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| | Thursday, February 2, 2017 | Issue #2988 |
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What the Collapse of a Strip-Mall Staple Says About This Industry's Future Matthew Carr, Emerging Trends Strategist, The Oxford Club
 Earlier this week, an old acquaintance posted on Facebook that a record store we used to frequent was closing its doors.
The post read, "SO SAD!" The words were accompanied by a frowny face emoticon.
I was shocked. Not by the fact that the store was closing its final location... but that it was still in business. I thought it had been shut down years ago.
The record store's parent company filed for bankruptcy in 2003. Prior to then, it had been closing locations since the mid-1990s.
Smaller music store chains were largely killed off in the '90s due to the expansion of Best Buy (NYSE: BBY), Barnes & Noble (NYSE: BKS), Borders and a whole host of other retailers muscling their way into the business.
So when I read that Facebook post, I wasn't sad. To the contrary, I say kudos to the store's owners for surviving this long.
Big-box stores have killed all kinds of individual businesses. But what goes around comes around...
Today, big-box stores are struggling with overexpansion and ongoing pressure from online retail. Last month, we saw plenty of evidence that another type of retailer is going to see the same demise as the corner record store.
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The Rise and Fall of GameStop
GameStop (NYSE: GME) was spun off from Barnes & Noble back in 2002. (I grew up with its predecessors Babbage's and EB Games.) It quickly became a strip-mall staple.
But GameStop's business model is quickly growing outdated. If it doesn't adapt, it's going to join the other lambs heading to slaughter in the rapidly changing video game industry.
I grew up playing video games. And, truth be told, I still play video games to this day.
As a Gen Xer, I've witnessed the rise and fall of many consoles: Atari, Sega, Neo Geo, PlayStation... I've watched Nintendo (OTC: NTDOY) reinvent itself numerous times.
Today, as I said, there is a fundamental shift happening in the industry. And it will likely cause the collapse of businesses like GameStop.
I'm talking about e-commerce.
For the holiday season, GameStop reported that video game sales declined 22.8%. And preowned video game sales fell 7.9%.
Meanwhile, digital downloads are on the rise...
Record Digital Revenue
This trend was on display in Electronic Arts' (Nasdaq: EA) third quarter report. Full-game digital downloads for consoles and PCs increased 82% year over year.
32% of all games it sells are digital downloads. That's up from 20% during the "Big-box stores have killed all kinds of individual businesses. But what goes around comes around...
"Today, big-box stores are struggling with overexpansion and ongoing pressure from online retail." | |
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company's fiscal year 2015.
60% of Electronic Arts' revenue now comes from digital sources - through subscriptions, selling extra content, full-game downloads and mobile.
The company is reporting record digital revenue. And it isn't alone...
In its third quarter release in November, Activision (Nasdaq: ATVI) reported digital revenue had increased 114% year over year. It's reporting record revenue all around because of the digital component to its business.
The company's games have 500 million monthly players. In two years, its monthly active users have doubled because of games like World of Warcraft and Overwatch.
On top of this, digital accounts for 69% of its revenue. In fiscal year 2015, it represented 54%. Retail sales now represent a mere 25%.
So this is a transition that's taking place very quickly. And it poses a major problem for a reseller like GameStop.
And you have to remember... consoles are more than just machines that play video games. Modern systems can stream TV, movies, music and even allow you to browse the internet.
It's all part of the overall trend I described here on Tuesday - the connection of everyday devices and services to the web.
Even if you're not excited about these advancements, you can rest assured that younger generations are. They're embracing these changes and making them happen.
And every day, their numbers are increasing.
Good investing,
Matthew | | Click here to post a comment on InvestmentU.com |
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International Plot to Overthrow the U.S. Dollar
There's a growing worldwide trend of "striking back" at the United States.
In fact, there's already a list of 25 countries agreeing to take "revenge" on the U.S. You might not believe it, but supposed allies Canada, Britain and Qatar are on that list!
Now, if you think our "friends" turning their backs on us is bad news... just wait until you see what our enemies have planned.
Discover how you could protect yourself (and your portfolio) from the crossfire by clicking here. |
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Silver and gold are both popular hedges. There are many ways to buy these metals. Here, we look at the pros and cons of each option. Read On... |
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As our world becomes more connected, our day-to-day dependence on machines, computers and artificial intelligence grows exponentially. And there's no slowdown in sight for one corner of the market. Read On... |
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In today's edition of Investment U Plus, readers are discovering a technology play with revenue growing at a whopping 25% per year. To find out how you can get all the details, click here. | |
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The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and our past performance does not assure the same future results. The stated returns may also include option trades. 
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