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With all the snow this winter, we can be sure of one thing â€“ people who live where it is cold will be getting cabin fever. Traditionally, people go outside to go sledding or participate in various snow sports. More so these days, the video game industry is taking hold of our idle hours and keeping us indoors while still providing for our need to let our hair down and relax â€“- thus there is no need to go outside and be cold. Video games have come a long way since their humble beginnings to the point of virtual reality in our family living rooms.
An industry leader in video game retailing is called GameStop. This Texas based company went through several transformations from its beginnings in the 1980â€™s. Today, the company is a $4 billion dollar company with 6,400 stores. That is pretty impressive for a specialty retailer. Sure it has some hefty competitionâ€¦ well known retailers with big names, none of which specialize in video games, but happen to sell games as a smaller part of their overall business. Which begs the question of any investor: which type of company would you rather add to your online stock brokerage account — a large sprawling retailer which sells many things including video games, or a focused video game retailer with small stores full of all types of video games? Interesting question, right?
GameStop, ticker symbol GME, is nearly the only company of its kind and scale which sells video games exclusively. I was in one of these stores over the holidays and I have to say, it was packed to the gills. The service was a bit slow, but that may be due to their policy of keeping the actual game discs behind the counter. Sounds like a recipe for not much shoplifting if you ask me — all the better to send the profits back to investors instead of thieves. This is a bricks and mortar retailer which also has a phenomenal website store.
GameStop is the only player in an industry which is in its relative infancy because video games only came on the market about a quarter of a century ago. Here the potential for growth lies in ever expanding technology, not in taking market share away from its competitors. Although with so many stores, and a strong grip on the video game market, GameStop has the potential for a near monopoly. In 2005, the company merged with a competitor â€“- EB Games. Two additional smaller competitors are Game Crazy and Play and Trade, a franchised store network. What makes video games a growth industry is the unrealized future potential of video games development. Plus virtual reality has applications outside of video gaming, creating other possibilities for technologies developed in the first industry to cross over into other industries.
As someone who comes from a family of video gamers, I’m intrigued by GameStop and will be keeping an eye on it. It may very well become part of my stock portfolio one day, after I assess its potential even further.