Popculture Deathcart: GameStop

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 form of the Destructor.

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?

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Comments (7)

  • Dane Reply

    Vengance is the name of the game, not shekel grubbing profit.

    January 28, 2021 at 4:15 pm
  • MrUNIVAC Reply

    GameStop also made the mistake of royally pissing off the source of their inventory and thus hastening the all-digital transition (and thus their demise). A sale of a used game screws game makers in perpetuity since it robs them of a current sale AND potential future sales from GameStop re-selling that copy multiple times. It’s also pretty much pure profit, which in the devs’ opinion belongs to them. This led to hilarious suit-driven reactions like “online passes” for unlocking multiplayer (which only came with new copies) and Microsoft’s original vision for the XBONE, which would have killed the used game market entirely. No one in any way connected with video gaming will cry for GameStop when they’re dead. Only the Republican Party establishment has a more antagonistic relationship with its suppliers and customers.

    The new systems all moving to x86 didn’t help either. PC ports before the last generation usually sucked since they were infrequent, half-assed, barely supported, and heavily pirated. Now that PC gaming is almost 100% digital and shares a platform with the “consoles” (really just PCs tuned for gaming), piracy requires a lot more effort and making a decent port requires a lot less. Nearly every big third-party game ends up with at least an OK PC version. The consoles only make sense now if you can’t live without Sony or Nintendo exclusives.

    January 28, 2021 at 4:38 pm
  • Chief_Tuscaloosa Reply

    True Blockbuster story: I went TDY for a class and came back with a 2 week late fee on a movie that was so high I could have gone to Walmart and BOUGHT 3 copies for Blockbuster to put on their shelf. The manager making minimum wage +1 gave zero f(*&s about losing me for a customer–pay me. I cut my card as soon as I got back to my apt and laughed my ass off years later when I understood Netflix’ business plan.

    True Gamespot story: when the missus finally convinced me the kids were not going to want to play 20 year old AAA titles and I should garage sale or Gamespot my box of 20-30 games, I drove to Gamespot to see what they’d offer. The manager making minimum wage + $1 dutifully scanned in the bar code on the game cases before he’d give me a buyout price. While waiting for him to scan it all, I saw one of one of the AAA titles I was selling on his shelf for $50 retail. When he finished, he announced something like $60 for 30 games. I said something slightly more polite than “you gotta be shitting me?!” and said I’d rather donate them or let them rot. I laughed my ass off years later when I understood Steam and GOG’s business plans.

    Question for the world at large: MUST a corporation squeeze their customer’s ball so firmly that the customer base can’t wait to burn their building down? Or can we only trust family businesses that are private and concerned with maintaining customer relationships that last decades?

    January 29, 2021 at 2:54 am
    • Jew613 Reply

      The guiding principle for American corporations is maximizing stockholder value. Essentially the goal is to manipulate the stock price so stockholders make money this quarter. That’s it, there’s nothing longer term. So yes, they will squeeze their customers for everything they can.

      January 29, 2021 at 1:33 pm
  • MrUNIVAC Reply

    Also, PC gaming is getting back into the realm of stupid expensive these days. The only AAA game on my radar is Halo Infinite, and my gaming tower is old enough that the only things that’ll carry over are the HDDs and disc drives. If I want to play it in 4K, it’s going to cost me nearly 3 grand in upgrades, and half of that will be for the GPU (thanks Bitcoin miners!). Sure I probably won’t need to upgrade it for 10 years, but that’s a lot of cash to lay out for one game.

    Meanwhile, an XBOX SeX costs $500, and they’re just as hard to get as one of those fancy new GPUs.

    January 30, 2021 at 10:55 pm
  • Brett Baker Reply

    Akshully, the Dutch Tulip Craze didn’t do as much damage as history books like to say.

    February 1, 2021 at 12:20 am

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