GameStop 2014 Annual Report Download - page 37

cooperative advertising and market development payments enable us to actively promote and merchandise the products we sell
and drive sales at our stores and on our websites. We cannot assure you that vendors will continue to provide this support at
historical levels. If they fail to do so, our salesand earnings could be negatively impacted.
The continued growth of our Technology Brands segment is dependent in large part on our relationship with AT&T and any
material adverse change to this relationship would affect our results.
We continue to grow our Technology Brands segment as away to diversify our business in order to continue to grow and to
help mitigate the financial impact from the cyclical nature of the video game console business. Gross margins in our Technology
Brands segment are higher than in our VideoGame Brands segment and as aresult, agrowing portionofour profitsisdue to the
growth of our Technology Brands segment. Our Technology Brands segment is primarily conducted through Spring Mobile, an
authorized AT&T reseller currently operating 361 AT &T branded stores selling post-paid wireless services and products, and 63
Cricket Wireless branded stores selling pre-paid wireless services and products. Therefore, we depend in large part on our
relationship with AT&T for the continued growth of our Technology Brands segment. In particular,wedepend on AT&T for
constant innovation and the timely delivery of products and services to our stores. Any material adverse change in our relationship
with AT&T,including the lack of innovation or failure to timely supply products or competitive service plans, or changes in the
manner in which AT&T compensates its resellers, could materially affect the continued growth of our Technology Brands segment
and our financialcondition andresults of operations.
Our growing relationship with AT&T could have an adverse impact on our business, including as aresult of restrictions on
our ability to offerproducts and services in the United States that compete with AT&T in wireless and wireline
communications and avariety of technology businesses.
We are asignificant reseller of AT&T products and services through our Technology Brands segment. We also sell certain
AT&Tproducts and services through ourVideoGame Brands stores. Our agreements withAT &T and its affiliates impose significant
restrictions on our ability to offer products and services in the United States that compete with AT &T inwireless and wireline
communications and avariety of technology businesses, including several that are adjacent to markets in which we participate or
are considering entering, which could materially adversely impact this component of our business.
We have made and may make investments and acquisitions which could negatively impact our business if we fail to
successfully completeand integrate them, or if they fail to perform in accordance with our expectations.
To enhance our efforts to grow and compete, we have made and continue to make investments and acquisitions. These activities
include investments in and acquisitions of digital, browser,social and mobile gaming and technology-based companies as the
delivery methods for video games continue to evolve, and investments in new retail categories like wireless and consumer
electronics. Our plans to pursue future transactions are subject to our ability to identify potential candidates and negotiate favorable
terms for these transactions. Accordingly,wecannot assure you that future investments or acquisitions will be completed. In
addition, to facilitate future transactions, we may take actions that could dilute the equity interests of our stockholders, increase
our debt or cause us to assume contingent liabilities, all of which may have adetrimental effect on the price of our common stock.
Also, companies that we have acquired, and that we may acquire in the future, could have products that are in development, and
there is no assurance that these products will be successfully developed. Finally,ifany acquisitions are not successfully integrated
with our business, or fail to perform in accordance with our expectations, our ongoing operations could be adversely affected.
Integration of digital, browser,social and mobile gaming and mobile phone and technology-based companies or other retailers
may be particularly challenging to us as these companies are outside of ourhistorical operating expertise.
Pressure from our competitors may force us to reduce our prices or increase spending, which could decrease our
profitability.
The electronic game industry is intensely competitive and subject to rapid changes in consumer preferences and frequent new
product introductions. We competewith mass merchants and regional chains, including Wal-Mart and Target; computer product
and consumer electronics stores, including Best Buy; internet-based retailers such as Amazon.com; other U.S. and international
video game and PC software specialty stores located in malls and other locations, such as Carrefour and Media Markt; toy retail
chains; direct sales by software publishers; and online retailers and game rental companies. Some of our competitors have longer
operating histories and may have greater financial resources than we do or other advantages, including non-taxability of sold
merchandise. In addition, video game products and content are increasingly being digitally distributed and new competitors built
to take advantage of these new capabilities are entering the marketplace, and other methods may emerge in the future. We also
compete with other sellers of pre-owned video game products and other PC software distribution companies, including Steam.
Certain of our mass-merchants competitors are expanding in the market for pre-owned video games through aggressive pricing
which may negatively affect our margins, sales and earnings for these products. Additionally,wecompete with other forms of
entertainment activities, including browser,social and mobile games, movies, television, theater,sporting events and family
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