A couple of days ago, Gamestop, the video game retailer, announced its acquisition of Impulse, the digital distribution (i.e. downloads) service, and Spawn, a streaming technology company. What are my thoughts? The usual disclaimers apply: my perspective is just that of a consumer, since I know little about the business end of the industry. With that out of the way…
The news did not surprise me at all, at least where Impulse was concerned.
From a financial perspective, Impulse is probably not that big a deal to begin with. Gamestop disclosed neither the expected revenue from Impulse nor the purchase price in its announcement, which makes me think it cannot have been that material.
From a strategic perspective, though, this makes perfect sense as a way to ward off threats to Gamestop’s traditional business by jumping into a new, and hopefully growing, market. One, we’ve all seen the rise of digital distribution services. But did you know that EA’s CEO, John Riccitello, expressed his belief in January that the digital business would overtake packaged goods by the end of this year? Two, publishers are beginning to take real measures to stamp out used games (see the “day 1 DLC” included in the recent Bioware games) – and used games made up 26% of Gamestop’s revenue and 46% of gross profit for fiscal ’10. In each case, the potential danger is obvious. And from Gamestop’s actions, we can deduce where it believes the future of the industry is (or could be).
Possibly even more interesting is the Spawn acquisition. I am not personally familiar with Spawn’s services, whereas I have bought a number of games through Impulse. However, the Gamestop press release had this to say:
“Once the Spawn Labs integration and testing on a new consumer interface is complete, users will have immediate access to a wide selection of high-definition video games on demand on any Internet-enabled device.”
That sounds rather like OnLive, doesn’t it? For a more detailed discussion, I refer you to the Dallas Morning News, which filed two stories from Gamestop’s investor day presentations. The Morning News’ report describes Spawn’s capabilities, and what it could possibly do, in more vivid terms:
“I saw a live, real-time demo of Halo: Reach activated through a web browser on a PC.
But while the games can be played on basically any Internet-connected device at up to 720p resolution, each game actually connects to an individual Xbox 360 (or PS3, if it’s a PS3 game) console in Spawn Labs’ data center in Austin.
In other words, the browser is essentially a display for a console hundreds of miles away. It’s fast, seamless and the games look great.
But GameStop isn’t just enthused about the service itself. It’s also eager to make Spawn’s technology work on a myriad of mobile devices. While phones are a possibility, tablets and laptops are the real goal.
Imagine being able to play Halo on your iPad (or Android tablet or whatever kind of tablet) over the Wi-Fi connection in an airport departure lounge. Or at home in bed while the kids monopolize your living room TV.”
Doesn’t that sound fascinating?
Even as a consumer down in the trenches, I can see the new forces rippling through the industry: casual and social gaming, multipurpose devices, digital distribution, DLC, free-to-play. This struck me as a glimpse of how one incumbent is responding to those forces. And I will be very interested to see how the situation plays out in the future.