Popculture Deathcart: GameStop
I’m smelling Tulips.
As of this writing, GameStop stock is trading at $320. This is actually crazier than Disney’s drastically inflated stock price. Yesterday, an acquaintance of mine asked, “how do you profit off this situation at this point?”
My answer was, “You don’t. This is Tulip Fever. The guys that were going to make a killing off this have already bailed.”
For those of you wondering what Tulip Fever is: In the mid 1500s Tulips were first imported from Turkey. They were a bit on the rare side because they have to be grown from bulbs and were highly prized due to their striking colors. They became something of a status symbol.
“If money can move freely, it can move stupidly.”
In Holland it certainly moved stupidly. The Dutch opened a futures market, which is another way of saying the gamblers started betting on prices. And Tulip futures became drastically and insupportably overinflated. At the peak of Tulip Fever, in February 1637, some single tulip bulbs sold for more than ten times the annual income of a skilled craftworker. In the end it didn’t matter how high the price had gone. Fundamentally, Tulips are just flowers, you can’t eat them, and you can always grow more of them. The Tulip futures market crashed and took the entire Dutch economy with it.
GameStop has been hovering around $5.00 a share since July of 2019. Long before the plague hit town. There was a reason for that.
When the market rebounded, all of the ships rose with the tide but let’s face facts, even though a sinking ship still rises with the tide, it remains a sinking ship. Thus, positioning some sure losers for short sales.
And before you start pounding on your keyboards like cocaine fueled monkeys, telling me what’s really going on here. Allow me to inform you that I used to have a Series Seven license. I do, in fact, understand what is going on here and it isn’t going to change the fundamentals of GameStop’s business model. They are the Blockbuster Video of the 2020s.
GameStop is going to fail.
GameStop has become a very borderline operation in recent years. The fact that they declared themselves an “Essential Service” and kept their doors open during statewide lockdowns, pretty much proved that. In response, one state simply pulled its business license. GameStop accepted reality and shuttered its stores. Presumably, they were hoping for either a buyer or a bailout. Neither will come.
GameStop wouldn’t have pulled that stunt if it were a sound company, but it is pretty obvious that it isn’t.
But there was a time when they were the big dog of software.
GameStop started life as that Eighties mall icon Babbage’s.
Babbage’s filled a very genuine need. It was thee software store. And not just for games. They carried everything from MS-DOS to Word Perfect to Harvard Graphics and of course Lotus 1-2-3. But yeah, the real reason Generation Xers wandered into Babbage’s on their endless mall circuits, was to look over the latest games.
And then find out if one of your friends had a copy so you could pirate it because “$120 bucks for a virgin copy?* Fuck that!
The silly name was a shout out to steampunk dream-boat Charles Babbage, the non-inventor of the computer. Although in fairness he came reasonably close and if Charles Babbage hadn’t had Charles Babbage’s personality, he might have done it. There are designs of his smaller engines that have been completed and do, in fact, run.
As the name implies the store was meant to be a one-stop software shop. Now, that seems silly today but, in the Eighties, software was brand new. While it feels natural to put business software in a business supply store today, back then it seemed just a little off to have Word Star next to the typewriter cartridges. Worse still the pimply-faced teenager behind the counter at Office Warehouse probably didn’t have the knowledge base to be of any help to the bewildered World War II veteran, who knew he needed something “computery” to keep his business up to date but didn’t know what.
Everybody was a beginner back then. No one knew who was going to end up on top. Radio Shack and Heath Zenith both looked to be good contenders for “king of the computer hill.” So, trying to be everything to everybody on the software side was reasonable enough.
But the fact was that the aforementioned businessmen didn’t like to buy business-related stuff in malls. It just seemed odd to the Man in the Gray Flannel Suit crowd to be buying office equipment in a store located between Sam Goody and The Gap.
Microsoft and Apple started drifting out of Babbage’s and Lotus Smart Suite followed them shortly, thereafter, turning Babbage’s into a gaming software seller.
This migration happened about the time that the console wars went nuclear, and Babbage’s quickly became the number one arms dealer.
A company that was named for a man with ties to the PC market began to feel a bit out of place in a world where most gaming was done on consoles and PC gaming software was the thing you only kept around for the niche market. In 1999 reality was faced and Babbage’s turned into GameStop.
For the next ten years, GameStop flourished as PC gaming software slid further and further toward oblivion. PC gamers became a bit of joke to the console crowd, “yes, oh Master Race, I admit your tech is superior, (*eye roll*) but I still want to play Halo.” By 2007 PCs only had about fifteen percent of the market left. While fifteen percent was certainly big enough to be worth serving, the other eighty-five percent was clearly and obviously the lion’s share that needed the most attention. Console gaming was the way of the future. No one really questioned that.
The death of PC gaming was just around the corner and while a few old hands at GameStop may have felt a little sentimental about its passing the view was, times change, and business is business.
And honestly, their business was treating their customers like shit. GameStop’s moneymaker was the used game market, and their profit margin was about as viciously overpriced as Blockbuster Video’s late fees. If you sold them back a AAA title, they paid you next to nothing for it, then charged something for it that was pretty close to new. There was no negotiating. You were screwed if you did business with GameStop.
And everyone had to do business with GameStop.
Things rolled happily along for the company during the 2000s just by following the age-old practice of buy low and sell high. And don’t be moved by your customer’s tears.
And then about ten years ago disaster struck.
The first of the Steam sales was launched and you could suddenly (and legally) buy AAA titles for the hilariously paltry sum of $5.00** a copy. At that time an older title from GameStop could run you thirty to forty dollars. But on Steam, those forty bucks could get you eight games. You could get everything you had been putting off buying and those games stayed in your library for-ev-er. And you didn’t have to stop playing a favorite because of console compatibility.
Compounding GameStop’s woes was the fact that the Steam Sales arrived at about the same time the hardware landscape started changing. PC gaming used to be prohibitively expensive because the computer itself was obsolete every eighteen months, but the technological development wave finally crested, and advancements started coming a lot more slowly. This meant that a five-year-old used computer was still viable for gaming with a new GPU and powersupply. If you had a little know-how; the total price was (at worst) $250. PC gaming was suddenly a lot cheaper than consoles.
Then came game rentals for the console crowd, which was less expensive than buying and selling used.
It wasn’t the end for GameStop, but it was the start of the slippery, all-downhill-from-here Blockbuster slope. Things were at best, sketchy for them when Covid-19 hit the country like a freight train.
GameStop was in the unfortunate position of being a company whose once, highly profitable model had died, and it couldn’t find a new one. They have long since settled uncomfortably into “manage the decline” mode.
Soon, GameStop will only be found in the mists of memory. Back when you had big hair and a butt that looked great in sprayed-on jeans. When synth music was playing in the mall and you’d just flirted with your best friend’s hot Aunt on her way to the Jazzercise studio. Back when the biggest problem weighing down your mind was, do I get a couple of cassettes at Sam Goody, or do I splurge on that new Sierra release at Babbage’s? It wasn’t a hard choice at all.
Babbage’s it was.
*$50 adjusted for inflation according to the all-knowing internet.
** Remember those days?
