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GameStop CEO: Redbox Game Rentals No Threat

By : Chris Tribbey | Posted: 18 Mar 2010

While discussing GameStop’s fourth-quarter and full-year 2009 financial results March 18, company CEO Dan DeMatteo said kiosk operator Redbox’s plans to expand its game rental program shouldn’t be a concern to stockholders.

“Redbox is testing video game rentals in some markets,” he said. “Video game rental has always been a channel of distribution in the industry. I see it as a shift from rental stores to machines, if they are successful, and [it will have] no impact on our sales.”

His comments came as the company reported its second-highest earnings year ever.

For the fourth quarter (ended Jan. 30) the company reported total sales of $3.52 billion, up 0.9% from the same quarter of 2008. The company reported a profit of $215.9 million, down 7.1% from the previous year.

For all of fiscal 2009 the company reported earnings of $377.3 million.

“We saw global market share growth as new software sales increased 1.2%,” DeMatteo said. “In 2010, we see great opportunity to deliver earnings growth by improving global operational efficiencies, expanding our leading market share and utilizing the buy-sell-trade model to drive new and used software sales.”

For 2010 the company is expecting a 5% to 15% drop in new hardware sales, but a 2% to 5% bump in new software sales, and a 5% to 10% bump in used product sales. New hardware sales during the fourth quarter were down more than $75 million from the previous year.

GameStop is also hoping new motion control gaming endeavors by Sony Computer Entertainment and Microsoft will help boost sales this year.

“In terms of the Sony Move and Microsoft's Project Natal, we are optimistic about the opportunity for these devices to transform the gaming experience on [the PlayStation 3 and Xbox 360],” said COO Paul Raines. “[We are] working closely with the manufacturers to make sure GameStop will be the destination for both.”

As for 3D games, DeMatteo said he doesn’t see that business really taking off until 2011.


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