With sales declining, GameStop steps into game publishing

As digital sales of video games take a bite out of its bottom line,GameStop is dipping its toes into potential new revenue streams that are a bit outside its comfort zone.

The retailer announced Thursday it will act as the publisher for the new title from storied game developer Insomniac Games, creators of the “Ratchet and Clank” series and “Sunset Overdrive.” In practical terms, that means it will be the exclusive brick-and-mortar retailer for “Songs of the Deep,” though players will be able to purchase digital copies through PC distribution services, the Xbox Marketplace and the PlayStation Store. GameStop will receive a portion of those digital sales as well.

Racthet and Clank by Insomiac Games.

Source: Insomniac Games
Racthet and Clank by Insomiac Games.

“We love the work that Ted [Price] and his team at Insomniac have created over the years,” said Mark Stanley, GameStop’s VP of marketing. “This partnership started as a series of casual conversations with Ted about a year ago. They had a passion project they wanted to bring to market, and we are always interested in exploring a new way to bring exclusive content to our gamer base. … It just seemed like a natural fit.”

GameStop shares have lost nearly half their value since early November, in part because sales of new software have been weak as more and more of GameStop’s biggest buyers — hardcore gamers — have begun purchasing games directly from console makers. In the holiday quarter, sales of new games fell 9.7 percent.

Analysts don’t expect deals of this sort to reverse the slide or fill the gap created by slowing physical sales of video games, but they said the partnership between Insomniac and GameStop makes sense.

“[‘Songs of the Deep’] is not likely the type of game that is going to sell at Walmart or Target, so if [Insomniac] lets GameStop do it as an exclusive, they get some downside protection,” said Eric Handler, senior equity analyst with MKM Partners. “For GameStop, as an exclusive retailer, you’ll bring some incremental traffic in. … Given what’s going on in the industry, it behooves them to take some low investment risks and see what happens.”

The partnership does not give GameStop any creative control over the game, which is expected to release this summer. The title follows a young girl who is trying to find her fisherman father, who had gone missing in the ocean. To do so, she builds a submarine to explore sunken cities and fight undersea enemies.

The publishing arrangement is the latest in GameStop’s ongoing efforts to diversify. Last June, the retailer bought the parent company of online toy retailer ThinkGeek in a $140 million deal. GameStop will likely use that unit to expand the intellectual property rights potential of “Songs of the Deep,” adding toys and collectable items for fans.

As for whether this will be a recurring business model, GameStop is not ruling it out, but Stanley is not committing to it just yet, either.

“Our focus is on working with Insomniac to launch ‘Songs of the Deep’ around the globe with the best support we can provide,” he said. “As we’ve said many times before, GameStop will continue to invest in new, exciting and innovative opportunities that result in more and better gaming choices for our gamers.”

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