Babbage's & the Foundation of GameStop

GameStop is an American retailer that sells video games, electronics, and gaming merchandise. It is the largest video game retailer in the world. GameStop traces back to Babbage's, a Dallas, Texas-based software retailer founded in 1984.^[3] This software retailer was founded by former Harvard Business School classmates Gary M. Kusin and James McCurry. The first location of the Babbage's retail store was in the Northpark Center mall in Dallas, Texas. This retailer soon made lots of profit for selling video game merchandise and evolved to become GameStop. GameStop became popular, but the digitalization of video games has affected its sales for some time now.

Historical Context

For many people, GameStop is known as the to obtain trade-ins or buy pre-owned games. However, there is a long history of how the company gained popularity. Babbage’s is the software retailer James McCurry and Gary Kusin founded in 1987, and their by-product was creating GameStop. Babbage’s changed its goal from simply selling software to selling video game products early on in the stages of the video game industry. At the time, people were excited about buying the new Atari 200, and Babbage’s started selling them rapidly. In 1987, the company started selling Nintendo games, eventually becoming a publicly traded company the following year. By 1991, two-thirds of Babbage’s sales were video game sales.

In October 1999, Barnes & Noble Booksellers bought the company for $215 million. They later purchased another video game retailer named Funco. This significant change paved the way for GameStop to develop. In 2002, GameStop went public, and the shares were $18 each [7]. Many investors saw great potential in the video game industry and contributed to the company. Barnes and Noble controlled GameStop for a few years until they decided to distribute the stocks. Sharing these stocks led to GameStop becoming independent in 2004. GameStop then bought EB Games for $1 billion in 2005. EB Games is similar to GameStop because it also sells similar products. After a few years, GameStop got to buy other retailers as well. Some retailers included Free Record Shop’s, Micronomania, and Rhino Video [4]. GameStop progressed more and more throughout the years. They did especially well from 2004 to 2016.

Current GameStop and Potential Problems for GameStop

GameStop is the world’s largest video game retail company as of January 2021. It currently has 4,800 stores operating worldwide. This figure is significant because it was a large drop in numbers compared to the total of stores last year. There are 3,200 stores in the U.S. The remaining stores are mostly in countries such as Australia, France, and Italy [8]. 

Problems became more apparent in 2013 when new generations of consoles were introduced. The Xbox One and Playstation 4 were being released, and it was an ample opportunity for GameStop. However, GameStop is focused on selling physical copies of video games, and these new consoles allow players to buy their games digitally [2]. The company faced and is still facing an enormous threat of digitalization. Players are turning to downloads because it is more convenient. As more stores and online forms of purchasing video games and consoles increase, GameStop faces financial difficulties. Retailers such as Amazon, Best Buy, and Walmart let people buy digital games, leading many to not go to physical stores to buy them [5]. GameStop’s stock value has dropped by two-thirds. In January 2019, the stocks were fifteen dollars, and in January 2020, they were under five dollars each [2]. Some believe that it is partially GameStops’ fault because they are not adapting to the digital advancements in video games.

The Future of GameStop

New consoles continue to include options for game downloads such as the Xbox Series X and the PlayStation [2]. GameStop cannot keep up with this system. Currently, GameStop is not doing well because the company reported a large drop in sales since 2017. In 2018, the company discussed selling itself to Sycamore Partners [3]. Sycamore Partners is a private equity firm and did not purchase GameStop. In 2019, however, GameStop announced they were no longer looking for a company to buy them. GameStop did not have the available financial resources. As time goes on, the digital world grows, and the gaming retailer continues to lose money.

¹ Adhc. “GameStop.” Environmental History, December 3, 2014. https://environmentalhistory.as.ua.edu/gamestop/. 

² Gilbert, Ben. “The World's Biggest Video Game Retailer, GameStop, Is Dying: Here's What Led to the Retail Giant's Slow Demise.” Business Insider. Business Insider, 2020. https://www.businessinsider.com/gamestop-worlds-biggest-video-game-retailer-decline-explained-2019-7. 

³ Hile, Bryson. “10 Facts & Trivia You Never Knew about the History of GameStop.” Game Rant, November 13, 2019. https://gamerant.com/facts-trivia-history-gamestop/. 

⁴ McIntyre, Stephen. “Game Over for First Sale.” Berkeley Technology Law Journal 29, no. 1 (2014): 1–60. http://www.jstor.org/stable/24119937.

⁵ Molina, Brett. “GameStop to Close 150 Stores.” USA Today. Gannett Satellite Information Network, March 30, 2017. https://www.usatoday.com/story/tech/news/2017/03/24/gamestop-video-game-stores/99573598/. 

⁶ PatTheNESpunk. “Rise of Babbage's and Video Game Stores - Video Game Years 1984.” YouTube. YouTube, September 1, 2016. https://www.youtube.com/watch?v=B_Usk26GjpQ. 

⁷ Thapa, Anuz. “GameStop: A Look at Its History.” TheStreet. TheStreet, January 27, 2021. https://www.thestreet.com/video/gamestop-a-look-at-its-history. 

⁸ Tighe, D. “GameStop: Number of Stores Worldwide 2021.” Statista, April 13, 2021. https://www.statista.com/statistics/1209737/number-of-gamestop-stores-worldwide/.