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GameStop Refuses to Sell Console Bundles That Include Digital Copies of Games

This feels like a desperate move to keep consumers in the retailer's "trade-in" ecosystem.

The one thing I'll miss about physical discs are the rad fake covers that GameStop employees make when they're bored.
The one thing I'll miss about physical discs are the rad fake covers that GameStop employees make when they're bored.

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.

242 Comments

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pappafost

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As much as I dislike Gamestop, I'm not looking forward to the day when used/traded/loaned games are no longer possible. I think we need to insist on more things like Steam family sharing in the digital retail space.

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Lord_Anime

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I feel like the answer to GameStop is how retro video games stores are alive. There are 1 off stores everywhere that specialize in used game business. But the shelf life of games is super long, and it's seems less likely for these shops to be profitable over time. That's why the hit every aspect of the gaming market to stay relevant.

- They sell SOME new games, in small quantities

-They buy/sell tons of used games

-They also sell card games, and run card game tournaments

-They have a video game arcade, or pinball arcade as part of their store.

-They hold weekly/monthly tabletop or video gaming events, and hook up with the local highschools/colleges to be the location for such things

GameStop has always seemed super corporate and not a place I want to "hang out". Card shops, used video games stores have this rad environment that I want to be in. And after playing a couple rounds of DDR, I'l buy a soda from them and get that sweet Zelda Cart I was eyeing. It also doesn't help that these days, every time I go to GameStop they hassle you to buy the yearly membership for hot savings you don't give a shit about. I think GameStop could tap into the diversities that used game shops offers, but it will take a hell of a marketing campaign and store redesign to accomplish. Their standard mall setup will not be adequate, and they will probably have to let's say sell off 1/3 of their stores. They have to answer, "I buy all my games digitally, why do I go to GameStop?"

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Senate4242

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I don't shop all that often at GameStop, but I am all for this. If I buy a console and it comes with a game, I would much prefer that game to be on a disc. I collect these things after all. I like actually owning my game, and not having it tied to a service.(Yes yes, I know it is just a license). I also still collect Blurays and CDs. I will buy piece-meal music and smaller indie games through an online store however.

Of course they are only delaying the inevitable, but the digital only future is a long ways out.

What surprises me is the number EA gave out. I expected the digital owners to be much higher than 20%. I feel much better about this all digital future taking longer than expected.

I order mostly from Amazon, as they often give me a discount, and I get free same day shipping with my Prime membership. I just got Forza 6 for 53.99.

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generic_username

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I walked into a Gamestop for the first time in months whilst on a desperate Mario-Maker-related Amiibo-hunt, and upon entering, came to the conclusion that I never, ever need to go to a Gamestop again. Not only was their selection of Amiibos terrible, but that and literally every other product sold there can be obtained cheaper from other retailers or more consistently online or digitally.

It's kind of a bummer to see brick-and-mortar stores start to become obsolete (seeing as I personally work at a bookstore) but Gamestop has always been an off-putting and sometimes even downright hostile shopping environment, so seeing it start to fade into obscurity isn't causing me that much anxiety.

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redzavod

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GameStop is the worst. I pretty exclusively buy digital these days, It makes me happy now knowing I'm contributing to driving their businessmen just a little crazier.

Amen to that. I've been outside of console purchases for a while, and this just seems shifty and shitty. Long live digital rights, death to the king.

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GaspoweR

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Edited By GaspoweR
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kdr_11k

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Edited By kdr_11k

How does GS even have enough power to negotiate deals like this? The stores look like they're only a small step above a black market den, the selection of games is downright pathetic, the prices are too high and at least here they're usually in malls with a Saturn/MediaMarkt store that sells more games for cheaper in a store that doesn't look like the employees will nick your wallet if you turn your back on them.

Why do people still go to GS to buy anything?

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HighPriest

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@austin_walker

So I've got an accounting degree, and though I'm not a currently practicing accountant, I'm still able to read an earnings sheet and SEC filings pretty well. There's a lot of talk about how GameStop's doing the last couple of years, so I thought I'd take a few minutes to actually look at their numbers, and thought you might be interested in the results of a casual investigation by someone who knows something about this sort of thing.

My conclusion is that GameStop is doing well financially. They are no longer growing at the same explosive pace they were from 2006-2009, but they appear to have plateaued at a very nice level and have been holding steady since then. Their books are either cooked to look strongly presentable for stockholders (which is super illegal and difficult to pull off, but not entirely impossible), or they're on really solid ground for at least another decade.

This post ended up super long so I'm going to drop most the rest of it behind a spoiler tag.

The most important thing to look at is "are they making money?" (go figure), so the first number to look at is Net Income. GameStop has posted a net profit for every year since 2002 (when they first made public stock offerings, and thus needed to file their numbers publicly) except 2013, when they had a significant loss (on paper) due to them reducing the value of "goodwill" assets they thought they possessed. This is the biggest warning sign I've seen - according to their SEC 10K filing for 2013, most of this amount was dropped from their European, Canadian, and Australian divisions, so I suspect that they had some significant reason to reassess how much their recent acquisitions in those areas were actually worth. It's hard to tell exactly what properties they were reassessing, but it may have had something to do with the closure of Jolt, their browser-based distribution company in Ireland, or their purchase of France-based Micromania game stores. However, this was a one-time issue, and the company appears to have backed off of large-scale international acquisitions since this came up.

Beyond figuring out the deal with that one annual loss, I've looked at a couple of their annually filed 10Ks but haven't noticed anything significantly out of place. One thing I will say is that I've been pretty impressed by how candidly they discuss their potential risks. It's a pretty good read of several dozen ways GameStop could crash and burn. This is actually a good sign, since it does show that their management isn't totally out of touch - they recognize the issues they're facing in a changing marketplace and are adjusting to meet them. A weak risk factors section in a 10K is generally a sign that either management doesn't know what the risks are or that they are deliberately glossing over them.

When people imply that GameStop is some sort of obsolete dying dinosaur company and that this sort of thing is like slapping a bandaid on an amputated limb, they might be right... in like 10 years, maybe. For now, as a businessman, I can tell you their business is doing alright, man. I personally won't be investing in GameStop because conversations I've had with former employees make them sort of seem like an anguish mill, powered by the souls of weeping orphans, but their numbers still look strong.

I'm not saying I like GameStop or that I go there myself (I don't and I don't). My gut instinct is that physical brick and mortar stores like GameStop should be withering away into twisted husks, but everything that I've read runs counter to that. If digital distribution is killing GameStop any time soon, 2014 should have been a rough year for them. Instead, it was only short of their highest recorded net by about 3.3%.

PS: I wrote GameSpot like 40% of the time I meant GameStop in the above stuff, so if I missed any, ignore any Spots in the above. You know what I mean.

PPS: Keep in mind that this is a casual look and that I'm nowhere near an expert, just someone with a little training that hasn't actually been used for a while. So if you put invest your life savings with GameStop tonight and they go out of business tomorrow, that's on you, not me.

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spctre

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@noah_n_bridger said:

It's weird to me we haven't gone all digital yet. I can order toilet paper and food to my door but you want me to go pick up a physical game?

I'm just saying.

all digital doesn't fit the rest of your post, joke or not

I would buy all-digital TP, as long as it's really, really soft

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Shindig

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"This toilet paper has already been redeemed."

Dark future right there.

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SpikeSpiegel00

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Edited By SpikeSpiegel00

GameStop seem to be holding on to a idea that is becoming more outdated with each passing year. As times change, and if they fail to see how physical games are becoming less sort after. They will most likely run them selves out of business. Not saying selling physical copies is a bad thing. It would be more practical to at least try to stay update with some of the more modern video game providers.

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Jesus_Phish

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Edited By Jesus_Phish

GS in Ireland have, in at least one store and they're doing it soon in another, introduced another company that they own called Zing or something. It's a sort of pop-culture not a comic book store but sells things that you'd find in comic book stores and on ThinkGeek. So half the store is Gamestop and the other half is this new Zing place. It's not enough for them to just trade off games any more to make it viable to run that store.

One thing I don't fully disagree with though is that I don't think it's a bad thing to get a physical game with your bundle. Even if you've decent broadband, if you buy a PS4 you're going to be waiting hours while you download Destiny or Madden or whatever it was bundled into your box as a digital title. And for all Sony seemed to push the idea of them prioritizing data so you can play while you download it seems very few titles do that and those that do are very limited in how they do it. I think it was one of the NBA games last year where it would let you play an exhibition match with a selection of two teams and that's all you got until the thing was done downloading. I'm sure an XONE takes a hell of a long time too but I've been told their download speeds are much better than Sony's.

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ithmoliar

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larmer

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As someone who doesn't care about owning any entertainment content, I don't really care if it's digital or physical. Gamestop (EB Games in Canada) never gets my money anyway. I will sooner buy a console from Walmart than I will from EB Games. And if anyone wants to buy a used game, I don't know why they bother with retail middlemen when person-to-person trades through craigslist and ebay are so much better for both sellers and buyers.

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Deusoma

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It saddens me whenever anyone talks about an all-digital future as a good thing. With their Steam refunds policy, Valve are likely to be the benevolent exception to the greedy rule. If all games are digital, you never really "own" them at all. :\

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bpcupid

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My Opinion Piece

After my first comment I realised my opinion ran much deeper... and since I had a little time I decided to try put it down... only read if you have some spare time/Actually care :)

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gamerpigeon

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@deusoma said:

It saddens me whenever anyone talks about an all-digital future as a good thing. With their Steam refunds policy, Valve are likely to be the benevolent exception to the greedy rule. If all games are digital, you never really "own" them at all. :\

Couldn't agree more. The single benefit of Digital is that it saves space but it essentially means that not only do you not really own anything but you also have nothing of value. you can spend thousands of dollars and have nothing to show for it, no way of getting any of that money back. Why do people buy houses? Why do people try to avoid buying cars with huge depreciation?

The ideas I've heard of a second hand digital store makes no sense as there is no difference between a pre owned digital product and a new one. So why would companies allow their potential profits to be undercut by this practice? If they get angered by pre owned physical releases then surely digital releases being sold pre owned would annoy them even more right?

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Ravelle

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@deusoma said:

It saddens me whenever anyone talks about an all-digital future as a good thing. With their Steam refunds policy, Valve are likely to be the benevolent exception to the greedy rule. If all games are digital, you never really "own" them at all. :\

Couldn't agree more. The single benefit of Digital is that it saves space but it essentially means that not only do you not really own anything but you also have nothing of value. you can spend thousands of dollars and have nothing to show for it, no way of getting any of that money back. Why do people buy houses? Why do people try to avoid buying cars with huge depreciation?

The ideas I've heard of a second hand digital store makes no sense as there is no difference between a pre owned digital product and a new one. So why would companies allow their potential profits to be undercut by this practice? If they get angered by pre owned physical releases then surely digital releases being sold pre owned would annoy them even more right?

We also can't go in to an era of Digital only without storage increase and staying around the same price range, both console and game wise. In Europe and some other countries the digital games are 70 euro's instead of the regular 59 euro's and digital deluxe editions go for 80 to 100 euros. This is only Playstation luckily, Steam prices are still regular.

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kagato

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I personally will always buy a physical game over a digital one unless its on sale for a fraction of the price during one of Sony/MS's promotions. To be fair though i usually buy my games new and only pick up pre-owned stuff when it is no longer available sealed, i doubt i'm making much difference to their overall sales in that respect.

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spraynardtatum

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This push for "all digital" is getting pretty dogmatic.

CNN and Fox News have proven that pitting people against each other is an extremely valuable tactic, albeit it basically works against everything that will build respectful and intelligent dialogue. This unfounded prediction of an all digital future by many in the gaming press just screams of that same kind of click-making biased stupidity. It's an unanswerable and unending discussion.

Gamestop selling a physical bundle instead of a digital bundle makes sense for them. And it's not like they're removing games from bundles...this article is just a smear.

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KaneRobot

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Edited By KaneRobot

@wraithtek said:

Didn't think I'd be saying this, but: Thank you, Gamestop.

Not quoted fully due to size, but yep. Basically - SCREW THE "ALL DIGITAL FUTURE." If I want to buy digital, I will. But if I want to actually own the games I buy, I'll stick with the model that has worked just fine since console games started coming out. All digital pricing does tighten up control on pricing, which isn't something we need more of. Game journalists push the all digital thing because it's convenient for them, usually having consoles in multiple locations, and they only have to pay for a fraction of the games the average person does. I need any price breaks I can get.

I don't need Gamestop specifically, but anyone with any pull that fights an all-digital scenario...I'm with 'em.

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Oldirtybearon

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@kdr_11k said:

How does GS even have enough power to negotiate deals like this? The stores look like they're only a small step above a black market den, the selection of games is downright pathetic, the prices are too high and at least here they're usually in malls with a Saturn/MediaMarkt store that sells more games for cheaper in a store that doesn't look like the employees will nick your wallet if you turn your back on them.

Why do people still go to GS to buy anything?

Because your anecdotal experience doesn't outweigh anyone else's anecdotal experience. Example:

I have never been to an EB Games/GameStop where the staff wasn't friendly and eager to talk about video games. I have never met another customer inside an EB Games/GameStop that wasn't friendly and eager to talk about video games. I have never once been bullied or inundated with talks about pre-orders or half-baked attempts to shill GameInformer magazine. All in all, the staff and customers at my local EB Games/GameStop like knowing their customers and their tastes. They're also pretty accurate when it comes to general knowledge. I've never listened to said staff give buying advice that was predicated on bad information. They mention cons as well as pros on the customer's inquiry ("is this game any good?" "how are the reviews?" et cetera), and when I tried to buy Aliens: Colonial Marines I was actually warned by said staff that the game was getting really bad scores online. Said staff member explained it as not wanting to see a customer get burned on a bad purchase. Considering she was always honest about how things were going, I believe her.

Does my anecdotal experience apply to all GameStops/EB Games across the world? Fuck no, and nowhere should I suggest that it is. Just the same as the inverse, really, people shouldn't assume that just because their local store is a shithole that it means every other store must be a shithole as well.

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THEBIGZED

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Hell of a SR2 cover, at least we Finns are doing something right.

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AndyC80

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@plasticpals: hi. I don't think Austin had an anti consumer perspective here, mostly one that is wary of the high profit model used by GameStop. Digital is nice for me, I have yet to use my ps4 drive at all, but I understand some like the physicality of a disk. I do not think its anti consumer to see a move towards all digital, in fact it is almost surely a certainty. DVDs and blue rays have no replacement and may never have one. As the market moves on, it may lose some of us but that is natural. To see it coming is not disrespectful but a statement of the obvious.

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Spwn

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OurSin_360

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Edited By OurSin_360

I actually think this is a good thing as packing in a download code is kinda shitty for anybody without an online service, access to the net, or just slow internet. However, they probably missed their mark on creating some sorta digital sales network like steam, origin, psn, etc. If they could somehow develop a digital network that allows trade-ins refunds so they could re-use codes they may be able to stay alive, but it's probably to late for that. They would also have to make some sorta deal, or rely on microsoft/sony to create a refund system similar to steam . Steam refunds ftw

Hopefully we get some sorta legal action that will require digital refunds for software at some point

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purpleeggshells

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I mean, who can blame them? Really? They don't want to end up like blockbuster, but they're only delaying the inevitable unless they embrace the changing industry in some way (don't ask me how though?!)

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dirtydale

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My friends and I used to cheat the Gamestop system pretty hard during the 360 days. We would buy a game for $60 as well as the $3 one year warranty, play it for that year, and when we got tired of it we would scratch up the disc so that it was unreadable. Then we would go back to Gamestop and with the receipt and exchange it for a brand new disc. Finally, we would go to the other Gamestop in town and return that to get our $60 back. So essentially we were renting a game for one year for $3 and a $60 deposit.

I always felt really good knowing that I was getting one over on Gamestop.

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Dirtyplatinum

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@noah_n_bridger said:

It's weird to me we haven't gone all digital yet. I can order toilet paper and food to my door but you want me to go pick up a physical game?

I'm just saying.

all digital doesn't fit the rest of your post, joke or not

I was gonna say something. Glad you were on top of it.

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mks5000

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I walked into a game stop to buy MGSV after work, and had to wait in line for 30 minutes because a guy was trading in and xbox and a bunch of games. After the other employee disappeared into the back to find god knows what I walked out and bought it off PSN.

This is the last time I'll attempt to buy anything at a gamestop

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BrianP

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My friends and I used to cheat the Gamestop system pretty hard during the 360 days. We would buy a game for $60 as well as the $3 one year warranty, play it for that year, and when we got tired of it we would scratch up the disc so that it was unreadable. Then we would go back to Gamestop and with the receipt and exchange it for a brand new disc. Finally, we would go to the other Gamestop in town and return that to get our $60 back. So essentially we were renting a game for one year for $3 and a $60 deposit.

I always felt really good knowing that I was getting one over on Gamestop.

This is devious and I applaud you

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PhantasmMask

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I feel that physical copies are here to stay until the online infrastructure gets upgraded in the US. Of course this isn't taking into account that services such as PSN are unwilling to compete with other retail outlets on price. (No one should have to pay $60 dollars for a 2 year old game Sony).

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AngstOverlord

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Discs have one key advantage over downloadable media; they do not expire. While most codes will remain valid after their written expiry date they are not guaranteed.

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Seikenfreak

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I don't like it when a console comes with a code for a game.

But I like physical copies of stuff. And if I'm spending hundreds of dollars on a console, why not give me the $5 worth of plastic a physical copy would cost the manufacturer.

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xrayzwei

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Just out of curiosity, of those that say they like to have the ability to lend out discs or borrow them, how many actually do just that? I just had this discussion with a few friends last week and while they like having the ability to trade, swap or lend stuff out they never do it. What's the benefit then?

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Sor_Eddie

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I really don't get the love for digital on console. It's not as though it's cheaper like it would be on PC, all it does is take longer to get it than if I had just gone to the store, takes up space on my HDD so I can have fewer games on the go at once, and I can't trade, lend or sell it.

To be honest, it always seems to me that so many tech writers have this incredibly myopic view where they seem to forget that the majority of the world doesn't live in either NYC or the Bay Area.

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zrais

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Down with physical media!

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Taklulas

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It's weird to me we haven't gone all digital yet. I can order toilet paper and food to my door but you want me to go pick up a physical game?

I'm just saying.

Once our internet overlords decide to stop fuck us over with slow internet speeds is when you'll see everything go digital.

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charlie_victor_bravo

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@zrais said:

Down with physical media!

Why? Limiting your options is one of the most idiotic thing you can do.

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ripelivejam

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All this tells me is that i should be prepared to look for another job in the very near future (and have a bitch of a time of it), but hey, down with retail amirite?

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zrais

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@charlie_victor_bravo: For me personally its because I want just less "stuff".

I personally don't mind if people still want physical copies of media, I just have no use for it.

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austin_walker

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@highpriest: Hey! This stuff is fascinating and I really appreciate it! I don't think that GameStop is dying, and like I said in the article, I get why this decision is logical. But in a market where they're the only ones doing it, the optics on it aren't great. It looks frightened. But who knows, in a decade maybe we'll look back and say that it was the first step in a strategy that kept the company relevant! Time clarifies.

(And for the record, I also wrote GameSpot like a dozen times while writing the story, so I feel you.)

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Wooderon

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Edited By Wooderon

I picked up a PS4 a few days ago that came with Destiny, a physical copy of the game. I only got to play Destiny the next morning because the game needed over 7 hours to do whatever patches and downloads it needed to do before it would let me on.

What's the point of physical games anymore if you can't just play them from the disk and need to put them on the hard drive anyway. I picked up a 2TB hard drive for my Xbox One a few months ago and have decided never to buy a physical game for it again. All they do is fill up shelf space.

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Jesus_Phish

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@wooderon: Well if you didn't get the disc version you would've had to wait even longer to download all that data.

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Wooderon

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@jesus_phish: 7 hours or 14 hours, it's still too long to wait between buying a game and being able to play it. I'm aware Destiny is a special case. I'd play MGSV instead but that needs patching now and it's taken 10 minutes to get to 5%.

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BradBrains

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@charlie_victor_bravo: eh in a world where the whole game is downloaded to your console anyway I'd rather not deal with discs and have the game on a server whoever I want. I get the appeal of physical discs But hey thanks for basically calling people who don't care as much about physical media as you idiots

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greased_ltng

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Edited By greased_ltng

I refuse to support Gamestop but, as a consumer, I wish console pack-ins came as physical copies. On an unrelated note, I also wish Devs would stop putting out stupid large patches.

I picked up my Forza 6 Xbox One from Best Buy on Tuesday knowing that a code was included. I also picked up a copy of Trials Fusion to play while Forza 6 downloaded. I stick in the disc and BAM! 5gig patch required... I couldn't even play my newly purchased Xbox.

Wanna guess what I did? Popped in Bluray like a G.

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GrayFox666

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Edited By GrayFox666

As someone who like cheap old games used games can be great. Plus the GameStop I've been going to for years is great and I like the people who work there, and contrary to the popular opinion of them , they don't do the dick move and sell new games for $5 cheaper the day it's released as new. Sometimes I don't want to keep every game I buy especially since I buy a lot of them and it's. Ice to get like $35 back in them

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BradBrains

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As someone who like cheap old games used games can be great. Plus the GameStop I've been going to for years is great and I like the people who work there, and contrary to the popular opinion of them , they don't do the dick move and sell new games for $5 cheaper the day it's released as new. Sometimes I don't want to keep every game I buy especially since I buy a lot of them and it's. Ice to get like $35 back in them

I was in gamestop this weekend and they had used games for 5$ cheaper than new :/

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Ry_Ry

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Most of my games are digital, but I can see why people prefer physical. So its nice to see them have options.