EB Games predicts sales boom
Jared Lynch
Business reporter
Video games retailer EB Games is forecasting its sales to soar despite consumer sentiment nosediving and businesses from department stores to airlines bemoaning the slump.
Michael Mauler, executive vice-president of EB’s US parent company GameStop, says while global growth is sputtering along, games sales are expected to rise 10-15 per cent worldwide this year, and by the same number again in 2015.
Not bad, considering global video game sales are worth about $US100 billion [$A114.6 billion] a year and Australia is EB’s fastest growing market, with 380 stores nationally and another 40 in New Zealand.
“It’s bigger than music, bigger than box office. So 10-15 per cent growth on a $100 billion business is pretty significant,” Mr Mauler said.
Australia is GameStop’s third-biggest market behind the US and Europe and accounted for 7 per cent of its revenue last year, which totalled $US9.039 billion
Mr Mauler said what positioned EB Games well was its “buy-sell-trade model”.
“Customers can come in and trade in their old games and get new games basically for the trade-in value of the old games,” he said.
The company gave customers $US1 billion globally last year in trade credits under its buy-sell-trade model, with pre-owned sales worth $US2.33 billion.
The video game industry is also cyclical. It gets a boost when new consoles are released and two of the biggest players Sony and Microsoft have launched new models in the past 12 months.
But it hasn’t all been smooth gaming. In 2013, the Australian business operated at a $US71.6 million loss, with the fall attributed to $US107.3 million in write-downs the year before. Net sales at existing stores also fell by 2.4 per cent in 2013.
However, since then the company has rebounded, with EB Games posting a $US37.5 million profit in the 12 months ended February 1 this year.
Mr Mauler said the company was now planning to hedge itself against the industry’s cyclical nature through several acquisitions, which include Apple reseller Simply Mac and wireless retailer Spring Mobile.
It also plans to expand beyond the screen with new ZiNG concept stores, which sell pop culture merchandise such as toys and collectables.
“We have got three stores now and we are opening one more before Christmas [at Fountain Gate in Melbourne],” Mr Mauler said.
“Based on the results of that we will see where that plan takes us.”
EB Games managing director Stephen Wilson said the company was also improving customer loyalty and building “a community”, which reached its zenith earlier this month when more than 30,000 people attended its annual games expo in Sydney.
Mr Wilson said the National Broadband Network should give gaming another boost.
“One of the difficulties living in Australia is frequently the lag when games are hosted Australia. Australia has the best players in the world but we always suffer because of the lag. With the superfast broadband we would be able to show the Americans just how good we are.”
Mr Wilson also said the business was insulated against online piracy, which the federal government hopes to combat through its copyright discussion paper.
He said unlike the music and movie business, gaming had control of its product chain, with built-in security in consoles.
“Piracy has always been there. It’s not a new phenomenon,” Mr Wilson said.
“But I don’t think it particularly impacts on games at the moment because the security systems are much better on say a PlayStation or an Xbox compared with the things that have been heavily pirated like the TV shows, Game of Thrones etc. Those are a lot easier to pirate than some of the video games.”
(164)
