Headline: The Game Never Ends.
Date: 4/19/2022
Body: A few months ago, I did a blog post about GameStop, and whether or not supporters engaged in stock price manipulation. Well, give them credit for eventually learning how to roll with the times. They are creating a marketplace for NFTs.
For review, I’ll take you back to the early 1990s (cue the fade-out). The hair was still big, freedom in East Germany was still a novel concept, and the music shared a sensibility of the 1970s, and the experimentation of the 1980s. Times were good. Go to the mall, and you’d find shops like Britches, Benneton and GameStop. I’m pretty sure that in 2022, the first 2 are dead, but the third one, GameStop, lives on. If you have strolled into the stores over the past few years, (I have), you’d have noticed that they still sold consoles, and games, but they also sold lots of other merchandise. (e.g. t-shirts relevant to gaming online, desk toys, etc.) This has not apparently been the jackpot.
But, the jackpot might just be what they are doing next. GameStop is starting its own NFT marketplace, dipping their corporate toes into what was a $41 Billion market in 2021. I think this is a brilliant idea, as the people most likely to want to buy NFTs (i.e. younger, optimistic, and willing to try things) is certainly the crowd at GameStop stores. In a financial disclosure, GameStop announced that it would be partnering with Immutable X to produce an NFT marketplace. Toward this project, GameStop has hired several dozen new employees who are conversant with this NFT ecosystem. In a great demonstration of their confidence, Immutable X will be paying GameStop $150 Million in Immutable’s own virtual currency, assuming that several milestones are reached. GameStop apparently has plans to cash in on “in game purchases” like special weapons and armor that you can only obtain by purchasing. For the coders and creatives out there, GameStop will have a $100 Million fund with which to pay for novel NFTs.
In another novel effort, GameStop is trying to mitigate their carbon footprint with this project. Immutable X is built on the Ethereum blockchain, and it can require substantial computer work to register and evaluate transactions, and this translates into high electricity costs and a large carbon bootprint. Immutable X has a practice of paying for carbon offsets, so, the environmental effects should be mitigated.
Will this be enough to rescue GameStop? The company hopes so, but there are doubters. One analyst was quoted as saying, “…While gimmicks like an NFT marketplace may help attract interest in the stock, it’s unlikely to translate into a huge financial benefit.” In researching this article, I have seen again and again (even from inside officers) that the strategy of GameStop is either unclear or abjectly missing. Also worrying, from a GameStop point of view, is that a recent survey of videogame developers revealed that 70% of developers were not interested in NFTs, and 72% were not interested in using cryptocurrency. It’s also important to remember that the NFT marketplace is still in its early days. OpenSea dominates with a more than 90% market share. And some new entrants, such as eBay and Coinbase, may become important competitors in the future. One company, Ubisoft, tried to run its own NFT marketplace and they were roundly catcalled.
The Verdict
Not too much on this one, but there is a question whether or not the NFT marketplace will work well enough to save GameStop. I think there is an instructive model to be found in the store Claire’s. (Stay with me, I swear, there’s something there.) Claire’s caters to the teen girl, and each generation is very different. But, they have stayed in business for decades because they stay true to a core attribute of teen angst: Finding your true uniqueness and revel in revealing it. I think GameStop was sort of the same thing for boys in the same age group. So, I think that if they spin this idea as a way to expose your unique style, and the NFT marketplace is used as a seamless portion of this strategy, they can reap huge rewards from this partnership. However, if they don’t focus enough on their own unique selling proposition (USP), then the NFT marketplace might seem a tacked-on way to extract more cash from their shoppers’ wallets.
REFERENCES
https://fortune.com/2022/03/18/no-articulated-strategy-gamestop-battered-plan-nft-marketplace/
Editor’s Note: Please note that the information contained herein is meant only for general education: This should not be construed as Tax Advice. Personal attributes could make a material difference in the advice given, so, before taking action, please consult your tax advisor or CPA.