The video game industry is shifting toward digital distribution. At some future date, physical game discs will simply cease to exist -- gamers will download their purchases directly over the Internet.
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Earlier this week, Microsoft announced that it would begin experimenting with digital game discounts ... This is such a tremendous blow to GameStop's business model that it's difficult for me to overstate the matter.
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To be clear, Microsoft has said this is only a test; a trial balloon to gauge gamers' reactions. But if this were to become a common trend -- a discounted, digital version of a game offered shortly after its release -- GameStop would have a real crisis on its hands. Gamers may prefer to buy physical when the digital game is the same price, but a digital game offered at a 33% discount would be an offer most could not refuse. GameStop would be forced to counter with its own price cuts, or lose out on business entirely.
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But that's just Microsoft, and as I've pointed out, the Xbox One isn't even selling well. (Not only am I constantly being proven right about GameStop, I was also proven right about the Xbox ONE... see that thread for more of my glory ) Each month, subscribers to Sony's PlayStation+ service get a slate of free digital games that they can download and play so long as they remain a member. While this service has been available for years, it's much more a threat to GameStop today than it's ever been in the past.
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The move toward digital distribution is in full swing. The debate is no longer about the inevitability of the outcome, but about how long it will take. Wedbush's Michael Pachter, a notable GameStop bull, believes the company has at least 10 years left on its core business. (Even GameStop is starting to have trouble drinking the Kool-Aid)
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While that's certainly possible, I would be utterly shocked if the company manages to survive another five years, let alone 10.(Hey they stole my number! )
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Its two major suppliers, Microsoft and Sony, are moving against it aggressively.