Revitalizing GameStop Strategy for Digital Era
GameStop faces challenges in consumer behavior, competition, management turnover, and stock price decline. The analysis focuses on internal struggles, leadership turnover, and capabilities, leading to a recommendation to partner with Activision for exclusive releases and sponsorships to enhance market position
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Presentation Transcript
Powering Change ALTUM CONSULTING MEMORIAL UNIVERSITY
Agenda 1. Challenge Kim Sheppard 2. Analysis Curtis Whelan 3. Alternatives & Recommendation Kim Sheppard 4. Implementation Christina Fong 5. Financials & Risks Evan Foote 6. What Success Looks Like Christina Fong
Challenge How should GameStop revitalize their strategy to remain top-of-mind in an increasingly digitally focused era
Key issues Changing consumer behavior/preferences Fierce competition Management turnover/diversity Declining share price
Objectives Innovative strategy Long-term business sustainability Consumer awareness
Recommendation GameStop should partner with Activision for exclusive release collectible items and streaming sponsorships for popular online games (such as Call of Duty) and revitalize their consumer market position
ANALYSIS CURTIS WHELAN
Analysis Focus Areas GameStop Internal Overview The Industry Overview Competitive Landscape Customer
Internal Struggles Share Price $5/Share Today $53/Share in 2014
Internal Struggles - Leadership CEOs 36 Months
Internal Capabilities 1. 2. 3. Broad Audience Product Differentiation Strong Marketing
Internal Capabilities 1. 2. 3. Broad Audience Product Differentiation Strong Marketing There are Positives to Draw On & Potential to Rebound
Internal Capabilities Financial Snapshot Net Revenue ($ USD B) 8.6 8.5 8.4 8.3 8.2 8.1 8 7.9 7.8 7.7 7.6 2016 2017 2018
Internal Capabilities Financial Snapshot EBITDA ($ USD B) 800 700 600 500 400 300 200 100 0 2016 2017 2018
Internal Capabilities Financial Snapshot EBITDA ($ USD B) 800 700 600 500 400 300 200 100 0 2016 2017 2018 Take A Deep Breath.
GameStop Revenue Channels New Hardware New Games Software Pre-Owned Accessories Digital Collectibles Other
GameStop Revenue Channels New Hardware New Games Software Pre-Owned Accessories Digital Collectibles Other Three Main Channels Supported by Others
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The Customer 1. 2. 3. Tech Savvy Experience Oriented Varied Demographic But Young.
The Customer 1. 2. 3. Tech Savvy Experience Oriented Varied Demographic But Young. The Customer is Demanding - Instant Gratification Matters
Industry Overview The Market $ 18 Billion/yr New Video Game Products $ 32 Billion/yr Digital Content
Industry Overview The Market $ 18 Billion/yr New Video Game Products $ 32 Billion/yr Digital Content Major Opportunity to Grow with the Market
Industry Overview E-Sports $ 1.5 Billion 2018 Prize Money 27% Year Over Year Growth $ 1.1 Billion Spent Watching Streams
Industry Overview E-Sports $ 1.5 Billion 2018 Prize Money 27% Year Over Year Growth $ 1.1 Billion Spent Watching Streams Big Opportunity to Expand Horizons
Competitive Landscape Bricks & Mortar Traditional Best Buy Origin Target Steam Walmart Gamestop Kmart
Competitive Landscape Bricks & Mortar Traditional Best Buy Origin Target Steam Walmart Gamestop Kmart You re Doing Okay, But Adapt. Be Proactive.
ALTERNATIVES & RECOMMENDATION KIM SHEPPARD
Alternatives Become a content creator 1 Exit business line 2 Partnership with Activision 3
Alternative 1: Become a content creator Pros Cons Bring new life to the organization Become community player New revenue stream Extensive R&D Lack of expertise Reactive position Management resistance Large, established competition
Alternative 2: Exit the business Pros Cons Cash influx for shareholders No further exposure to market decline/risks (Blockbuster) Livelihood of tens of thousands End of an era No future for the company
Alternative 3: Partnership with Activision Exclusive merchandising & streaming sponsorships Pros Cons Talent access Competitively positioned products New revenue growth Recognition in the gaming community Costs
Decision Matrix Objectives Alt. 1: Content creation Alt. 2: Exit business Alt. 3: Partnership Innovative strategy Long-term business sustainability Consumer awareness
Recommendation GameStop should partner with Activision for exclusive release collectible items and streaming sponsorships for popular online games (such as Call of Duty) and revitalize their consumer market position
IMPLEMENTATION CHRISTINA FONG
Implementation Actions Activision Partnership & Framework PowerUp Rewards Improvement & Marketing Management Team Diversification Streamline Operations (Retail Stores)
Why Activision Activision: Game Development Company That Produces Some of World s Most Popular Online Games. Goal: Partner with Activision to Reach Global Gaming Market and Change GameStop Position in Consumer Market.
Benefits for GameStop & Activision GameStop Activision Exclusive Release to Activision Collectibles Exclusive Benefits of Activision Games GameStop = $8.3B in Annual Sales GameStop Already Sells Activision Products GameStop Ability to Boost Activision Sales Sales Boost
Online Game Partnership Framework Popular Online Game Large Customer Base Established Online Game Series Continuous Improvement & Proven Track Record of Developers Proven E-Sports Following
Activision Partnership: Reaching Customers Goal: Partnership Provides GameStop with Planning, Organization, and Streaming Involvement with E-Sports Events for Consumers. GameStop s Name at Global E-Sports Events Provides Activision with Time, People, & Money In-Store Merchandise with In-Game Access Rights Streaming at GameStop Locations Booths at E-Sports Tournaments
PowerUpRewards Improvement Lacks Customer Segmentation & Customization Capability No Big Data Analytics Capability to Harness Sales Information Solution: Hire Contracted Data Analytics Firm to Optimize Analysis Capabilities 6 Months to Build & Setup 6 Months Continuous Improvement
Additional Marketing Push Primary Marketing through Activision Partnership Additional Marketing Support from Streamers Streamers: Play Video Games and Comment on Games for General Population. My Stream Today was Sponsored by GameStop! (Think Podcast Sponsorship)
Management Team Diversification Problem: Current Management Team Lacks Diversity Management Team Not Involved in Gaming Industry Unlikely They Are GameStop Customers Solution: Hiring New Talent with Industry Expertise
Talent Management New Hires Must Be Involved in Gaming Industry Recruit from Top Gaming Companies Strong Tech Background Team of 5 with CEO Support
Streamline Operations Assess Bottom 10% of Retail Stores Monitor Sales at Retail Locations Continuous Streamlining & Closing
Implementation Timeline Short-Term (2020-2021) Activision Partnership E-Sports Sponsorships Talent Recruitment (Data Contract & Internal Employees) Mid to Long-Term (2021-2023+) Continuous Sponsorship Ongoing Evaluation and Store Monitoring Continuous Tech Innovation
Implementation Costs Item Cost Activision Partnership $ 1-2 MM Talent Management $ 2 3 MM/yr Big Data Contract $ 5 10 MM Sponsorships $ 50 75 MM/yr Promo & Events $13.75 MM TOTAL $ 103.75 MM
FINANCIALS & RISKS EVAN FOOTE
Assumptions GameStop s cash and cash equivalents are not all tied up in securities significant cash on hand
Current financial position GameStop recorded a significant net loss for 2018 Due to significant write-off of goodwill/intangible assets EBITDA of $419.50 million Does not include the income for discontinued operations Significant cash on hand paying for implementation out of cash/cashflow
