Cover Story: Advancing to the Next Level

With the traditional video game industry — i.e., games designed to be played on consoles in living rooms — in decline, the world's largest video game retailer, GameStop, figured it would have a lot to lose. Rather than become a dinosaur in a fading industry, however, the Grapevine, Texas-based cross-channel retailer took a series of steps to adjust its business model to remain relevant in an evolving and dynamic marketplace. Chief among those steps was a shift to providing consumers with more digital content.

While full-game digital distribution of console games isn't a viable option at the moment (adequate broadband penetration at sufficient speeds isn't available in the U.S.), opportunities do exist for digital distribution of add-on content. With that in mind, GameStop partnered with Microsoft and Sony to help it capture market share in this burgeoning business segment. Through September, GameStop's digital distribution of add-on content and digital currency unit sales were up 77 percent year-to-date.

"Ultimately, we want to connect gamers to games anywhere, anytime, on any device," says Shawn Freeman, senior vice president and general manager of digital commerce at GameStop. "As game opportunities continue to emerge on different devices and platforms — consoles, PCs, phones, Facebook — our strategy is to help gamers get connected to those games anywhere and any way they want to. There are lots of different ways people are playing games that are incremental to the games they're playing on their consoles in their living rooms."

To aid its quest to be be an omnipresent solution for gamers, last August GameStop acquired Kongregate, a social gaming destination and community for core gamers representing the fast-growing free-to-play gaming market. Kongregate currently hosts 10 million monthly players, who spend approximately 23 million hours per month on the site.

Kongregate is "a great platform for us to begin to deliver games into the mobile channel," says Freeman. Kongregate has developed a mobile-optimized version of its platform for Android phones. The majority of Kongregate's games are Flash-based, which the Android model supports. Calling it a very early but significant step for GameStop into mobile, Freeman believes the acquisition of Kongregate is just the start of the brand's work in the channel.