The Games are Stopping at GameStop

GameStop took a hit on 3/24/17 after missing on sales and announcing it will close some stores this year.

Comparable store sales were down 16.3%.

This augurs very poorly for game manufacturers, EA (see 1 year chart) and ATVI (see 2 year chart).

A short or put idea is in the console vs. smartphone gaming business.  The largest player is Electronic Arts (NASDAQ: EA).

Even with an installed base of 101 million Wii units, 80 million PlayStation 3 systems, 80 million Xbox 360 consoles, 13 million PlayStation 4 machines, 7 million Xbox One units, and 7 million Wii U systems, the console business can’t compete with the sheer billions of smartphone and tablet users around the world.

“Practically everyone in mature markets now has a smartphone and the majority has access to a tablet,” van Deelen says. “In emerging markets, the smartphone is often their first device that is connected to the Internet. With an installed base of billions, the audience is enormous on a global scale. A console is not a must-have device like smartphones, and in a growing number of cases, tablets are. Mobile devices, which aren’t purchased to play games on, introduce new consumers to games.”

The overall question now seems to be not if Microsoft will exit the game business, but when and how.

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