GameStop and Microsoft are forming a “multiyear strategic partnership”

| Oct 9, 2020
GameStop and Microsoft are forming a “multiyear strategic partnership”

It may not be another developer or publisher acquisition, but this latest announcement involving Microsoft is keeping right in step with the company’s near-bi-weekly bomshell-dropping moves within the game industry.  Late Thursday afternoon,  videogame retailer GameStop announced that it has entered a “multi-year strategic partnership agreement with Microsoft Corp., further advancing its strategy to expand its physical and digital videogame offerings, as well as enhance the Company’s retail technology infrastructure”.  The full press release was provided by Microsoft News Center.

The new and largely unexpected partnership appears to address a myriad of areas where each company is facing its own unique challenges, though it’s GameStop that stands to see the most dramatic of changes.  For starters, the beleaguered retail chain will undergo a complete back-end and in-store solution overhaul that will be built on Dynamics 365, Microsoft’s cloud-based business applications and customer data platform.  “This will enable store associates the ability to to access omni-channel insights about customer preferences and purchasing history, real time information on product availability, subscriptions, pricing, and promotions in order to provide a differentiated and personalized in-store customer experience,” the press release reads.  So at the very minimum, the new GameStop retail experience will be structured on top of a Microsoft backbone, and somewhat cryptically they will be keeping tabs on what their customers purchase in order to better sell more products to them.  Fairly dry Big Brother Microsoft stuff, but not to worry,  it does get a little sexier.  Sales associates will be given Microsoft Surface devices that will allow them to move freely about the store and attend to customers faster and more efficiently, an image more akin to that of the interactions one has come to expect when they enter the Apple Store (and to a lesser extent, the customer experience that Microsoft’s now all-but defunct retail stores have attempted to provide in the past).  On the software side, Microsoft 365 and Microsoft Teams will become the primary tools that associates will use for productivity, task collaboration and communication, with the aim of helping them provide better customer experiences while also offering “enhanced security and identify management capabilities”.  So, to me at least, that suggests a new look, cool new toys and tools for the salespeople, and hopefully, a modern and more customized experience for consumers that respects their needs and their time, but also protects their privacy and data.

Perhaps the most interesting tidbit from the press release that is of key  interest to gamers came from the paragraph that focused on Microsoft’s renewed  Xbox All Access financing program. It appears to spell out Microsoft and GameStop’s business arrangement in plain English, stating that “GameStop and Microsoft will both benefit from the customer acquisition and lifetime revenue value of each gamer brought into the Xbox ecosystem.” In other words at the very least, GameStop will be getting a cut of the revenue of each Xbox All Access plan that is sold in its stores, an arrangement that could go a very long way in helping to counter the retailer’s losses as the industry trends increasingly towards digital sales, not to mention provide actual profit for Gamestop on every Xbox Series console sold through Xbox All Access even if the customer does not buy a game along with it (game stores traditionally make no profit on the sale of a console and have to make it up in additional software and accessory sales attached to to the console sale itself).  Even the sale of an Xbox Series S, an all-digital console that all but guarantees the customer will not be returning to by physical copies of new or used games, will still profit GameStop if sold as part of the Xbox All Access. Consequently, it can be expected that the retailer will be pushing the financing program hard.  The good news though is that Xbox All Access is already considered by many gaming pundits to be a very good deal for the average consumer, and in the time of a global pandemic, many hard-strapped customers will likely welcome having the option as opposed to outright rejecting it as an aggressive sales tactic.

Positivity towards the new GameStop-Microsoft partnership was tangible in yesterday’s markets, reflected by a 44% jump in GameStop’s stock.

While the press release largely focused on GameStop’s benefits from the partnership, its obvious that Microsoft stands to gain a great deal as well.  The summer of 2020 saw the closure of all but a handful of Microsoft Stores across North America and worldwide, severely impacting the company’s retail presence at possibly the worst time — right on the eve of the launch of two next-generation Xbox consoles.  While GameStop’s clientele is a much more narrow slice of the consumer electronics purchasing market than what Microsoft’s own stores used to target, GameStop’s over 5000 locations worldwide will offer Microsoft much wider reach and retail presence than it ever had with the Microsoft Store, allowing it to piggyback on GameStop’s already established network chain.  In specific regards to the upcoming Xbox Series X and S, Microsoft can now guarantee over the course of the next console generation that its products will be guaranteed increased visibility and space on the store shelves of the world’s largest videogame retailer, space which up until now has been mostly ceded to bitter rival Sony as well as Nintendo (and arguably, Funko PoP figurines).  Finally, there’s all the positive PR and customer goodwill that comes from doing the entire game industry a solid by not only saving the world’s largest videogame retailer from oblivion but also potentially evolving it into something better.

For certain, there are a lot of questions that will arise from Microsoft and GameStop linking arms.  Is the partnership a potential conflict of interest?  Is the deal enough to truly turn GameStop’s fortunes around?  With the increased integration of Microsoft hardware and software into GameStop’s daily operations, will GameStop start selling other Microsoft products aside from games, like Surface Tablets and Office 365, and possibly competing products as well? All I can say is that as a gamer who doesn’t ever want to see GameStop or any other traditional game store vanish, but also fully embraces digital game distribution, I’ll be watching this story develop with great interest…and a big tub of popcorn.

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