GameStop 2003 Annual Report Download - page 3

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Legend฀of฀Zelda:฀Wind฀Waker฀-฀GameCube
video฀game฀products฀gives฀us฀a฀superior฀position฀in฀attracting฀both฀avid฀gamers฀and฀the฀more฀
occasional,฀value฀shoppers.฀฀We฀serve฀both฀the฀mall฀customer,฀with฀518฀stores฀in฀most฀of฀the฀
best฀projects฀in฀the฀country,฀and฀have฀1,085฀strip฀center฀stores฀serving฀both฀neighborhood฀and฀
“big-box”฀anchored฀centers.
฀
The฀history฀of฀the฀video฀game฀business฀has฀been฀defined฀by฀a฀perception฀that฀we฀are฀cyclically฀
tied฀to฀the฀introduction,฀growth,฀and฀waning฀of฀the฀last฀major฀hardware฀unit฀in฀the฀marketplace.฀
Years฀ago฀that฀was฀true,฀but฀not฀in฀today’s฀far฀larger,฀more฀diversified฀and฀innovative฀video฀game฀
market.฀฀It฀is฀too฀often฀assumed฀that฀any฀“cycle”฀is฀measured฀only฀by฀the฀number฀of฀hardware฀
units฀sold฀per฀year฀by฀the฀dominant฀hardware฀in฀the฀market.฀While฀this฀is฀a฀useful฀barometer฀
of฀growth,฀the฀more฀important฀number฀is฀the฀cumulative฀number฀of฀total฀hardware฀units฀in฀the฀
marketplace.
Frequently฀when฀asked฀about฀“the฀cycle”,฀we฀ask฀–฀Which฀cycle?฀฀If฀we฀are฀only฀talking฀about฀Sony’s฀PlayStation฀2,฀Microsoft’s฀Xbox฀
and฀Nintendo’s฀GameCube฀(the฀major฀cycle฀drivers),฀there฀is฀a฀pattern฀of฀growth฀and฀inevitable฀decline฀ahead฀of฀the฀next฀genera-
tion฀technology.฀฀However,฀when฀you฀consider฀the฀introduction฀and฀sales฀growth฀of฀the฀“added฀cycles”฀from฀Nintendo’s฀introduction฀
of฀the฀GameBoy฀Advance,฀the฀GameBoy฀Advance฀SP,฀and฀likely฀this฀year฀and/or฀early฀next฀year,฀Nintendo’s฀Dual฀Screen฀Portable฀
(DS)฀and฀Sony’s฀first฀move฀into฀the฀portable฀market,฀PSP,฀it฀puts฀into฀perspective฀that฀there฀are฀
cycles฀within฀cycles
,฀all฀cumulatively฀
driving฀the฀growth฀of฀our฀business.฀฀Furthermore,฀an฀important฀part฀of฀our฀business฀is฀buying฀and฀selling฀used฀video฀game฀products฀
where฀older฀platforms฀still฀do฀very฀well฀for฀us.฀Indeed,฀we฀could฀put฀onto฀the฀cycle฀map฀Sony’s฀PlayStation,฀Nintendo’s฀N64,฀and฀the฀
original฀Nintendo฀GameBoy,฀all฀of฀which฀are฀still฀selling฀in฀our฀stores.฀฀Those฀are฀a฀group฀of฀great฀cycles!
฀
2.฀฀Isn’t฀the฀slowing฀growth฀rate฀of฀the฀video฀game฀market฀a฀concern?
฀
It฀is฀not฀slowing฀for฀GameStop.฀฀The฀total฀market฀for฀video฀game฀products฀has฀grown฀from฀$6.6฀billion฀in฀2000฀to฀$10.0฀billion฀in฀
2003,฀and฀is฀forecasted฀to฀grow฀to฀$10.5฀billion฀in฀2004.฀฀While฀the฀percentage฀growth฀rate฀has฀declined,฀the฀cumulative฀size฀of฀the฀
market฀is฀ever฀growing,฀and฀GameStop฀is฀increasing฀our฀share฀of฀that฀market.฀In฀fact,฀we฀have฀increased฀our฀market฀share฀every฀
quarter฀for฀the฀last฀24฀quarters,฀and฀these฀figures฀do฀not฀include฀our฀used฀sales.฀฀We฀are฀excited฀about฀the฀future฀for฀video฀game฀
growth฀and฀will฀continue฀to฀develop฀new฀approaches฀to฀increase฀GameStop’s฀total฀share฀of฀the฀business.
฀฀
3.฀฀What฀about฀increasing฀competition?
฀
It฀is฀true฀that฀virtually฀all฀of฀the฀retailers฀that฀have฀departments฀in฀the฀entertainment฀category฀have฀
entered฀the฀video฀game฀business,฀and฀many฀have฀paid฀more฀attention฀to฀the฀potential฀of฀video฀game฀
products.฀In฀addition,฀over฀the฀last฀two฀years,฀we฀have฀seen฀the฀movie฀specialists฀repositioning฀their฀
businesses฀to฀do฀more฀with฀used฀video฀game฀products.฀Competition,฀often฀powerful฀competition,฀is฀
a฀fact฀of฀retail฀life.฀฀Our฀basic฀philosophy฀of฀retailing฀is฀that฀competition฀is฀ever฀present,฀and฀will฀likely฀
grow.฀Consequently,฀we฀have฀never฀rested฀on฀our฀success,฀taken฀our฀increasing฀market฀share฀for฀
granted,฀or฀believed฀that฀we฀couldn’t฀improve฀on฀our฀basic฀business฀model.฀฀I฀believe฀the฀proof฀is฀in฀
our฀performance.
฀
Our฀operating฀earnings,฀when฀compared฀to฀the฀only฀other฀national฀video฀game฀specialist,฀are฀far฀
superior;฀our฀new฀store฀growth฀has฀put฀us฀in฀proximity฀to฀the฀best฀of฀the฀“big-box฀retailers”,฀and฀we฀have฀found฀a฀way฀to฀thrive;฀and฀
finally,฀we฀have฀no฀doubt฀that฀the฀new฀entrants฀into฀the฀used฀business฀will฀push฀us฀even฀faster฀into฀improving฀all฀areas฀of฀the฀used฀
retailing฀model.฀We฀are฀continuing฀to฀customize฀our฀used฀systems฀technology,฀accelerate฀our฀operational฀efficiencies,฀and฀further฀
fine-tune฀the฀buy/sell฀algorithms฀of฀this฀very฀unique฀business฀model.
In฀retail,฀we฀believe฀what฀we฀have฀earned฀is฀only฀a฀head฀start฀on฀our฀competitors.฀In฀order฀to฀stay฀ahead,฀we฀have฀to฀improve฀in฀all฀
areas฀of฀our฀business.฀I฀believe฀we฀have,฀and฀will฀continue฀to฀do฀so.
Thank฀you฀for฀your฀support฀of฀GameStop.
R.฀Richard฀Fontaine
Chairman฀of฀the฀Board฀and
Chief฀Executive฀Officer