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It’s All in the Game

GameStop is pulling out all the stops to keep up with the evolution of the video-game industry. An Interview with Robert A. Lloyd, EVP &spamp; CFO, GameStop.

For GameStop, the world’s largest video-game retailer, the competitive landscape may seem like a corporate version of “Mortal Kombat.” Formidable foes loom, from big-box chains like Wal-Mart and Best Buy to Internet retailers and distributors like Amazon and Steam. The latter threat is particularly worrisome: although GameStop has more than 6,500 stores in 15 countries, nothing makes bricks fall faster than clicks.

But GameStop has no intention of hitting the exit button. Currently ranked 298 on the Fortune 500 with revenues of $8.8 billion, the company is determined to prevail in both the physical and digital worlds, says CFO Robert Lloyd. It has numerous resources to call on, including its PowerUp Rewards loyalty program, with 23 million members; new initiatives in digital sales and online gaming; and a dominant presence in the profitable pre-owned game and gear market. The company is also getting into used mobile electronics, a $184 million business for GameStop in 2012.

Called the “resident GameStop historian” by CEO Paul Raines during a recent earnings call, Lloyd, 51, joined GameStop’s predecessor companies in 1996 as controller, following stints at several telecommunications startups. Recently he spoke with CFO about the changes he has witnessed at the company and the challenges that lie ahead.

Let’s start with the important questions. Are you a gamer?
I play a little bit. My kids definitely are gamers.

What’s your favorite game?
“Uncharted” is one of my personal favorites, but “Call of Duty” gets a lot of play in my house.

You’ve been at GameStop from the beginning. How has its business model changed since then?
Historically and now, we are predominantly a video game retailer. We sell games made by publishers like Activision and Electronic Arts, the consoles that Sony, Microsoft and Nintendo make, and all the accessories you need. We also have a pre-owned business.

About three years ago, the video-game market started to move more into the digital arena. You started seeing more game play online, and particularly with console games you started seeing add-on levels that are distributed digitally through Xbox Live and PlayStation Network. We sell that digital product in our stores.

These add-on levels are generally known as downloadable content, correct?
Yes. It’s a way for the publishing community to monetize development dollars and prolong the life of their franchise titles. Take a game like “Call of Duty.” About two or three months after a new version is launched physically, the publisher, Activision, is going to release additional levels for the game. We sell that content in subscription form, so when you buy the physical game, you’ll prepay for the content that will be digitally delivered over the course of the next year. We’ve built a very nice business out of that.

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