There will be growing pains

In the wake of the lingering threat of a market preference switch to digital games, GameStop has adapted by expanding their non-physical gaming business which is made up of Digital, Collectibles, and Technology Brand segments. Their Technology Brand segment consists of Apple (NASDAQ:AAPL) retailer Simply Mac and AT&T (NYSE:T) retailer Spring Mobile, which also sells DirecTV and Cricket Wireless services. GameStop also recently announcedtheir new game publishing label GameTrust.

During last quarter’s earnings conference call, GameStop CEO, Paul Raines, explained that in 2015 non-physical gaming contributed to 25% of operating earnings. He also stated their goal is to increase this contribution to 50% of operating earnings by the end of 2019.

GameStop’s Collectibles segment has been a major contributor to the increase in their non-physical gaming business, largely due to the ThinkGeek acquisition. GameStop’s Collectibles segment include figurines, cosplay accessories, and other “geek toys.” Among their figurines are the notable Funko and Pop! Vinyl figures, which have recently gained much popularity.

TickerTags data shows organic social conversation (volume of tweets, not including retweets and tweets containing links) regarding “Funko” figurines has increased 135% yr/yr (YTD). Organic social conversation regarding Funko +GameStop has increased 460% in that same time period. Interestingly, conversation has tapered off slightly since February.

A price raise might be inevitable, but Epic taking a mere 12 percent of revenue (again, including Unreal licensing fees) could stave it off for a few more years. You won’t necessarily notice the change on your end, but it could make a difference regardless.

There will be growing pains, of course. I have over 2,000 games in my Steam library. More than most, I understand the investment some PC gamers have made in Valve’s platform, and why they might be reluctant to switch. I’ve seen plenty of Steam “competitors” arise over the years, and I’ve watched them fall, unable to convince players to break from their past investments.

But Epic doesn’t need to convince players, per se. It only needs to convince developers. EA’s storefront succeeded because it gave no alternative. You either play EA’s games on Origin or you don’t play them at all.

Epic doesn’t make a ton of games—but it’s made an attractive offer. If enough developers decide the grass is greener on Epic’s platform, we could see a slow trickle and then an eventual exodus. What would it take, for you? If Obsidian’s new game is exclusive to the Epic Games Store, would you switch? If the new Doom is exclusive, is that enough? What about the next Hitman, or Deus Ex, or Psychonauts 2? And how long until your Epic Games library is about the same size as your Steam library, until you start making purchases on Epic’s platform by default?

It’s not a given. Epic has a lot of work to do to make this future viable. But for once, it feels like Valve has some real competition—and that’s always a good thing for consumers.

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