Over the last few years, we've seen the return of the classic "pack-in" console bundle, featuring both a game system and a game to play once you get it home. If you check major retailers like Amazon, Best Buy, GameStop or Target, not only will you find a wide selection of bundles, you'll actually have a hard time finding a brand new console that doesn't have a game packed in with it. And in almost all of these cases, the game promised on the front of the box is actually a card with a download code printed on it. Almost.
During a recent earnings report conference call, GameStop executives outlined their decision to move away from "digital" bundles and highlighted their recent effort to provide "physical" bundles instead. This new strategy went into effect just last month, with the release of Madden NFL 16. While other stores sold Xbox One and Playstation 4 bundles featuring digital copies of the football game, GameStop "worked with Sony, Microsoft, and EA" to reach an arrangement for the retailer to provide a physical copy with any new console purchased. This isn't just a little experiment either. GameStop COO Tony Bartel explained that if Sony and Microsoft continue to release digital bundles, GameStop will turn to "third party" physical-bundles. This could mean that they'll work out a deal with a major publisher like EA or Ubisoft to include a free physical copy of a recent release.
Why do this? Well, the gut reaction is to point out that GameStop wants people buying physical discs because you can't buy digital games directly from them. But it's actually a little more complicated than that. It’s not just that GameStop's executives want you to come into the store to buy new games—the profit margins on new games haven’t ever been the driving force for the retailer's business model. Instead, it’s about making sure that there are used, physical copies remaining in circulation. As Sam Materra points out over on The Motley Fool:
It's ... not possible to trade in or resell digital games, which poses a big challenge to GameStop's used games business. Last quarter, used games generated about one-third of GameStop's revenue and nearly 45% of its gross profit. Digital bundles reduce the number of available game discs in circulation, limiting GameStop's ability to resell them.
GameStop's business model has always been about selling a game to a consumer for $60, buying it back from them for a pittance, and then selling it to a second consumer for $50 (and then repeating that process over and over again). This worked for years, but now GameStop is facing a digital world, one where publishers (including EA) report that around 20% of all console games sold are done so digitally.
While this might be the logical move for GameStop, it really just makes me feel like they're flailing in the face of inevitability. It's a bad look. This strategy might keep some key physical discs in circulation for a bit, but the company needs to figure out a better way to remain relevant as more and more buy their games without ever leaving the house.
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