GameStop 2011 Annual Report Download - page 20

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evolved considerably through several generations since the introduction of video game consoles in the
1980s. The typical cycle for hardware consoles lasts approximately five years and during each cycle it is
typical for the price of the hardware consoles to decline over time. This cycle of consoles is longer than
previous cycles and as a result sales have declined in recent years and there is uncertainty regarding
future consumer demand for existing products. At this time, Nintendo has announced that the Wii U will
be launched in late 2012 as the next generation of the Wii. The Company does not have definitive
information regarding plans by Microsoft or Sony to introduce new consoles. Given this uncertainty, the
Company expects that demand for new console hardware will continue to decline until new consoles are
introduced.
In addition, portable handheld video game devices have evolved to the Nintendo 3DS, which was
introduced in March 2011, and the Sony PlayStation Vita, which was introduced in February 2012. The
market for handheld devices has declined in recent years as the proliferation of smart phones and other
mobile devices and digitally downloadable mobile video games offer video game players alternative ways
to play games.
•Video Game Software. Sales of video game software generally increase as next-generation platforms
mature and gain wider acceptance. Sales of video game software are dependent upon manufacturers and
third-party publishers developing and releasing game titles for existing game platforms. In recent years
the number of new games introduced each year has declined and the market for video game sales has also
declined each year. This trend is expected to continue until new consoles are introduced.
Used Video Game Products. As the installed base of video game hardware platforms has increased and
new hardware platforms are introduced, a considerable market for used video game hardware and software has
developed. Based on reports published by the NPD Group, we believe that, as of December 2011, the installed
base of video game hardware systems in the United States, based on original sales, totaled over 275 million units
of handheld and console video game systems and grew by 26 million units in 2011. According to IDG, the
installed base of hardware systems as of November 2011 in Europe was approximately 173 million units and
grew by 20 million units in 2011. Hardware manufacturers and third-party software publishers have produced a
wide variety of software titles for each of these hardware platforms. Based on internal Company estimates, we
believe that the installed base of video game software units in the United States currently exceeds 2.2 billion
units. As the substantial installed base of video game hardware and software continues to expand, there is a
growing demand for used video game products.
PC Entertainment Software. PC entertainment software is generally played on multimedia PCs featuring
fast processors, expanded memories, and enhanced graphics and audio capabilities. Trends in sales of PC
entertainment software are largely dependent upon introductions of hit titles, which are typically limited to one or
two per year.
Casual Games. The casual game market consists primarily of digital games and has grown rapidly over
the last few years. Casual games are generally defined as simple, easy-to-use, free or very low-priced games
played through the internet in Web browsers, on dedicated gaming Web sites or on mobile phones or other
mobile devices. Casual games cost less to develop and distribute than a traditional console video game and are
often supported by in-game advertising or user-purchased premium content. The typical casual gamer is
predominantly female and older than a traditional console video game player.
Business and Growth Strategy
Our goal is to continue to be the world’s largest multichannel retailer of new and used video game products
and PC entertainment software and expand our business into the mobile device category to provide the best video
game content to our customers anytime, anywhere and on any device. We plan to strengthen that position by
executing the following strategies:
Increase Market Share and Expand our Market Leadership Position. We plan to increase our sales by
increasing market share by increasing awareness of the GameStop brand and membership in our loyalty program,
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