Blockbuster, the movie rental powerhouse, recently announced plans to expand its video game business, but despite the strong storefront presence of Blockbuster in the U.S., Colin Sebastian of Lazard Capital Markets believes the company does not pose a significant threat to GameStop.
In attempt to highlight the company’s video game offerings, there will be specially designated sections in each store set aside for game rental and purchases. In addition, Blockbuster is expanding its inventory to meet the needs of a broader set of gamers:
“We’re committed to offering a full assortment of everything gamers want in our stores - hardware, accessories and retail and rental games across all platforms - including Nintendo Wii, Sony PS3, Microsoft Xbox 360 and Nintendo DS,” said Rod Murray, Blockbuster’s vice president of games merchandising.
In his investor note on GameStop, Sebastian dismisses the ability of a competitor, even one as well-established as Blockbuster, to significantly derail the steady march of GameStop’s profits:
Sebastian comments in a new investor note that GameStop has maintained, and perhaps even gained, its market share in recent years. This is despite increasing competition against other more generalized retailers such as Best Buy and Circuit City. Conversely, Blockbuster has had limited success in building market share with its video game sale.
Furthermore, GameStop has a very profitable core business in the used game market that Sebastian thinks is difficult to outmatch:
In his summary, analyst Sebastian argues: “We believe GameStop should continue to benefit from its focus on video games, core gamer consumer base, and highly profitable used segment, which are key differentiators from other retailers.”
As a humble consumer, I don’t particularly care which monolithic corporation is selling me games, but there is a Blockbuster literally at the end of my block. Sometimes convenience trumps a business model. I’m sure there’s plenty of money in the consumer market to go around, though.
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