EA's Bad News for GameStop

By Dan Gallagher

Once the Reddit-fueled frenzy on GameStop shares has faded, investors will have to come back to reckoning with a tough business made worse by the pandemic.

A hint of how much worse can be seen in the latest earnings report from Electronic Arts.

The game publishing giant reported late Tuesday a 19% jump in net bookings for the December quarter, driven by digital sales and its live services. The company noted that 62% of its new game sales for the quarter were digital, compared to 49% in last year's holiday period.

Digital game sales create two problems for GameStop. One, they generally don't move through GameStop stores, with the exception of those driven by cards that the retailer sells.

They also don't generate used sales down the road --hurting what has typically been GameStop's largest source of profits.

The shift to digital sales has been going on for a while, which is why GameStop's current management is pursuing an "omni-channel" strategy to build up its online business.

As EA's results show, it's a race against time.

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February 03, 2021 10:10 ET (15:10 GMT)

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