How much trouble is GAME in following Mass Effect 3 dispute?

OPINION: Are the retailer’s days numbered, or is the spat with EA a storm in a tea cup?

OPINION: The UK’s only specialist games chain has been unable to secure a deal on stocking a key triple A title at launch – just how much trouble is GAME in following the Mass Effect 3 dispute?

This week the news broke that GAME, the UK’s only specialist video games chain, will not stock the hugely anticipated Mass Effect 3 upon its launch in March, as well as some other EA titles.

Today, an analyst has predicted this will result in a £6-7 million loss in revenue.

GAME itself refers to the incident simply as a ‘supply issue’ which means it will not be able to fulfil orders.

However it has been widely speculated the chief cause of the dispute with EA is down to an inability for GAME to secure the extended credit terms it needed.

It could be argued the GAME’s spat with EA and the consequential lack of a triple A title at launch should be considered a singular incident, not to be blown out of proportion.

On the other hand, EA is about the biggest publisher in the world, depending on how you measure it, which alone makes the fall-out significant. Credit disputes are cancer for retail – if you can’t get the products in the store, you’re pretty much screwed.

This wasn’t lost on the shareholders – as the new broke GAME share prices dropped 15%, according to some reports.

If a similar issue occurs with another publisher, or another big title, you don’t have to be too cynical to start asking some big questions about the retailer’s future. Whichever way you slice it, the retailer currently looks more precariously balanced than it ever has.

The big question is why? For an area that makes so much money, shouldn’t Game be swimming in cash?

Last year the UK games industry was estimated to be worth around £2.52 billion. To put that in perspective, UK music sales amounted to £795.4 million in the same period. Though both figures are in decline, there does seem like there is an awful lot of cash sloshing around in games.

The problems facing bricks and mortar retail are many fold. And this is compunded for specialits, since supermarkets and e-tailers have been smashing into new markets for years.

But in particular we can look at what the game market is these days.

As yet there is still no official chart to measure games downloads, though we understand one is on the way from trade body ELSPA.

Even without it, it’s clear the digital download market is growing, and while Game has made moves towards this area, it’s online pure-plays like Steam that have got really rich over it.

For many, this rise can be used to show not only a change in consumer buying habits – increased popularity for digital downloads rather than physical disks – but a resurgence of PC gaming.

Most agree the PC platform, unencumbered by aging hardware, is experiencing growth. And while it would be wrong to say Game turned its back on PC gaming years ago – it certainly dedicates nothing like the shelf space it used to to the format.

Walk into any GAME or Gamestation (which it owns), and you’re mostly met with rows of console disks. And the current console platforms are getting long in the tooth now.

Meanwhile PC makers such as Alienware are even trying to get in on that market, with the X51 offering a cheap(ish) gaming PC that seems very clearly targeted at replacing consoles in the front room, but with vastly more powerful hardware. This is a trend to look out for.

Throw in the hugely disruptive Apple App Store download model, which is claiming ever more of the gaming space, and suddenly GAME’s business model of console disks looks like an increasingly small area of the market.

The games market is in a state of flux, and the things that made a retailer successful when the last console generation launched, are not necessarily the same today.

Would a new console generation reverse its fortunes, giving the games industry a general kick up the arse while it’s at it? Quite possibly, but there’s no word on exactly when the next lot will emerge from Microsoft, Sony or Nintendo.

It goes without saying no one wants to see another big UK retailer go under.

And it should also be remembered many big chains that have seemed in similarly wobbly positions in the past – such as Dixons – have managed to turn the business around to a large degree.

But we have also seen some big high street names on the chopping block in the last couple of years.

If things do get worse, a buyout from someone like Gamestop would seem to be the most obvious move, since the US retailer has been sniffing around the UK for some time anyway. Or Best Buy, though it recently left the UK market with its tail between its legs.

This is pure speculation, but you could also see Dixons making a swoop, if it was back to its full pre-recession strength. And with its growing interest in video games, it’s not entirely implausible that a firm like a cash rich Tesco could be interested. Though the Competition Commission may have something to say about that.

Amazon, who has in no small part contributed to GAME’s woes, has even made tentative moves into retail environments in the past – so who knows?

Such a wholesale buyout would at least stave off the company going entirely bust, taking 10,000 jobs with it. But if not, and the retailer gets dismantled and sold to various bidders, one thing is for sure it will be a sad day for High Street, and the games industry as a whole.