Microsoft Corporation (MSFT), GameStop Corp. (GME): This Game is Complex and Risky

The final words

Coming back to the point of used games and new gaming consoles, let me first brief you about the entire scenario and then talk about how it affects GameStop. After the launch of Xbox One, Microsoft Corporation (NASDAQ:MSFT) announced that if a gamer wants to play a used game, he will have to pay a charge for installing it on his console. This means that a particular game can be attached to only one Xbox Live account. There is not enough clarity around this now, but if this is confirmed then it poses a serious concern to GameStop. It will then have to take decisions regarding the pricing of such used games because gamers might want to actually get the new game instead of paying a fee plus the cost of the used game. This is going to be a big challenge for GameStop, which has established a strong foothold in the market for used games.

Another big question for GameStop to handle is the fast-paced transition to digital games. Most gamers prefer to download game files directly to their consoles instead of buying game discs. I can see GameStop trying to enter the territory of digital games, but as of now it does not have a large share in this market. This quarter digital receipts grew by an impressive 47.3%, but the key is to maintain this growth over time as more and more gamers are moving towards a digital format.

I would not suggest taking a new position in the stock until we get more clarity around used games from Microsoft Corporation (NASDAQ:MSFT) and Sony (anticipated to follow the same course as Microsoft Corporation (NASDAQ:MSFT)). Besides this, we should also wait to see the response to the Xbox One.

Mihir Mehta has no position in any stocks mentioned. The Motley Fool owns shares of GameStop and Microsoft. Mihir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article This Game is Complex and Risky originally appeared on Fool.com is written by Mihir Mehta.

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