics and changing gamer behaviours aside, GAME Group went into administration because it did not react fast enough when the writing was on the wall three years ago. There was an awareness in 2009 of how the industry would progress in the next three years, so nobody can say they were caught on the hop. Stores should have been more ruthlessly culled, in-store offerings should have been more diversified into other entertainment formats and online distribution should have been more advanced (although was ahead of some of its rivals, it should have accelerated this leadership).

Even if the CEO has the right intentions, it is difficult to persuade the Board to move beyond its comfort zone – the pace of change required was not fast enough and left senior management cold at the thought of it. Part of this was down to the culture of GAME, which had extremely loyal staff who grew together over the years. This makes the redundancy call even harder to execute as nobody enjoys wielding that cost-cutting knife.

The bottom line is that the market for packaged goods hasn’t been significant enough to support the infrastructure costs of GAME, specifically in the UK. This country of gamers does not require the size of real estate GAME has offered, and the board of GAME sadly left it too late to morph itself into the optimum size and service required in the UK.

Nick Parker is the founding partner of Parker Consulting Ltd, the industry’s foremost advisors in strategic planning, business intelligence and research.

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