George S. May Business Blog

GameStop director sells $60 million worth of shares

Leonard Riggio, board chairman of the video game retailer, GameStop, sold 2.3 million of his shares recently for $60 million, dropping his percentage of ownership from 6.9 to 5.5%.

While that is the only piece of “news” surrounding this story, I do want to take a minute to congratulate Mr. Riggio on a wonderfully bold, but insightful move.

The fact is, just as stores like Blockbuster and Hollywood Video have fallen at the hands of online distributors, GameStop is not far behind. It is the most simple lesson in business economics. As a business owner, if you can deliver the same product as your competitors at a lower cost to you, then you win. With the developments in online capabilities for both XBOX and Playstation platforms the future is beginning to look quite grim for the GameStop’s of the world. Put it this way, Netflix is already available through the XBOX Live feature. No longer do Netflix customers have to wait for the dvd to come in the mail. If they have an XBOX they can just log on and watch the movie through their console. It will only be a matter of time before that capability is available for games as well. Then, while GameStop pays for the rent of their retail store, online stores will not. While GameStop pays for the 15 different employees to work at that store, online retailers will not. While GameStop pays for all the flashy cardboard signs and in store advertising, online retailers will not. When a game comes out that has a bug and GameStop has to pay to send all of their copies on the shelf back in, online retailers will not…

Get my drift?

The world of online distribution for video games is moving at light speed. As a video game distibutor, now might be the time to get on board. Ask Leonard Riggio.

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