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Game over? 10,000 jobs at risk in crisis at high street computer shops

  • 10,000 jobs on the line as store battles for survival
  • Sales hit by the internet rivals and lack of new consoles

By
Sean Poulter

09:15 EST, 12 March 2012

|

19:49 EST, 12 March 2012

Ten thousand jobs and more than 600 shops are under threat after computer games specialist Game warned it is on the brink of collapse.

Shares in the group slumped by more than 60 per cent yesterday to around 1p each as executives warned they could be worthless.

City analysts believe Game could go into administration within two weeks as it cannot afford rent payments due on hundreds of outlets at the end of March.

Under threat: Game could sell off their 600 UK stores - putting 10,000 jobs on the line

Under threat: Game could sell off their 600 UK stores – putting 10,000 jobs on the line

The chain has been hurt by a
relationship breakdown with some leading games producers, who refused to
supply new titles such as Mario Party 9 and Mass Effect 3.

It has also been hit by competition from cheaper rivals such as online giant Amazon.

Game bosses are in talks with banks and suppliers to find an agreement that allows it to continue trading.

But they warned investors in a
statement: ‘It is uncertain whether any of the solutions currently being
explored by the board will be successful or will result in any value
being attributed to the shares of the company.’

Popular release: Game's woes have worsened after it failed to stock new eagerly-awaited titles such as Mass Effect 3

Popular release: Game’s woes have worsened after it failed to stock new eagerly-awaited titles such as Mass Effect 3

There are suggestions U.S. games
retailer GameStop could buy the British chain, which also includes
Gamestation shops, if it goes into administration. However, it seems
many staff and outlets would go.

Jon Copestake, consumer goods analyst from the Economist Intelligence Unit, said: ‘The outlook for Game does seem bleak.’

Game has more than 600 stores in the UK, plus stores in Portugal, Spain, France, the Czech Republic, Denmark, Sweden, Norway and Australia.

Sales have slumped as gamers have switched to buying the latest titles online – often at lower prices.

They have also been hit by the growth of mobile phone download-only games.

Stock trend: Shares in Game have slumped as its struggled against falling sales

Stock trend: Shares in Game have slumped as it has struggled with falling sales

The new Microsoft Xbox will reportedly not have a disc drive at all and everything will have to be downloaded.

Game is seeking access to alternative sources of funding and has asked suppliers for more generous trading terms, but so far it has not been possible to source new products from a number of suppliers.

It admitted that it is uncertain whether its efforts will be successful or whether the company will be left with any value.

Its troubles have been made worse after it failed to stock new eagerly awaited titles such as Mass Effect 3 and Street Fighter X Tekken.

Shares have slid from more than 70p at the start of last year to just 1.7p, including a fall of 48 per cent following today’s statement.

The group agreed fresh lending facilities with banks last month but the loan was not enough to reassure suppliers, who have balked at being asked to give the group better terms to help it stay afloat.

The company, which has 1,300 stores worldwide trading under the Game and Gamestation brands, suffered a woeful Christmas, with like-for-like sales down 12.9 per cent in the eight weeks to January 7.

They blamed poor Christmas results on a lack of new consoles and a squeeze in consumer spending.

It has already signalled that losses for the year to the end of January are likely to be around £18million – but since then it has sunk deeper into the mire.

It has reportedly hired advisory firm Rothschild to help it sell all or parts of the business, but it is understood that securing a deal in such a short time-frame will prove difficult.

The company is believed to have lined up accountancy firm Deloitte to handle any insolvency process, which could see Game’s UK operations put through a pre-pack administration for all or some of its estate to be sold on quickly.

COMPETITION, DOWNLOAD ONLY GAMES AND A LACK OF NEW CONSOLES HIT HIGH STREET VIDEO GAME STORE

Aggressive competition and a lack of new consoles to sell hit Game severely over the Christmas period.

Established in 1992, the majority of the company’s 1,000 stores can be traced back to its former guise as Electronics Boutique.

But in the last four to five years its
earnings have dwindled from around £100million to an expected full-year
loss of around £20million as the likes of Tesco and Amazon have flooded
the market with cheaper deals.

Big launch: Staff at the Oxford Street store warm-up the crowd before the launch of Call of Duty Black Ops

Big launch: Staff at the Oxford Street store warm-up the crowd before the launch of Call of Duty Black Ops in 2010

Now, the retailer faces possible
shutdown as influential suppliers hold the company over a barrel and the
decisions of the past mix with the weak economy of the present to form
an impossible climate.

The company stepped up its presence on
the high street in 2007 when it bought Gamestation, adding more than
200 stores at a time when other retailers were starting to retreat from
expansion plans.

The acquisition left the company with a
bloated estate but also a duplicated format, as Game and Gamestation
were similar retail models.

A consumer spending squeeze has
tightened its grip across the retail sector in the last year, leading to
a general decline in sales, while supermarkets including Tesco and
Sainsbury have entered the market, selling games at discount prices.

The group also faces a trough in the
console cycle – it has been a few years since Sony released the
PlayStation 3 and Microsoft unveiled the Xbox 360 – and hardcore gamers
are waiting for the next big thing to hit the market.

The Nintendo Wii attracts a more
casual, family gamer, who uses the console less frequently and is less
inclined to invest in the hottest new titles on a regular basis,
analysts said.

Game’s performance has been spiralling
downwards, with it most recently disappointing customers by failing to
stock sci-fi game Mass Effect 3 after a spat with games giant Electronic
Arts. Now other suppliers have refused to sell on their products.

Matthew McEachran, retail sector
analyst at Singer Capital, said with the benefit of hindsight, the
company’s decision to buy Gamestation – which included more than 200
stores – contributed to its demise.

Mr McEachran also suggested Game’s own model was weaker than its rivals.

He said: ‘We’re also cynical about the
business proposition. If you go into a bigger HMV store, there’s a bit
of theatre in the games section. If you go into a Game store, they’re
just so soulless.’

He added: ‘Game has a bloated cost
base, a weak proposition, a pinch point in the economy, increased
competition – it’s death by a thousand cuts.’

Rhino Group bought 77 Virgin Games stores in 1993 and then rebranded them as Electronics Boutique in 1995.

Here’s what other readers have said. Why not add your thoughts,
or debate this issue live on our message boards.

The comments below have not been moderated.

I do sympathise with all Game staff with the obvious stress that they are going through at this time, I hope for them that a solution can be found.
But saying that important lessons have to be learned, the first being that companies and manufacturers must support each other in this recession, Electronic Arts etc need to sell their products and for that they need high street outlets as well as online suppliers. The other lesson that Game must learn is to move with the times, price realistically and competivelly and above all listen to the needs of the customer. Their move away from PC gaming and concentrating just on consules was just stupid, to survive they need a new strategy and new lines such as maybe selling computers, video cards, tablets etc, just concentrating on boxed games and consules is a sure fire recipe for disaster.

I have bought a couple of things from them the last few days and to be totally honest the way they served me and the quality and lack of items really Pi***d me off. Monday bought a copy of Mercenaries 2 – problem disc strached so badly i would of had more chance playing vinyl in my Xbox, Tuesday took it back and the 3 other copies they had were only slightly better so took the best as i did not want a “gift card”. on Tuesday i also bought a pre owned Wii and a few games, didn’t check the box as i believed that everything would be ok after just having complained about something, got home and opened the box to find everything but the console in the box, Today i’ve got to use my lunch hour to go back and try and sort this out. I really would advise everyone to check everything you buy from them!! plus side is cheap gaming. 1 final thing concidering they aren’t actually in administration yet i really think that the customer service is terrible!

serves them right! The numptys who run the business have little clue about the industry nor how to compete.
1. FAILURE to remain competitively priced both at retail and online
2. Poor relationships with suppliers
3. Abuse of position in industry – offering poor rates for trade ins and selling used products for almost the same price as new products (seriously pathetic)
Thank you amazon and zavvi, i have saved LOADS of money by purchasing through you.
looks like the group has no continues/credits left – GAME OVER

Game over….

So 10,000 people will soon be reclassified by Dunce Duncan Smith and Greasy Grayling. They were “hardworking” members of the cliche “hardworking families” etc, but soon will become, at a stroke, “benefit scroungers”. About time we all just got rid of Duncan Smith and Grayling, is it not and replaced them and their carpetbagging private “workfinding” taxpayer-supported useless companies with a system which has justice and decency at its heart.

Another high street shop bites the dust. This was inevitable and really no surprise. I’m a gamer and never buy any games or accessories from Game shops as it’s just too expensive. It’s far cheaper to buy from the likes of play.com, zavvi, amazon, etc.
It’s only a matter of time before highstreet shops earn a permanent place in our history books, bar maybe clothes shops as people like to try clothes on before they buy…or cheap shops like Wilko, Everything’s a Pound, etc.

In commenting on how rubbish Game as a business actually is, from my view point as a consumer, I didn’t think of the employees who’s jobs were at risk, a few of whom have commented here. As horrible as it is to be at risk, there is a very big chance that once in administration the company will be taken over (by an American firm I heard). Fingers crossed for you all.

Seen as how it’s all fun and laughs at this company’s expense, has anyone stopped to realise the 6000+ members of staff myself included, could end up out of a job?
These people have mortgages to pay, children to feed, and need to keep a roof over their heads. It’s not exactly easy getting a job in this day and age is it?
It is sad to see people laughing at this and thinking its all one big joke all I can say is “what goes around, comes around”.
It’s a shame people have no decency or respect for others…

I feel bad for the poor staff at the stores, im sure if they could set the prices they would set them lower. Lets hope one or more of them branch off to create their own, more reasonable stores! Otherwise GAME will just be making room for more pound shops on our highstreets

Whole gaming industry only cares about money nowadays. games are already becoming souless crap just like what happened with music and film. money people take over and kill everything good.

The views expressed in the contents above are those of our users and do not necessarily reflect the views of MailOnline.

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