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Game over? High street computer store facing closure of 600 shops as key suppliers refuse to provide it with products

  • 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’d be more saddened by the demise of Gamestation than by GAME itself, since I remember Gamestation when it was just a single shop here in York called York Games Exchange. Back then, preowned games were their specialty and many a bargain could be found. Even after they expanded and became Gamestation, their prices were still a good £5 or so cheaper than GAME. Cue a rapid expansion and a takeover by GAME, and the chain was more or less ruined, and their prices were standardised across the group.

GAME and Gamestation are one and the same. £44.99 there or £35.99 in ASDA, let me think about that one…

I used to work for Game. It was the worst company I have worked for to date. I put 4 long hard years into that company working as a sales consultant, then key holder, then acting deputy yet they would never promote me any higher. The wage was rubbish and the lies and broken promises became standard affair. They’ve finally got their just deserts. Good riddance.

A lot of sense talked here, GAME was badly run: it became greedy at the top exploited those in touch with their customers. It also failed to cope with the back office complexity of a series of takeovers. The problem with a lot of acquisitive companies who seek to dominate by sheer size – is they miss focussing on the detail. Big mistake.
Former Game HQ worker..

F1 2011 bought in September 2011 for £42.99.
Price offered at trade in £7.99 (game and gamestation)
I’ll keep the game Thanks.

If it’s true that the next Xbox won’t have a disk drive and require all downloads, then I definitely won’t be buying it. I want to be able to archive my games and also there’s only so much space on a disk drive. That and we keep hearing about ISPs threatening to adopt usage-based billing. No thanks. Anyway, Game must be doing something wrong if it’s in such dire straits. Here in Canada we have several chains like EB Games and Game Stop and they seem to be doing fine. Certainly no shortage of ME3 to go around.

More and more will shut as everyone shops on the internet -It’s like Woollies, no-one used it but when it went everyone wailed. Use it or lose it folks, in 20 years the High St will be just Cafes and charity shops and it will be our own fault.

The internet and hi tech computers are putting paid to traditional retail jobs. Already in my local supermarket they have self service tills, in 10 -15 years time I can see no place for check out operators. The government knows that the rapid escalation of technology is making a lot of jobs redundant, but they still bury their heads in the sand and keep going on about jobs that won’t exist in the future.

Why can’t they sell them for the same price as off the net? Then instead of shipping you can just walk to the shop to get it on the day of release. Game are wayyyy overpriced!
– lloyd4571, East Yorkshire, 12/03/2012 15:58
Because stores have to pay to keep a roof over their head – online websites do not.

Haven’t been in my local Gamestation store for a while, but whenever I did they always had god-awful music blasting out that always made me want to leave the store as quickly as possible.

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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