Game’s GBP74 million acquisition of Gamestation could prove a lucrative deal in light of recent hardware launches. Game’s broad appeal has been buoyed by the success of Nintendo’s Wii and DS Lite consoles and now, with Gamestation alongside, Game Group will be better positioned to capitalize on core gamers, who still account for the lion’s share of the market.
Game has acquired Gamestation for GBP74 million.
Game has enjoyed a bumper year in 2006/07, growing operating profits by a staggering 400% – helped by the re-emergence of Nintendo as a key player in the hardware market. The success of both the Wii and the DS Lite has been instrumental in broadening the videogame market to encompass a wider demographic and has proved crucial in attracting non-core gamers to the market. Game has worked hard to broaden its appeal in recent years, which has helped it to capitalize on this trend.
Gamestation on the other hand, has differentiated itself – targeting the core gamer – and has successfully communicated its specialist credentials. Essentially, this provides a natural complement to Game’s proposition and will enable the group to operate a dual branding strategy, with each brand focusing on different, though heavily overlapping, customer segments.
The successful PS3 console – released early this year – is clearly targeted at the core gamer and tech savvy shopper. This is ideally suited to Gamestation’s proposition and will enable it to exploit further sales of hardware and associated peripherals. And, now that Gamestation is part of Game, the group will be able to boost operating margins through greater scale efficiencies and share best practice between the brands.
That said, competition in the videogames market remains tough with both specialists and non-specialists competing hard to exploit new hardware releases. The market is also subject to price competition, led predominantly by grocers and pureplay online specialists, and though Game is now better positioned to compete – with its increased scale – taking on the likes of Tesco and Asda will still prove an arduous task.
With Gamestation now under its belt and Game enjoying strong like-for-likes in the current financial year, the group can fully capitalize on the lucrative core gamer, build its share of non-core gamers and exploit strong growth across the market through current and future hardware releases.
Source: Verdict Research