GameStop Stocks Dive After Sony's PlayStation Now Announcement

By Luke Caulfield , Updated Jan 08, 2014 01:18 PM EST
Close

When Sony announced its PlayStation Now service at CES yesterday, gamers oohed and ahed, but the announcement had a completely different effect in the business world as Blockbuster stocks took a tumble.

According to a GamesIndustry report, GameStop stock is trading 9% lower than Monday following Sony's PlayStation Now reveal. Why? Because the nature of PlayStation Now. In case you missed the announcement, PlayStation Now isa cloud-styled Gakai based service that will let gamers stream a wide variety of titles from Sony's past consoles like the PlayStation 2 and 3 over to current devices like the PS Vita, PlayStation 4, and even directly to Sony brand Bravia televisions (read about more details on PlayStation Now here). Streaming games directly is a serious threat to brick and mortar retail shops like GameStop, because it allows such stores to be bypassed completely.

PlayStation Now is going into a trial run at the end of the month, and if it works well, it could help do to GameStop (and other retailers) what Netflix did to Blockbuster.

While the service is no doubt a potential threat, it's not all doom and gloom for outlets like GameStop. In a note to investors, famed Wedbush Morgan analyst Michael Pachter said the dip in stock is more a short term effect instead of a long term: "Sony's sell-through number helps GameStop much more than the launch of PS Now hurts them, yet GameStop shares getting hammered. The sell-off in GameStop shares that followed the PS Now announcement is overdone."

"It is important to note that PS4 has no backwards compatibility with PS3 discs, meaning that the availability of PS3 digitally streamed games will not directly result in lower used sales of PS3 games to PS4 owners," he argued. "GameStop's used gaming sales from PS3 discs on PS3 consoles are most likely to be impacted; however, until we know more about game availability, timing, and pricing, among other factors, we do not see a meaningfully negative impact to GameStop in the near-term."

Similarly, the dive in stocks doesn't mean GameStop is a sinking ship. A report from Forbes reminded readers that the company's stock "is up nearly 78% in the last year and it posts annual revenue over $8 billion." For any of you investors out there, "analysts at Stifel Nicholas downgraded GameStop stock to hold.'"

See Now: 'The Walking Dead' Season 8 Gets Preview Special on AMC

© 2017 Game & Guide All rights reserved. Do not reproduce without permission.

Join the Conversation

Real Time Analytics