GameStop 2005 Annual Report Download - page 5

As has always been the case at GameStop, it is not the
number of new stores, but the quality of new stores we
open that matters. We have always devoted time, energy,
capital, and hands-on senior level involvement to our real
estate management. This has paid off with a very high rate
of successful stores, and led to uncovering more growth
opportunities in markets that are underserved. That focus
will continue in the future.
Magazine, with over 1.9 million paid subscribers and the
38th largest US consumer publication, as well as the soon
to be combined GameStop.com and EBGames.com, had
excellent years and, as a result of our merger, are going to
be even more formidable and profi table in 2006.
As spectacular a year as GameStop had in 2005, this is
a business that does not allow too much time to refl ect
on the past. The video game business and GameStop’s
business, in particular, are always about the future.
And what a future we foresee.
In 2006 we will fully launch into the next generation of
super-powered consoles. We look at last year’s launch
of Microsoft’s Xbox 360 as a “soft launch” due to very
restricted quantities of the hardware being available. 2006
is, in our mind, the real launch (or re-launch) year of an
amazing sensory experience for the gamer.
Furthermore, we are anticipating that towards the end of
2006, Sony will be releasing the PS3, the next generation
of the most successful and widely used console ever. The
PS2 originally hit the market in October 2000 and our U.S.
stores have sold over 4 million units – and we believe the
PS3 could top those numbers over the next 5 years.
As amazingly powerful as both these consoles are, by
marrying their computing and gaming horsepower to the
visually stunning HDTV capability, video gaming will move
to an astounding new level of visual excitement. Arthur C.
Clarke once said that, “suffi ciently advanced technology
is indistinguishable from magic.” While the technology
advances do seem “magical,” the sales opportunities are
both clear and real.
And there is more.
Nintendo will likely hit the market late in the year with the
sequel to the GameCube, codenamed the Revolution. And
what I fi nd particularly exciting is that Nintendo is going in
their own unique direction. This approach has the potential
not only to drive the outstanding Mario-led brands, but
with a revolutionary new controller, the Revolution will
make game play easier and more intuitive.
We could not ask for more. We have two well capitalized,
very aggressive companies in Microsoft and Sony competing
at the very highest technical level and attracting gamers with
the “wow factor,” while Nintendo is doing what they have
always done best, being exceptionally creative in getting the
younger new gamers into the category.
There is no question that we stand at the kickoff point
of a major new cycle in video gaming that will create
growth. Gamestop is clearly the leading retailer offering
next generation hardware and software. However, by also
selling trailing platform products that we buy back used,
we create real value for new, more budget conscious
customers, thus allowing the GameStop model to reap
double benefi ts from new hardware releases.
Leadership will be the key.
It takes an extended group of experienced leaders to drive
a rapidly growing business, and we have that team. Fur-
thermore, it takes an equally expansive team of managers
who are well versed in the increasingly complex business
of serving the video game customer.
As the video game business has become more complex
with more platforms, more add ons, and more online game
play, our customers have come to expect that GameStop
store managers and store associates can talk-the-talk, be
ahead of the buzz, and always know what is coming next.
Our management team is deep, experienced, and com-
mitted to staying ahead of opportunities.
Since the completion of the merger, we boosted an already
strong team by naming Steve Morgan as GameStop’s new
President. Steve was formerly President of North Ameri-
can and Canadian stores for Electronics Boutique, and
brings added depth and perspective to our team.
In addition, we have expanded the GameStop board with
four new members including Electronics Boutique’s found-
er James Kim, who now serves as the Chairman and Chief
Executive of Amkor Technology, Inc; former Electronics
Boutique Director Stanley (“Mickey”) Steinberg, a senior
advisor to the mergers and acquisitions fi rm of Casas,
Benjamin and While, LLC; Jerome Davis, former Global
Vice President, Service Excellence at Electronic Data Sys-
tems; and Larry Zilavy, former Executive Vice President,
Corporate Finance and Strategic Planning for Barnes &
Noble, Inc. These individuals provide our board with even
more depth and a very wide range of experience.
And fi nally, it is a powerful statement to realize that Game-
Stop worldwide now has over 30,000 people focused
solely on giving full and total attention to the fastest-grow-
ing, most dynamic entertainment business in the world.
We will continue to differentiate ourselves by maintaining
a passion for gaming and serving our gaming custom-
ers, and also by seeking every opportunity for profi table
growth to drive value for our stockholders.
Thank you for your support and continued interest in
Gamestop. The best is yet to come.
R. Richard Fontaine
Chief Executive Offi cer and Chairman of the Board
Both our major “broadcast vehicles,” Game Informer