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GameStop stock dropped after Microsoft announced Xbox Game Pass

by Eric Frederiksen | March 2, 2017March 2, 2017 6:00 pm PDT

Microsoft announced this week its new Xbox Games Pass, a $10-a-month service that gives subscribers access to a collection of over 100 full games. As investors responded to the news, GameStop’s stocks tanked, dropping by about 8 percent following the announcement.

Streaming video killed the rental store

Netflix is credited with having single-handedly slain the Blockbuster beast, a chimera built from limited supplies and overdue fees. It began with movies-by-mail, assisted by stuff like Redbox, but it was really the streaming that killed the brick and mortar shops. From the outside, the Xbox Games Pass looks a lot like Netflix’s streaming service. One flat rate gets you access to titles from all kinds of participating publishers.

While it remains yet to be seen whether or not the Xbox Game Pass will be successful with gamers, the move is in direct competition with GameStop. While GameStop does technically sell new games, no one would blame you if you thought the company had stopped the practice, considering reports from GameStop employees saying they have to say new games are out of stock just to keep their jobs. GameStop’s core business hovers around buying and selling games, game accessories, and game consoles.

A game pass then, a way to get older games at an extremely low price with unbeatable convenience, is terrifying for both GameStop itself and for investors who remember what happened to Blockbuster.

GameStop doesn’t just sell used games, though. It also sells tons of Xbox and PlayStation gift cards, and the company has broadened its approach in recent years with moves like the purchase of ThinkGeek.

Whether this hit on the company’s stock persists and whether the Xbox Game Pass hurts the company will be determined by how well it does with fans. It’s kind of like Netflix, but with a lot more waiting and a lot more bandwidth. It could prove wildly popular or tank hard. A good selection of games is crucial, and there are concerns like the bandwidth required

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Eric Frederiksen

Eric Frederiksen has been a gamer since someone made the mistake of letting him play their Nintendo many years ago, pushing him to beg for his own,...

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