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Maybe Best Buy’s numbers say more about music than about games
Yesterday, I blogged about Best Buy’s like-for-likes, down nearly 15% in the Entertainment Software and Hardware.
Regular reader Christian Hunt thought I might have jumped ahead of myself in my conclusions about what this result about the games industry. His comments are below.
I read your piece and it set me thinking. In particular your conclusion from the Best Buy numbers: "That’s a pretty catastrophic Christmas for video games".
First thought: Best Buy’s Entertainment Hardware and Software category is much broader than just games. It also covers music and DVDs/BluRays.
In my experience the floorspace dedicated to music and DVDs is much larger than that dedicated to games in Best Buy stores (even though in the case of BluRays at least, the per unit price (and perhaps the margin) is similar.
Take a look at the table below from a Goldman Sachs research report on Best Buy which (and I’m assuming the split within the category is their estimate rather than established fact) shows that music is in much greater decline than games or movies.
Hence I’d conclude that the decline in the category is less about things going badly in games and more about things going really badly in music.
Second thought: because of the nature of Best Buy’s stores (out of town/megastore format) people are more likely to go there for larger items than smaller purchases. Hence the smaller items are likely to be additional purchases when buying other items rather than the reason for the trip itself. So this isn’t necessarily about a decline in the sale of those items, maybe it just means that people buying larger items aren’t buying so many ancillary smaller ones. I do accept though that if you’ve popped out to buy a console you’re likely to buy some games to play on it. That contrasts with Gamestop which, as the name implies, is a specific destination for people looking to buy games. Perhaps this different dynamic explains the difference in the performance of the two chains.
Final thought: I’d contend that people are buying more online (Amazon et al) and that therefore this is possibly just a case of cannibalisation rather than a decline.
What do you think? Is Best Buy’s declining entertainment revenue a symptom of a wider malaise, or is it specific to the chain?