Amid an avalanche of bad economic news, including the subprime mortgage meltdown, the loss of 80,000 jobs in March and record home foreclosure rates, I set out to find a business that is thriving despite the economic turmoil. That business is video games and the major player in that marketplace is GameStop.
GameStop’s sales grew from $5.3 billion in 2006 to $7.1 billion in 2007 and their profit rose to $288 million from $158 million the prior year, according to an article in the Dallas Morning News (DMN) on April 8, 2008. GameStop plans to open 600 stores in 2008 and sales are expected to increase at about 20% (DMN). That’s a significant level of growth compared to many other stores that are issuing earnings warnings. And there are several big name releases that are planned for 2008 that should continue to propel the growth of the industry.
During the last recession in 2001, overall video game sales went from $8 billion in 2000 to $10.3 billion in 2001 and to $11.7 billion in 2002. At $50 to $60 a game, it’s a relatively cheap form of entertainment, since people play the average video game for 20 to 40 hours (DMN). And during difficult times people tend to spend more time at home consuming media such as video and online games, TV and movies.
Like every business, GameStop will face some challenges in the coming year, since there are no major hardware launches planned and the popular Wii console will be more readily available at stores like Target and Wal-Mart, which could cut into GameStop’s sales. However, business among GameStop’s core customers, the hard-core gamers, should remain strong even if the soccer moms migrate to the big box retailers for their game purchases, according to Michael Pachter of Wedbush Morgan Securities.
Peter Koeppel is Founder and President of Koeppel Direct, a leader in DRTV direct response television, online, print and radio media buying, marketing and campaign management. With a Wharton MBA and over 25 years of marketing and advertising experience, Peter has helped Fortune 500 companies, small businesses and entrepreneurs develop direct marketing campaigns to increase profits.
Peter started Koeppel Direct in 1995 and has built it into one of the leading infomercial direct response media buying firms in the U.S.
