On Tuesday, Microsoft announced a new subscription service called Xbox Game Pass that will grant access to a 100-title library of games for $9.99 per month. Following the news, market shares of GameStop Corp. (GME) dropped around 8%.
The sudden decrease in company stock price was seen by Wall Street investors largely as a response to Microsoft’s announcement. Trading closed at $24.44 on that day, a -7.84% drop in value over previous investment estimates.
The tech giant has since responded to accusations of them trying to kill GameStop, saying there is actually a close working relationship between the two firms.
GameStop stock plummets, expected to go down a bit more
GameStop share prices going down is actually not new at all, with the company seeing a slight but steady decline ever since late last year. Year-over-year figures show roughly a -3% drop every quarter since Q1 2016.
The video game giant is taking a hit mostly from its physical game sales business. Paradigms on the industry are shifting strongly towards digital copies, but there is still a niche to buy and trade games at local shops.
In spite of this, the company is actually seeing a steady rise and favorable numbers on other ventures. Tech brand and collectible sales are up every financial quarter, taking over the majority of profits and growth for GameStop in recent times.
Analysts expect stock value to drop a little bit more and then stabilize by the end of the year at around $22 per share. Some even suggest buying now that prices are low since it could prove worth investing later down the road.
Microsoft and GameStop need each other and will work together
Following Microsoft’s announcement of Xbox Game Pass, the gaming community reacted mostly favorably to the news of a subscription service that rivals Sony’s PlayStation Now.
Microsoft tracked consumer reception over the day and was pretty satisfied with the results, according to Xbox Marketing VP Mike Nichols. The executive talked to Business Insider during a brief interview to clear things up about their impact on GameStop.
“I’M HAPPY TO ANNOUNCE THAT WE ARE WORKING WITH RETAIL PARTNERS, SUCH AS GAMESTOP, ON OFFERING XBOX GAME PASS TO THEIR CUSTOMERS,” the executive said.
In a way, both companies depend on each other. GameStop sells physical copies, consoles, and gear for Microsoft’s Xbox One and PC platforms, while the tech giant needs an industry leader as a third-party ally to sell their products.
Xbox Game Pass will offer fans the chance to play titles such as Fable III, Gears of War, Halo 5, SoulCalibur II, Saints Row IV, and more on Xbox One for just $9.99 a month upon launch.
Source: Business Insider