MS will give GameStop a share of Xbox digital revenue

https://arstechnica.com/gaming/2020/10/microsoft-will-give-gamestop-a-share-of-xboxs-digital-revenues/

This is pretty gross and will most likely end up incentivizing GameStop to push Xbox consoles over PlayStation.

The first sign of this new revenue-sharing arrangement actually came somewhat hidden in a press release GameStop issued last week, trumpeting a "Multi-year Strategic Partnership with Microsoft." That announcement focused heavily on GameStop agreeing to use Microsoft's cloud-based infrastructure for its back-end sales systems and a deal for store associates to start using Microsoft Surface tablets going forward.

...

"I received an email from [GameStop Investor Relations representative] Eric Cerny and in the email he said, 'We are allowed to state we will receive a portion of the downstream revenue from any device we will bring into the Xbox ecosystem,'" Domo Capital Management President Justin Dopierala told Ars in an interview. He added that Cerny later clarified in a phone call that the deal applied to all digital sales on all next-gen Xbox consoles sold through GameStop.

What's "gross" about this? Yes it will incentivize Gamestop to push Xbox consoles, but it won't cost the consumer anything so it's just like a marketing deal with a retail chain but structured differently.

Gamestop won't stop selling PlayStation systems and they do tons of marketing deals with all kinds of companies so it's not like they're expected to be totally neutral or anything. It could lead to some gross behaviors based on how Gamestop operates (like forcing sales associates to be very pushy about certain products or maybe even lie about whether PlayStations are in stock) and that would be bad, but the deal itself just seems like an aggressive promotion and could end up helping save Gamestop from collapse, thus preserving places for people to buy games and retail jobs.

I guess GameStop needs to make up lost revenue after telling employees to ignore state shutdown orders during a pandemic shortly before shuttering a few hundred stores anyway.

I am pretty darn sure Gamestop will be happy to sell you any system you wish to buy from them. A sale is a sale.

In fact, this probably will make it so Gamestop will do less of a hard-sell on the Series X to people who just want (and may only be able to afford) the Series S.

It's an interesting way to go about it. I assume they still sell codes in store but I can't imagine that brings in much bacon.

@bigsocrates: Yeah you answered your own question there with "forcing sales associates to be very pushy about certain products or maybe even lie about whether PlayStations are in stock". The quote also mentions its all digital sales, so GameStop get nothing extra for the console sale, yet have to push it. Feels predatory to me. It's also gross how on one hand MS's messaging is "we don't care where you play" and the other hand is "but we've also given a large retailer of consoles a great reason to push our box."

Another gross thing is how GameStop treated its employees during the pandemic, as @bocckob mentioned.

This is just an elaborate co-marketing deal, I’m not sure what the hubbub is all about.

@whitegreyblack: But it's not the same anymore. The second a retailer starts getting a kickback from one company over another, it affects their impartiality.

That's never a good thing.

This is a marketing deal, not xbox funding an award show.

Dude, have you ever been in a Gamestop? they are pushy about literally everything. Thinking the sanctity of Gamestop is being ruined here is too much.

Now its just a Xbox store I guess. Just a faster way for them to go down the drain. Who care. Bad company.

@bestyhammar: what is the actual real world difference of that? Less Sony products carried at dying Gamestops? It's not a big deal.

I'm wary of anytime two big corporations get together to do anything. I think the further away companies keep their money from each other, the better. Gamestop has had a history of pretty crappy business practices and the more Microsoft begins to throw it's money around in acquisitions and partnerships, the more uncomfortable I get.

I also wonder if there is any sort of *wink wink nudge nudge* over in GameInformer's direction as part of this deal, what with them being owned by Gamestop.

Every time you go in a gamestop and see staff with T-shirts, lanyards or posters, talking about pre-orders for a specific game? The wall of empty boxes? These are all game publishers that are paying money to Gamestop to get them to push their game over others.

I don't think we should be expecting some kind of impartiality from retailers. Frankly all of the console war horseshit that's been flying around recently has been a general annoyance.

@bestyhammar: It's not great. I just wanted to point out that this might head off what was likely going to be a "you can never find a Series S at a Gamestop" situation – so, there's a minor potential benefit to customers.

Trying to get to Reggie? :P

And thus the shambling zombie of Gamestop marches on!

I do wonder what the effect would be if one company had a similar deal across multiple stores. Gamestop, Microcenter, Target, Walmart etc. Whenever you go out, Xbox is the nr1 brand you see. Would that have a meaningful impact ? Or are we at the point where internet research is king and the effect of instore marketing is not all that pronounced any longer? I guess it's a rhetorical question because naturally there will always be parents & grandparents buying systems for their young kids that are generally clueless about the world of videogaming. I just don't know if a deal with Gamestop on it's own is moving the needle enough for Microsoft.

I do know that the marketsize of playstation and their amount of commercials & sponsorships (most notably the Champions League since 1997) has introduced the verb 'playstation' in the mainstream of my country as a synonym to videogaming. Xbox doesn't seem to market much here at all, even delayed the Xbox One release by a year last time around.

My weird out there tinfoil thought is this:

Xbox sales provide bonus revenue for GameStop. Xbox related sales then join the ranks of used games and Rewards Memberships in terms of stuff you gotta push to keep your job. Xbox Series S is the also the cheapest "next gen" console in stores. GameStop sells a ton of Xbox Series S consoles and the consumer base for the weaker box becomes the majority target for development.

Some of my cohorts in gamedev have praised consoles for minimizing the amount of catch-all tweaking what needs to be done to work on at least 5 different contemporary graphics cards and 6 CPUs. Having a dual choice (especially when we haven't really seen the Series S in motion yet) at launch could provide an interesting inflection point for that brand... Especially if they triple down on Game Pass and Xcloud stuff.

At any rate stuff like this revenue share deal is just making this generation a little wilder than I expected it to be.

Someone at Microsoft found documentation indicating they had to close more Microsoft Stores than they had to begin with, so they created a scheme to create more with minimal overhead to complete the closing process.

@whitegreyblack:I don't think it will be anything quite like that; hardware has a very tight margin and GS never makes anything on systems. It's games, XBL, controllers, and literally everything else that they make a profit on.

interesting. I didn't make the connection in my post but I was thinking about the closing of all those MS stores in relation to my thinking. This is a cheap marketing attempt in physical spaces I'm sure, as you're saying.

Have a pretty hard time caring about this. I get that it's slightly different since Microsoft is a major console manufacturer but at its core this is just another advertising and promotion deal, same as the many many others that game retailers have cut over the years.

@bestyhammar: lol when have companies outside of (some) journalistic ones been impartial? Money is money. And more of it to a dying business is good for it.

@eukara: "Fuck 'em"

This is the non-est of issues.

I think ist will just be interesting to watch. Likely we will never see "sales figures" for how many Xbox Series X system will sell through Game Stop and won't see if they had a "greater" or "lesser" sales percentage than other stores. But, if we do see taht isyt would be fascinating, right?

Also, the the groundswell negative backlash against both GameStop and Microsoft make we wonder if this will be a wash for sales. They might sell more, but they are also turning off customers who annoyed by even the appearance of manipulation - this has good and bad effects.

I'm actually neutral on this. For Microsoft it could be a smart move to make sure 'a' retailer is beating the drum for them. So, fine, we will see what each side get a out of this, right? Honestly, I don't think Gamestop is long for this world regardless of this deal or not. With Walmart, Target, Amazon, Costco, and Best Buy selling the system basically without much sales pitch or incentives for employees' it is hard to see how this will make a huge dent unless GameStop just clicks with sells lots of other stuff too.

How would Gamestop "push Xbox over PS"? If someone is going to their store to buy a console I think most people already know which one they're going to get before they get in their car. Most their employees are half-sleep teenagers who don't say much besides "hello" and "are you a member".