It's (not) in the GAME

As some of you are no doubt aware, an internal memo from GAME (transcribed below) was recently leaked which detailed the reasons as to why the beleaguered high street chain will not be stocking EA releases in March.

Dear all,
Last week we held an event for our partners in the industry and explained the challenges we are facing in the short term - and we asked for their support.
We asked them to trade with us using manageable credit terms, and for them to continue to do that whilst we work through the strategic review and refinancing of our business.
We gave the industry commitments - we committed to integrity and openness in our dealings, and working with everyone equally.
We committed to only stocking products on which we could get the right credit terms, regardless of the title or the supplier. We will not stock products if the terms are not right for our business - we will not sacrifice long-term credit requirements for short-term sales opportunities.
As a result of us taking this position - a position that we believe is critical to our long-term health as a business - we have taken the very difficult decision to not stock EA's March releases, including Mass Effect 3.
As a specialist retailer dedicated to games and gaming, it is never easy to make a decision not to stock a title, particularly one with such a strong fanbase. But it is imperative that we treat every supplier evenly, that we stick to our commitments, and that we don't sign up to payment terms that will hamper us further in the future.
It is even more critical that we manage this appropriately with our loyal customers. We know they will be disappointed regarding Mass Effect in particular and in recognition of this, we will be contacting our Mass Effect pre-order customers and as a gesture of goodwill we will be offering them £5 of reward card / elite points.
I know that many of you will have to manage customer and supplier feedback directly, and I would like to thank you in advance for your support and am happy to answer any questions you have directly - just grab me as I walk around.

While it's commendable that GAME will not back down over the issue and is trying to deal with all publishers/distributors on an even playing field, it strikes me as strange not to put off the decision so that they can stock two of the most hotly anticipated EA titles of the year, Mass Effect 3 and the SSX reboot. The timing really couldn't be any worse for GAME, as these two titles, ME3 in particular, would have made a decent profit for the group.

Perhaps the bigger concern for GAME going forward is that if this stand-off continues they may find themselves on the outside looking in when FIFA13 comes out later this year. As many readers are aware FIFA12 set the record for both the highest and quickest selling sports game of all time, so to remove yourself from the equation seems tantamount to corporate suicide to me.

GAME recently said that they would be willing to consider giving publishers a cut of their used game sales, perhaps they could bring this to the table in an attempt to get a more flexible arrangement with EA ratified? I certainly think this is a case of GAME needing EA rather than the other way round, especially with the increase in games sales on-line at places like Play.com and Amazon.

Either way, this situation needs to be sorted out, and fast. EA represents a large chunk of the gaming pie, and GAME can't afford to do without their games on their shelves.

UPDATE 

Mark Photiades, a market analyst with Singer Catalyst Markets has estimated the capital loss to GAME from not stocking Mas Effect 3 at around £2.5million. In a Post by Nick Fletcher on the Guardian website, Photiades is quoted as saying -

"Working on the assumption that a decent triple A title sells 0.8m-1m titles in the first few weeks of release in the UK and assuming Game has around 20% share, we calculate that by not stocking Mass Effect 3, Game is potentially missing out on around £6m-£7m of revenues in the UK given the title will retail for £39.99,"

 That is a massive loss for a company already forecasting losses of around £8million for this year alone. Interestingly he also states that profit margins on new titles stand at around 24%. Also of interest is the opinion of Nick Bubb in the same piece who doesn't seem to understand the market at all.

So, had you heard of this new so-called blockbuster game Mass Effect 3 that comes out next week? Well, nor had we, and despite all the tut-tutting about how ominous the EA supply problem is, we suspect that it is just a storm in a teacup in a seasonally quiet time of year, as the big game suppliers can't really afford to do without Game at Christmas, given its huge share of the market. We are more concerned about the lack of news on the overseas disposal front.

Idiot...