Up For Sale – GAME’s Spring Clean Could Be the Beginning of the End

I was planning to write an article on the current state of GAME and Gamestation entitled “Just What Is GAME Doing?”. Both chains are owned by The GAME Group, are the only large-scale gaming store chains in the UK and have run into recent financial difficulty, most notably, being turned down for credit by publishers Electronic Arts and Ubisoft. Sony is clearly showing little confidence in them either, as all PlayStation Vita games come with a sticker attached proclaiming the game to be the property of Sony until passed to the customer – indicating that GAME are effectively loaning all titles from the publisher until sold to the customer.

It was never looking good for both GAME and Gamestation, but recent developments revealed by a Sunday newspaper have indicated that things are worse than we thought. So, instead of writing an article asking about what GAME is doing, I’ve written a piece explaining why the company is taking the action it is – and what could happen if things go south.

In the middle of the week, Twitter and the games media alike exploded with news that GAME was holding a huge sale on all pre-owned games and, as later learned, consoles, cutting prices in a frenzy that saw PlayStation 3s going for £100 and 3DS handhelds for just a handful of pennies more. My own Twitter stream was packed with people declaring their intention to effectively clear out their local GAME and Gamestation stores as prices plummeted into pences rather than pounds, and my own examination of stores yielded surprising results. GAME in Perth reduced brand new copies of Resistance 3 to £19.99 and Fallout: New Vegas‘ complete edition to £24.99 – these were later reduced to £14.99 and £19.99 respectively, on the same day, in the space of a few hours as units failed to shift.

Talking to members of staff at a more local GAME store, they confessed that the “Spring Clean” promotion being held in stores across the country was, unofficially, a complete fire sale held to prevent the firm from going into administration. The presence the sale had on social media is a sign that the strategy may well have been working, and my local GAME stores have been more crowded than normal as of late, indicating that troubles might be easing – until news came in earlier today suggesting that the fire sale is not so much a hint at potential trouble in the future as it is confirmation of trouble in the here and now.

As documented by UK games trade magazine MCV, British broadsheet The Sunday Times has revealed that The GAME Group has hired financial advisers Rothschild to find a buyer for the troubled firm should it go into administration in the next two weeks. This will only happen if the company cannot afford to pay the rent for their approximately 600 stores – which would explain the fire sale and the immediate need to raise rent money. That desperate tactics are needed – and that the time limit is so short – suggests that GAME are in more trouble than we might have imagined, and that their time could well be up in the space of a fortnight. Their share price this morning is more than self-explanatory: GAME’s value on the London Stock Exchange has dipped below 1p/share, bringing their market capital down to around £4 million. That is, in simple terms, shockingly bad.

But what would happen if GAME does go into administration, putting thousands of jobs at stake and threatening to remove gaming from the high street altogether? One big option, discussed quietly with some GAME employees and naturally chugging its way around the rumour mill, is a GameStop buyout. A dominant force in the Republic of Ireland, the American gaming giant has closed stores in Northern Ireland and England in order to better focus on their UK online business which launched in July 2011. Reports in UK newspaper The Independent have already suggested that the company is interested in GAME’s stores in Spain and Portugal and could well buy them should The GAME Group put them up for sale and simply refurbish them as GameStop stores, in a procedure known as pre-packaged insolvency. This would mean that most if not all jobs are kept – unless GameStop opts for restructuring – and similar procedures could well be carried out in the UK should GAME enter administration in two weeks’ time.

This is, of course, all speculation. GAME and GameStop are refusing to comment on any matter related to the buying or selling of stores, but should GAME fall – and it’s looking more and more likely that it will – it would be wonderful, for the sake of the UK games market, if the Americans were there to catch its fall. Not that GAME had anything to do with Mass Effect 3‘s UK number 1 this week, which makes you wonder if we really need them after all..

Sources: Independent, MCV, MCV

Original photo by Damien Walters, filched from BBC News

Tags: GAME, GAME administration, GAME buyout, GAME crisis, GAME Spring Clean, Gamestation, GameStop, The Game Group PLC