The Rise and Fall of Gamestop | Design Club

[music] [music]
Good time zone internet. Hello and welcome to Design Club, the only game design show on the internet that today is talking about something that's related to game design but isn't game design itself. I'm your humble host Will, joined as always by my pal Jeff. Say hi to the people, Jeff.
Hi to the people, Jeff. Hey everybody, I am Jeffrey Zakin, the studio director of Extra Credits and Extra History, but more importantly for this, I am our game designer in residence and resident Methuselah, since I'm even older than Will, which is important. We usually say my game design is more important to this conversation. Today, my age.
Yeah.
is my strength today.
That's That's right. Gather around young gamers of 2026. You're
[laughter]
You youngks, Jeff and Will ARE GOING TO TELL YOU A TALE OF A MAGICAL PLACE, A MAGICAL PLACE called the GameStop. Now, um what
Which used to be more magical than it is

today.
Right, that's true. So, okay, we should probably explain.
Actually, well, I I want to throw something down right at the beginning.
Yeah.
For street cred.
Yeah.
A long time ago, GameStop had it.
Yes.
Like and that's where we're coming from because as we're kind of looking at like the rise and fall and where GameStop is now, this was once a place and we'll get to it shortly that actually had significant cred in the gamer community.
Yeah. Yeah, it did and it shaped a lot of gamer culture, right?
Yes.
Uh and the reason that we're talking about it now is a bunch of things, largely the CEO Ryan Cohen, and largely Ryan Cohen's obsession with buying eBay. And why that Yeah. And why that has caused a uh uptick in people paying attention

to GameStop, including us, and why I think it makes sense that he wants to buy GameStop. And also, um what the how we got here. How the heck did we get here, right? How did we get to the place where GameStop is now 50% I I need everyone to understand this. GameStop's market cap is about $10 billion, give or take, depending on when you're watching this. We're recording this towards the end of uh July 2026, if you're watching it.
Quick quick note, Will. What does market cap mean?
Market cap is the total amount of value of stock in that company that's currently in the market.
So, what the market thinks it's worth. If somebody was going to go buy GameStop,
Yes.
that is the theoretical price.
Correct.
And once again, that was how much?
$10 billion with a B.

Okay. GameStop also owns $5 billion of eBay.
Stock.
Stock. Which means that GameStop is 50% eBay by value?
Or that if a logical person was breaking it apart for pieces, and this doesn't always actually reflect adequately in how
Correct.
get um things are capitalized. But you would think that if you own $5 billion in stock from a company or if you own enough stock to be worth $5 billion separately, that your company therefore would be whatever its value is minus that as your actual value.
Right. So, it's just very interesting that we're at this extremely weird place where uh and and this is uh by the way, part of an effort to to perform a hostile takeover of eBay where you simply buy enough stock on the open market to have a controlling share of a company and then you run the company

because now you have a controlling share of the stock. For a company that's worth sh- five times as much?
Five times.
How much is eBay worth?
50.
Okay.
50.
So, GameStop owns 10%.
Yes.
Of eBay then.
Yes.
That they've gone out and bought, which is half their company's value.
Yes.
And they're trying to do a takeover of eBay.
Uh-huh.
So, a $10 billion company is trying to acquire a $50 billion company.
Uh-huh.
And actually, I guess with enough debt and money, you could theoretically go buy it out. We've seen weirder things.
short.
Mhm.
Like, you have to have a controlling interest, which is 51%. So, they're 41% short. And they're half GameStop. Like, I don't So, it's weird, right? And and and it it's kind of sad, actually, that this this is the place where this is like what GameStop has become. And GameStop's not a stranger to controversy in recent

years. There's you know, there was all the stuff during COVID. There were all of the original things about Yeah, resale value. We're going to get to all of that stuff. Um but it it is it is a really fascinating cultural phenomena that we wanted to take this opportunity to like look at, right? Um so,
So, let's hop back in Yield time machine.
Yeah, he he he uh uh
back to the days of yore. So, I want to set the stage a little bit before we get into this. So, it wasn't until the 2010s that I would say downloading games became something that was viable and mainstream. Like you could say it really started in 2006 with the seventh generation of consoles, the 360, the Wii, and the PS3 because those are the first ones

that came both with internet connections and hard drives. And that took off. But as somebody who used to run a video game market research firm, I can tell you that like if you're looking for significant percentage of games bought digitally, that wasn't happening until the 2010s and even to the mid 2010s.
Right.
GameStop and physical game stores are significantly older than that. And so when we talk about why they were juggernauts at the time, it's because that was where you bought your games. And that for therefore helps game shape game culture and that's the place we're going to be going back to start from.
Right. And I think that it's important to note that um it was important It's important to understand that GameStop was the hub of a lot of game culture
Mhm.
[clears throat]
because it was because we didn't have Discord, right? You had like forums,

maybe, and maybe if you were like super up on it, you had like uh I guess a team TeamSpeak wasn't a thing, right? Like TeamSpeak
I mean it was it was all asynchronous. It was things like Reddit,
Yeah.
which were also still growing at the time, but this is pre-Discord.
Yeah.
This is pre pretty much any of the cool hangout apps like Discord.
Right. So that this was um and so when you went to get your games, that was one of the ways like the act of purchasing a game was involving yourself in gaming culture because of GameStop, right? And that that feels kind of weird, but there is something about going into a store and seeing GameStop TV and talking to the person and seeing what's on sale and those giant cardboard standees and hearing about what was coming up next and picking up your Game Informer and like all of those things were what gaming culture was for a lot of people before we moved as much online as we

have now.
And for a lot of people, they even the dipping the toe in it.
Yeah.
Like when when you're going to go buy your gift for your nephew and you're like, "Oh, I'm going to go get him a copy of, you know, the first Battlefield or World of Warcraft or any of these other things that you actually bought physically.
Yeah.
Parents, uncles, whatever it was, aunties, moms, walked into a physical store to buy them. And I cannot you cannot underestimate the power that GameStop employees had for the number of people walking in with like, "My nephew says he likes this game called Call of Duty."
Right.
Directing them to the correct Call of Duty or trying to suss out, "Oh, your nephew owns an Xbox 360. Therefore, you need this copy, the the Xbox copy, not the PlayStation copy." Like all of these little things. And people who worked in GameStop knew. Like they were signing up for that because they had they loved games and it

was a place that would pay them to hang out and that they could get big discounts on all the games they bought.
Yeah. And that that model has worked remarkably well for many decades after. You pay young people who are very invested in your in in your industry largely in their discount. Looking at you, Games Workshop.
Actually, hold on a second. I did forget um people are talk about ICQ. ICQ did exist before Discord and was a very acceptable alternative, though it does not have the robustness that ICQ Discord does today.
Uh ICQ's market adoption was also a little geographically lumpy.
Yeah.
Um it was it was much more um in my understanding it was much more prevalent in other parts of both the states and the world. Like my my East Coast upbringing, nobody had ICQ.
Well,
Yeah, and so like that that was
fairly what more widely adopted.
Yeah, correct.

But
Anyway.
We're going to hop into the history, too, but so this is the starting point is pre-digital downloads in any meaningful way. Um consoles being robust sellers.
Yep.
And you know, with the breakouts of the PlayStation and the PlayStation 2, you know, and the GameCube and all of these things, there needed to be a dedicated place where you could go buy both the hardware and the software. And
And also at the same time, the other thing to really remember is mall culture. Right? Malls died a horrible, painful, immediate, abrupt death in many ways due to COVID, right? But you need to remember that the but the time period that we're largely talking about, right, when GameStop was in its heyday, was in a place where malls were a social third space for many people. Right? The mall as a whole and GameStop being part of malls. They weren't all in malls, but man, were a lot of them in malls, right?

Yeah, they were in malls, plus. Like it was surprising to find a big mall without actually a GameStop and probably any electronic boutiques. Like there were a couple of competitors.
Yep.
And so you went to the mall or certain other places to get games. But this was consoles were big. PCs were at the decline at that point. Um and like they adopted digitally much like Steam with the digital adaptation really saved a lot of PC gaming in a way that I think is hard to appreciate.
Yeah.
But otherwise, like consoles were big, consoles were big advertisers, consoles sold a lot of games, and there wasn't really the mail-order version was not nearly as interesting.
Yeah.
Um and you also got them later. Like if you wanted to get your Call of Duty kind of like going to your the movie opening night. If you wanted that drop or the World of Warcraft expansion or one of many other things,
Yeah.

there would be lines going out of the stores to get that at midnight when they were legally allowed to sell it.
Yeah, and there was something kind of cool about this. I remember I went to the midnight launch for Halo Reach. Um
Very good game.
Yeah, very good game. Uh in my opinion, one of the best of them. Uh because the less the less super you make the main character of a Halo game, the better the game is. Anyway, um And it was kind of cool
Medal of Honor drops. There we go.
Yeah, yeah. Um
Many, many, many drops.
Yeah, right. Uh the the big thing about it, too, was that it was it was uh a little subversive cuz you got to be in the mall after the mall was supposed to be closed. Right? Which was weird, right? That was like it was exciting because there was a thing, it was exciting because you got to do a thing you weren't like normally able to do, which was kind of cool. You were hanging out with other gamers, like it was a culture thing. Um yeah.
Very good.
And so, let's see here. So, in the malls and other places, multiple different

stores, like GameStop is a surviving one, the reason we're talking about it, and we'll get to that, competing for your attention. And one of the other big ones, too, is video game publishers had a love-hate relationship with the stores, which we'll also get to. But this was one of the huge places for what they call point-of-sale marketing, which is sure, you can run TV spots, you can put up billboards and other things, but GameStop would sell every possible space actually and the others for advertising within the store.
Yeah.
There'd be posters on the walls, in the windows, there'd be big standees. You would buy what are called end caps, which is the end of the aisle where they set up that row of games. All of these are paid for. This isn't hey, the employees thought this was cool. No, GameStop made hundreds of millions of dollars. Possibly more. From individual publishers who had big games coming out to set up all of these things in the store and it wasn't on a per store basis. You would buy regions.

You'd be like, oh yeah, I'm buying the 800 GameStop's in the western region to all run this campaign, which involves windows, three end caps, you know, a standee, four things hanging from the ceiling. And then you'd go out and you'd spend bucket loads of money.
Yeah.
Buying these so that when people walked in to buy a game, maybe they'd instead buy yours or they'd know that hey, Red Dead Redemption that from those Grand Theft Auto guys. That's a game that's going to be coming out. Like this was very efficient marketing. And so there was like all of these parts that you know, the gaming people went there, the publishers poured money in. This was the place to buy your games. We'll get to resale in a minute. Well, like GameStop's were hubs.
I actually have a question about that advertising. Was one of the things cuz you would know this far better than I. Um
We used to do secret we we by the way, I I don't know if I've ever talked about this. We realized this early and that nobody was tracking it. We actually used to send we had an ERG employee who would

go into all of these different stores with a camera, capture all of this and we'd upload it into like our own unique tool. So marketer so publishers could check and see if stores were actually displaying like they were supposed to and we would calculate percent of store taken over by each advertising campaign so that marketing people could go and be like, "Hey, these guys are outspending us." Like uh we I studied more of this just because nobody was studying it. So
Yeah, right.
a ton that I'd never known. So yeah, go ahead and ask your questions. I actually might know the answer.
Um one of the things that uh bugged people and was very much a part of GameStop culture was you go to buy the thing and they ask you if you want to pre-order an upcoming game, like a specific upcoming game. Was that upsell like part of marketing spend? Was getting GameStop cuz I know I know it was a metric for GameStop employees that they needed to get a certain number of of pre-orders, right? And we can talk about the ethics of all of that, but

like that idea that like if you can
remember that, but so I can't give you I'll I'll give you a for real, I don't remember.
Mhm.
But also, I can absolutely see whether it was paid for or not, GameStop looking to be like, "Oh, can we get you back in for another time by giving you a pre-order?"
Yes.
Because the other big one was pre-a lot of digital big digital drops. Pre-ordering your game was important because each GameStop, you know, would only stock X number of copies. And they'd try and judge that appropriately to what they thought the demand was. But there would be times that if you hadn't pre-ordered your copy, you couldn't get a game game game day one cuz they'd all be sold out.
Right, yeah. For Do you Do you remember Do you remember when games sold out? Pepperidge Farms remembers, right? Like that was a thing. wild. We're like just brushing history off. But we do need to
I know I'm sorry. I'm looking at chat scrolling by and some of these, but yeah, like there were all sorts of weird things that happened because of the physical format

Yeah.
that digital pretty much ignores now.
Yeah.
And GameStop was very good at continuing to capitalize, I'll just say capitalize on all of those kinds of things. And they were so powerful. And I I want to relate this story that if that they could actually push publishers, especially mid to small size ones around on amount ordered or even requiring games to go in there. Like I think our very first EverQuest expansion which came out in 2000 [snorts] or 2001. Somewhere around there. Uh Kunark Ruins of Kunark. We'd been thinking to do a digital only expansion for our MMO. And we got called by GameStop and they said, "Hey, if you guys don't also have a physical copy in our store, we will never carry anything you put out ever again." And we said, "Oh, well, we'll have a physical copy in your store as well to sell."
Yeah.
And they could get away with it because they were that big. Like it was amazing the power of

GameStop at the time.
Yeah. Absolutely. Okay, so we we do need to acknowledge something which may make some members of our audience turn even more to dust than they already have.
Yeah, we we have laid the groundwork I feel like to say why This is interesting.
Right. Okay.
So take us back, Will.
So let's go back to before I was born. The year is 1984 and a company is founded and that company is not named GameStop.
Wait, let's see. Was there was there somebody throwing a big hammer through a television screen?
Oh, no. Though that was a thing
ad.
Yeah, that was that was that wasn't an ad that many people still remember and which by the way Epic clowned on Apple with during the Apple Epic lawsuit. Anyway, not important. Um no, uh the year is 1984 and the company that's founded is Babbage's.
Or as somebody in pre-show chat said, "Isn't that a place that should sell a bag of cabbages?"
Right. And you would think

was that? Do you remember?
That was Thunder. That was Thunder [laughter] heavy army chat.
that was good. Yes.
Um so Babbage's fou- founded in 1984. We're going to um elide uh everything that happens from 1984 until 1999 when they become GameStop. But we do need to acknowledge that that the company that would go on to become GameStop was not born as GameStop [clears throat] and what had a running start and a presence already as Babbage's when it became GameStop. I would argue that the fact that very few people remember the name Babbage's probably is an indicator that like that era well um structurally necessary for what follows has been eclipsed by the cultural impact of GameStop. As a as a joke.
And honestly, GameStop is a much better name than Babbage's.
Yeah, I mean
Like I believe Babbage's wasn't that like a family name or something?
Charles Ba- I I had I I looked it up. Charles Babbage was an English um

mechanical engineer polymath who was uh one of the people who was uh in charge of the original mechanical concept of the computer or who invented the original mechanical concept of the computer. So it was sort of it's a computer thing, right? But not a accessible computer thing, which kind of goes back to the whole cultural discussion of making nerd stuff accessible to the general public, right? Like you're not going to go to
actually look at the time, too. If it was '84, consoles were fairly like that wasn't the console age, that was the PC age. So it would have started as a PC shop.
Yep.
Selling PC software and possibly piece probably PCs as well.
Yeah. His name is now Charles GameStop. That's correct. Posthumously got his name changed to Charles GameStop. That's correct.
Rest on his tombstone, right next to the pizza.
That's yeah, right. Exactly. Um okay, so
[clears throat]
Let's go to '99. So GameStop is one of GameStop emerges

out of Babbage's as a rebrand uh and as one of the major places to buy video games in '99, what what's out at '99? Uh
EverQuest.
Okay, great. Excellent. Console-wise, we're on Game
two or PS1? Either the end of the PS1 or beginning of the PS2, right around there.
PS2 launches in 2000.
Okay, so
So, we're
1 year before the PS2,
Right.
they timed that pretty well. End of the PS1, so all the all the first all the fifth generation of consoles are selling well.
Right. Uh
About to hit into PS2, which is the biggest thing for a long time around there.
Right. For for Nintendo, we're still on the Game Boy Color. The Advance wouldn't come along until 2001. Right? So, we're like right at the cusp of a lot of things about to happen.
see. Actually, around there, I believe

StarCraft and Half-Life.
Yeah.
Couple small games.
Yeah, I just
Uh Battlefield came out, the first one just after that, and Counter-Strike.
Yeah.
There were some very foundational games that came out '99, 2000, 2001.
Yeah.
Yep, the Matrix Oh, there we go. Under just called out The Matrix had just happened.
Yeah. Yeah, so so there's a ton There Yeah, Sega still had a console, the Dreamcast was a thing, right? So,
The rebrand my guess was a way to help get them away from being a PC perceived focus
Yep.
and into the growing market of console.
Yeah. Right. So,
And oh, importantly, big box stores were not very interested in this kind of thing at the time. You did not wander into Walmart and Target and other places and find a big video game section.
Right. It was still a children's toy, right, in a lot of ways. I I getting

Actually, I think it was just it was specialty places like Target and Walmart were I my guess is we're just afraid to sell
Mhm.
that kind of stuff.
I remember getting my Game Boy Color as a gift from a Toys "R" Us.
Toys "R" Us actually, up until the mid-teens was one of the top five sellers of video games in the United States at least consistently.
Yeah.
Like Toys "R" Us moved a lot of They were one of the first equivalent big boxes to actually carry games in a meaningful fashion and do it in a strong way.
Yeah. Okay, so so that's the era of culture that we're talking about, right? So GameStop emerges onto the scene just as a bunch of very influential things are about to happen, right? The Advance, the GameCube, the PlayStation 2, the death of Sony or not the death of Sony, the death of Sega, excuse me.
Xbox is coming, yeah.
Xbox is on the horizon, right?

Halo.
Right, which means Halo and uh all of these things are like about to happen. So I I agree that the move sort of was opportunely timed to be part of this rise of gaming culture, right? Plenty of people remember playing games before that, but those shifts to those consoles generations was a big deal, right?
[clears throat]
Alas, poor Atari, we knew him well, yeah.
Yeah.
Okay.
But yeah, so but video so dedicated video game stores were a thing. We had GameStop, there was Electronic Boutique. I mean, there were multiple different chains. And again, one of the reasons we're talking about GameStop is that they're the ones that survived. Every other, to the best of my knowledge, dedicated video game store um like mall-style national chain store went out of business.
Yeah.
And GameStop rode it through. So but this is like is where if you were talking about the rise of GameStop, like it went from baggage

and it came in at an opportune time and it just started going gangbusters. And they they were national. And that's also important because they could run national campaigns. People could be familiar. You could be in another city and you're like, I want to pick up a copy of so-and-so and you knew where to you'd go to the mall and you'd look for a GameStop.
Yep. So, uh we we can actually talk about this real quick. Um this is kind of
Oh, man.
very very interesting. Let's talk data. Jeff's one of Jeff's favorite topics. Yeah. GameStop outlived Blockbuster. Wild, right? Cuz remember you could rent games at Blockbuster? Remember renting a console at Blockbuster? You member?
I actually I remember actually well renting it wasn't a Blockbuster. I remember renting VCRs so you could watch a movie.
Yeah. That was a whole thing, too. Um or checking out a VCR at your library? It's a thing. Anyway, okay. So, um the earliest I have data for here is in the um Wikipedia summation of the

10-K forms for GameStop Corporation filed with the US Securities and Exchange Commission. This is not I pulled this off Wikipedia. This is Wikipedia collated information that's available from the SEC. Okay? Great. Excellent. In 2001, there were 1,038 store GameStop stores, okay? By 2003, there were 1,498, 50% more. 2004 had 1,800 GameStop stores.
My autograph is out.
And then in 2005, there were uh 3,600 because that's when they acquired EB.
So, 3,600. What were they right around 99 you said or 2000?
2001 was 1,000. So, they're more than three and a half times bigger in a 4-year span. Because their brand achieved market saturation in part by buying EB, right?

That the explosive growth is cuz they bought EB Games. Uh and uh
Which honestly was amazing because it took one of the other huge mall chains out of the malls and it gave them a big footprint for malls that they weren't already in.
Yeah.
And honestly, for the time for most people, EB and GameStop were interchangeable.
Yeah, I think there wasn't there it was it was not early enough that Like and they had similar branding, too, right? They had like similar uh branding schemes. They were both big on like the black, red, and white thing. They Like I don't know that I could tell you what the difference at the time was as someone who liked video games.
I don't think there was. I mean, I think it's like, you know, going into different bookstore chains.
Yeah.
I actually I think a bookstore chain would be an excellent com- comparison.
Yeah.
Because there were many of them and sure, there were some differences on how they did set up or other things, but if you were going to go buy a copy of a book,

like pretty much most bookstores would give you the same book.
Yeah. Yeah, the um uh like Barnes & Noble versus Borders versus Books-A-Million versus God, it's been so long since I've seen a bookstore. I weep.
[panting]
Actually, I bumped into a Barnes & Noble yesterday.
Mhm.
Driving home from my child birthday party, there was a big Pokemon raid going on and there was a huge Mewtwo
Yeah.
sitting out Mewtwo Y Mega Raid sitting outside a Barnes & Noble that people must have known about and collected there.
Mhm.
Because we cruised by and like joined 14 people battling it. So, good for them. They're hanging out in a bookstore battling Pokémon.
Yeah. Um
So anyway, um yes. Um
Yeah. And then also of note, though less important, is that in 2006, they acquired uh

GameBrands Incorporated, also known as Rhino Video Games, which only had 72 stores in the US and incorporated them, too. So, by the time we're done with 2006, we're at 3,800 stores and at 2007, we're at 4,000. When in 2001, there were 1,000 GameStop stores in the in the US, and by 2007, there were 4,000.
So, four to 4x Actually, that's not just 4x, it's 1,000 to 4,000.
Yeah.
That's 3,000 more at least like regional store managers or store managers and all of the infrastructure and everything to support all of that.
Yes.
Cuz well, remember when I was saying like they could call up and say your game needs to be physical and in here?
Yeah.
This is one of the reasons. Like
Yeah.
they carried stuff.
Right. And so, I think in some ways, when when we talk about GameStop in this

era, too, it is and I see a lot of people like in chat pouring one out for EB. Um I think it's important to note that GameStop isn't GameStop is just the one that happened to live. I actually don't think there was anything unique about GameStop other than they were the first ones to they were the ones who were like, "Yeah, we're going to we're going to become the dominant market force. We're going to buy stuff. We're going to buy other companies. We're going to achieve like market dominance." I know I'm not I'm not describing any like unique strategy or anything. They were just bigger and had more money.
I I actually think they're a little a little more ruthless, which you in the long term probably served their survivability better and and have actually for a while even been better for consumers. Like that they were just they were aggressive on their negotiations getting things in and just running things like a corp running things like a business rather than like a place that sells video games.
Yeah. I think yeah, I think that's fair. Do we

also think as part of that ruthlessness and this is a thing that didn't make it into the notes, but I do think it's relevant. Um that their existence and market dominance in being a physical games retailer helped lock in the $60 price point for as long as it stayed locked.
Probably. Like I think actually I would think yes that they just they needed uniformity. Like if you're going to run a nationwide ad campaign you you want a price people can understand. And like that is different than a lot of say mom-and-pop shops. Like it's the difference between going into a mom and dad owned say indie comic shop versus something let's just say like a GameStop is one of those you might see more price fluctuation and other things, but also you don't know what's in stock. The service might take three times as long. It's not going to be organized as well. Like there's a whole bunch of stuff that when it's a couple people running it versus run on a huge corporate structure

Run on a planet of grams.
Pros and cons.
Yeah.
And I'm I'm not saying one is better than the other. I'm just saying if you're moving mass goods
Yeah.
you need to set up a store to move mass goods.
Yeah.
And they were the place that did it.
Yeah.
But it also meant generations of gamers could go in and pick up a game and walk out
Yeah.
with it and knew it was most likely going to be there.
Right. So, let's talk about what happens after they walk out with the game.
Okay.
so they go they buy a game.
Mhm.
They take it home. They love it. They play it. They're done with it. And then
Bum bum bum.
They bring it back and they trade it in at GameStop.
Not initially. So, initially, I mean, excuse me, yes, there's always been game buying back, but one of the big big parts about physical media ownership, whether it's a CD, a DVD, a VHS, um a Blu-ray, or any of the different game formats, is you can move it around.
Yeah.

You know, I can go over to Will's house and say, "Check out my DVD, you know, or my old VHS of the original Star Wars." And if we could find a VHS player, I can take it to Will's house and we can watch it together on his VCR.
Right.
Or his DVD, or his CD. I can take my old copy of Halo: ODST and go over to Will and say, "Hey Will, let's put it in and play some couch co-op."
Yeah, right.
Like This also means you can take your disc and give it to a friend, sell it to a friend, etc. And there was a brisk third party market, but GameStop at some point with that ruthless efficiency I was talking about, realized a thing, which is "Hey Will, I've We're a game company. We've made a game. We're going to go print 500,000 copies um of our game for the PlayStation. We pay Sony our royalty when we make the discs, not [clears throat] when we sell them. So, Sony gets 500,000 copies of royalty disc money sent to them, and we ship those in to GameStop. This

is just our GameStop order. And GameStop takes them across its 4,000 stores,
Right.
or puts them in a regional warehouses and starts sending them all out. And I don't know, it's a $60 game and GameStop's going to pay 30-something.
Yeah.
Or with
last step, by the way, if you've never seen this, the last step in retail is usually a giant markup. Um yeah. Yeah.
Because shelf space is expensive.
Yeah, with some guarantees and other things.
Yep.
So, GameStop is paying I'm just going to make up the price at 30. I don't even remember. It It is fluctuated and it is a negotiable.
Yeah.
So, they're going to pay 30 for each copy they can sell a customer. Or, they suddenly realized what if we ran a system where people could bring their games back and maybe we'll buy them cheaper. Five or 10 dollars cuz gamers wanted easy place to do this and it's kind of hard to go sell your used game.
Right.
So, [clears throat]

let's buy these for five or 10 dollars and we'll give people store credit.
Right.
Because they did just stays within our store. We might not even recognize it as profit. You know, it's a credit that somebody then takes another thing out. So, it's really just an exchange. Um and so we can now take that five or 10, let's be generous, 10 dollar game and we'll sell it used for 50 instead of 60. Wow, we just made a lot more on that markup.
Yeah.
And they started doing more and more of this and more and more aggressively. And a lot of the game devs and publishers who would, you know, printed out those 500,000 copies, paid Sony their royalty and shipped them in, started getting undercut by the same retail store that they were hoping were supposed to sell their stuff in new price. And specifically, the publishers and developers, they didn't get any cut of this secondary market.
Right.
GameStop would buy it and sell it, buy and sell it. And their game, which was sitting at the higher price up here, which just wasn't getting sold

nearly as much.
Yeah.
And this was why we started seeing all of those single-use DLC coupons and all sorts of other things being included in the game as they were really hoping that this game that they'd made and paid all the dev budget for, people would buy it new as opposed to having GameStop, which was literally at the point of sale, you'd have people saying, "Oh, I see you picked up this copy of Red Dead Redemption. Would you like a used copy for $10 less? Like they would undersell you at the cash register.
Yeah. And
And um this was one of the first really big GameStop controversy, internal controversies.
Yeah.
Because pubs and devs hated this.
Right. And [laughter] and I uh Chris said yeah, I I don't I'm not saying I don't think that GameStop forced DLC. I I don't think that's the case they're making. What we're saying is GameStop had a thing that they did in the market and one of the possible responses was to do single-use DLC or other day one DLC kind of thing kinds of

things from devs. That's the path That's the path that they went with.
to encourage you to buy the game new as opposed to buy the game used.
Right. Yeah. So and
DLC was a method.
Yeah. Um and I think the
Um actually I want to answer this. Mostly yes. Game devs hate the used game market mostly because their game is getting sold in a way that they don't get anything from.
Right.
And it's it's a really tricky one cuz almost all game devs are also game players. Like they respect the fact that people can buy a game and trade it in. It's just GameStop started doing it so aggressively and undercutting developers so aggressively on that.
And the
And that
Right.
It made it very distasteful.
And the turnaround time was a big thing, right? Like um the you could get you you could get used copies very soon after a game launched,

right? Because people would play it and not like it or play it and return it or whatever, right?
Beating it in a couple of days. And the game devs don't get anything, only the publishers. Actually, that's not entirely true. Game devs get a percentage of their games sold. It's a royalty structure.
Yeah.
So the publisher collects the money and some of it goes to the developer.
Yeah.
But um yeah, like there'd be people who would beat a game in 3 days because the other thing was the resale price would be higher the closer it was to the game's release.
Yeah.
So, if you could get get a game, beat it in 3 days, and turn it in, you might get 15 instead of $10.
Right.
Or like, it's still a pittance to what this to what you paid.
Right.
But, um,
So, so there was this very aggressive structure of the and I also think that this, in terms of culture, this expectation that you could that you had an accessible place to resell your games to GameStop is one of the places where

the, um, the the gamer sort of feeling of I like physical because I can resell it stems from, right? And that's not a commentary on whether that's a good or bad thing, just pointing at this and saying that if there weren't 4,000 stores across the United States where you could easily and consistently get value back for your used games, that would be less a part of the gamer culture psyche. Um, for how the physical game market functions, right? I think that's a very important thing, right? Like, yeah, there were absolutely mom-and-pop stores or other places where you could do this, but GameStop was ubiquitous enough that you could do it anywhere, right? And GameStop would take your game. And it was a cultural running joke that they would give you so little money for it, but people did it anyway because it was accessible, right?
And because what else were you like, are you going to go on eBay and try and sell

it, or, you know, Craigslist, or like, it was the amount of work to effort, like, hey, I can sell this for 12 instead of five, but it's going to take me 3 hours to do it, and I have to drive somewhere to meet somebody, and sift through these other things.
Right.
Like, it was Yeah.
Yep. Um Okay, so that's that's like a whole That's the other whole big elephant in the room with GameStop's um emerging as as they became ubiquitous, their emerging cultural thing was you could get games cheaper. You could
Um sorry, I'll answer that in chat. Um I didn't mean to click on that one.
good. Um you could you could get games cheaper. You could get value back for your games. So, you could get new games, hang out with other people, right, who enjoyed games. GameStop and like there was a while I don't remember. Chad, what was the last time any of you saw a demo console in a GameStop or in general? What was

the last time you saw a demo console? Do you remember demo consoles?
No, man. Yeah.
Do you Do you remember those, right? Like um Like that that whole thing and the ability to engage with the culture and hang out for a little bit, right? I I know I what like when I got sent to the mall with mom, uh I was like, "All right, Mom, you're going to go do what I'm going to be in the GameStop." Right? Okay, so there's that. It's a hub of gaming culture. It's the place you get your new games. It's the place you get games cheap. It's the place you get rid of your old games. It's the place you get rid of old consoles. It's where you get the new console. It is everything. It is the singular tiny box that is all of gaming culture.
Mhm.
And then
Can you do me a favor, Will? Is my chat showing up in YouTube chat?
No, it's not going to, but I will uh I will attend to that one.
the thing that got it over into YouTube chat.
No, I will.

Yeah.
Why is it not doing the YouTube chat?
Cuz cuz
I'm sorry, YouTube chat.
No, it's fine.
I thought I was typing to you.
Okay, cool.
[snorts]
I will solve this problem um Actually, real quick recap then. Um almost all dev studios um have a royalty structure with their publisher where the publisher takes the recoups the cost of the development and then there is always some split after that where the publisher retains some, the developer gets some, and then the dev studio gets to choose do they save it up to pay for their next game, do they share it with their employees, both? But typical structure, and there are always exceptions, but typical structure is if a publisher or whoever funds it, they get paid back first for the funding, and then there's a split afterwards. And then both companies choose. Publisher can then take part of that split and pay their employees or not in some sort of profit sharing. Developer can take their split and pay extra to their employees or not, but depending. And that's just how it's set

up.
Yep.
Occasionally you get something that's work-for-hire where literally it's just we pay you X to make this and then we keep everything after that. But those are very specific structures where you're like getting hired to do a thing as opposed to kind of a typical pub-dev relationship.
Yeah. You know what you're getting.
Yeah, that is literally as long as I can remember in the game industry as the usual way it works.
Yeah.
Sorry, I was thought I was answering that in chat, but
No, no, no, you're good.
Um okay.
So, all right. So, the next big thing
Mhm.
is as digital games crank up,
Mhm.
as more and more games become digital, GameStop needs to achieve a reason to continue existing in the same way, right? Like it's not it's not it's not all at once, right? Cuz cuz digital games wasn't an overnight thing,

right? Gen 7 didn't launch and people weren't like, "Great, I'm never buying a physical disc ever again. That's the end of that. Yeet." Right? It was over time, right? And the writing was on the wall for a while before this happened.
Actually, people kept people were predicting the death of physical media for at least 15 years before
Yeah.
I think it really became a thing where you might actually talk about it.
Yeah.
But actually, one other thing. So, GameStop dominant GameStop buying out, but other groups moved to fill in the void because at a certain point, big box stores looked and said, "Wow, video games are big business now." And Target started carrying, Walmart started carrying, Best Buy started like carrying they devoted whole sections in their stores to this. Toys R Us Toys R Us started selling like actually, the biggest five if I remember correctly for the US in the mid-teens were GameStop, Walmart, Target, Best Buy, and Toys R Us.
That sounds correct to me.

By volume.
Yeah.
Sold the most games.
Yeah.
Physical games. And then also through their website where you could order and they would ship them to you if there didn't happen to be a big box store near you.
Right.
And so, GameStop won kind of I would say the mall, um but it didn't it also there is no way it could excuse me, it could compete with the big box, but it wasn't going to like it wasn't going to buy out Target.
Right.
In the same way it bought out EB.
And and a big thing to keep in mind for one of the reasons that those are so um that those big box stores were so um competitive against GameStop with its specialty employees and specialty like place and one-stop shop is that people who are getting gifts wouldn't need to go somewhere else. Oh, you're doing your shopping at Walmart, I can pick up little Timmy a birthday present because the video games are here. And that's part of how we get a lot of

the the shovelware gift problem thing, too, right? Is because those uh less quality games were uh pretty ubiquitous in places like Walmart, right? Like the bargain bin. Um and uh people would go to those places because they were already there, right? GameStop didn't have the GameStop, by being a specialist, lost out on that exchange because people weren't already at GameStop unless you were a gamer.
People were at GameStop cuz they were at the mall. People were at Target or Walmart or Toys "R" Us cuz they were also buying other things.
Yeah.
And one of the big ones, too, returns at Target were are probably significantly easier than say a return at GameStop.
Interesting. I hadn't thought about that, but I would probably agree.
The other one, though, is all of the big-box retail toyed with the idea of used games, but none of them really were set up to do it in the way that GameStop was cuz GameStop was manned by

game-playing employees.
Right.
Whereas groups like Target weren't.
Yeah. I also think Yeah.
why GameStop continued to own the trade-in market, and that became a driving force. And it's weird. You could go to any of them to buy a new game, but if you're really going for the cheaper used game, it became GameStop. So, big box had this weird thing where it kind of actually helped solidify GameStop's uh we sell used games thing.
Right. And by the way, uh one of the set up requirements here is also local legal requirements around uh around buying back things from customers and pawn like it becomes, depending on your jurisdiction and where you are, it becomes a pawn transaction, which means that GameStop's have to have certain um legal requirements met that other companies didn't, right? That just They They didn't
a pawn shop.
Yeah, they didn't already have those things set up, and GameStop did when they were required to by law in the different places. So.

So, big box comes in to start repeating it. So, it's Target GameStop takes over them all. Big Box starts competing. So, GameStop at least doesn't completely own the space, but they're still a major power within it.
Right.
And they're the one that if if you're talking to people, that's usually the one they would identify as the gaming store.
Right.
versus the others which were places you could go to buy lots of stuff and also sold games.
Right.
Oh, also importantly, big box stores didn't carry back catalog.
Yes, that's true.
That big box stores wanted to carry what moved. And so, they were go by the most recent things or the big titles. Like, sure, they'd still sell you Red Dead Redemption 4 years after it came out cuz that title still moved enough copies. But, mid-tier A-level game or indie game that wasn't a smash hit like, say, a Journey or a Bastion just it wouldn't survive in a Toys R Us or a Walmart or a Target or any of those.
Right.

Yeah, they they they had much less dedicated space for it. So, there was there was a smaller and more frequently rotating catalog.
And honestly, I think less people showed up to buy the games at those kind of places. The people who wanted those kinds of games were heading to a GameStop.
Yeah. Okay. So, then we got [snorts] to talk about it. It's weird. It It's just weird.
Okay, so, in the malls
Mhm.
a pawn shop
Uh-huh.
in the in the consciousness as a place you can go buy video games.
Right. So, naturally, the next course of action is that in 2015, they bought ThinkGeek.
Wait, say that again, Will.
In 2015, GameStop outbid Hot Topic and paid $140 million for the ThinkGeek label.
Mhm.
[clears throat]
Oh, and catalog and brand and
Correct.
all of it.

Correct. And started to some extent carrying ThinkGeek stuff online, but also like cannibalized the ThinkGeek website and the ThinkGeek um uh the the ThinkGeek internet presence and that was sort of one of the big moments of wait, they did huh? Because I think this is the point where by the time 2015 rolls around, I think GameStop has it in their mind that in order to achieve Yes, Hot Topic wanted ThinkGeek. We discovered this in the pre-show when we were double-checking our notes. That uh that yes. Um
Sorry, too many fun comments not to be able to
it's it's good. Yeah, this is this is weird, right? This is where it gets weird, right? Because up until now, it all sort of makes sense, right?
And well, GameStop had slowly because of collector's editions and other things, GameStop I think had slowly expanded out to carry not just games and consoles, but some surrounding merchandise.

Yeah. Yeah, nerdy stuff, right? And ThinkGeek was definitely nerdy stuff. Bag of holding, unicorn meat, weird, you know, costume supplies,
coffee mug,
tea, Earl Grey hot, like whatever, right? And so, [clears throat] I guess in that respect it kind of makes sense. But this is this is also I would argue the point at which GameStop really like put a flag down and said, we are going to diversify because we recognize that physical game sales are declining
Mhm.
because [clears throat] of the rise of digital, right? We're at 2015 at this point, right? I am I I think 2015 I had uh I was in the middle of building my last PC that had a disc drive.
Interesting.
Like
Actually, give me a second while we're talking. I think I can tell you percentage of sales that were digital versus retail in 2015.
Sure. Yeah. Lots of people, by the way, still have their have their bag of holding. Um And so this this like really becomes the

point where I don't know. Actually, how do you all feel, chat, while Jeff is looking up this stat? Do you feel like you can Does it seem reasonable to say that 2015 is the tipping point when GameStop stopped being perceived as a store that sold games and also other stuff to a store that was sort of a general nerd gamer milieu, right? Rather than just being primarily about games. Because to me, that's sort of when I think of it, but I could also be like retconning myself on that. Um
It's so hard without looking at the data to actually like it might be, let's see, quantity key.
Yeah. Let's see. Um Mercenary says it wasn't Geek Co until 2019. That seems correct. Um Merith is old but always perceived as a game store. Yeah. Um Yeah. Uh also feels like the time the customer experience also took a major downturn.

And it's when it started becoming more bland. Yeah. Well, like Okay, so ThinkGeek ThinkGeek is remembered fondly because it was weird. But ThinkGeek's brand wasn't anything special. It was just weird, right? Like it it didn't have a defining factor. It was just weird geek stuff,
Oh.
right? It wasn't like known for quality. It wasn't known for anything. It was just like geek lifestyle stuff, right? And so they didn't gain more identity out of buying that. They didn't pick up like anything particular that they could hang their hat on. It was just more geek stuff, right?
Hey, well, I got a number for you.
Yeah.
Okay, so if we look at the revenue split of games released both physically and digitally. So, this does tie it in because we're we do we have started to see digital-only games at this point.
Yep.
But, if we say games that had both physical and digital release. So, like hey, I can buy Halo physical or I can,

you know, buy the download copy. And you take all of seventh gen and all of eighth gen titles.
Mhm.
Which would be the time if you're looking at 2015. Roughly 25% of the revenue came from digital games and 75% from physical.
Okay.
So, in 2015, it was still 25% digital, 75 physical for games that had both.
Right.
this is big caveat it's on console.
Right. Okay.
So, again, this caveats it's um but it's also um if you go back to 2010, so 5 years before,
Mhm.
about 4% came in digital, 96% physical.
Okay, so there's a major trend that GameStop is noticing and I think that's a big part of their thinking going forward.
from around 2005 through 2010, it was roughly that same amount.
Yeah.
And in 2010, you start seeing it go up 11, 12, 13, 14, 15, where you see it go up from that 5% to the 25% from 2010 to 2015.
Yeah.
So, if you're paying attention to the

numbers, and I happen to know GameStop was cuz they were a customer of ours, they were seeing this trendline go up.
Right.
But, so weird. I I like GameStop was a big customer of ours and I'm just looking at this data now.
Yeah.
Again.
Yeah. It's It's
thought about that in a long time.
Yeah. Very interesting. Okay, so they start adopting other stuff and then 5 years later they get hit with the same thing everybody else gets hit with, COVID. And the problem, I think for GameStop during COVID, was manyfold. And I think some of it was their own making, and some of it was inevitable given the structure of the gaming sphere. Right? Okay, so let's let's we'll just address the the the of the
talking about the pandemic and games.
Right, yeah. So, the of their own making stuff was that GameStop corporate made a bunch of, I'm going to say, bad

decisions around the way that they treated their employees, how long they stayed closed, what their safety precautions were. They made a bunch of really bad calls there. There's no real excuse for that. We're going to kind of acknowledge that, that happened, and we're going to say that it definitely decreased the overall perception of GameStop, and move on from it, cuz we don't want to get I don't want to get bogged down in that.
It killed some of their brand perception.
Yeah.
Like, people gamers like gamers like other people usually getting treated well, especially gamers or people who sell them games.
Right, because you because the staff were those was generally so small, you developed a rapport with the people who worked there, because it was your GameStop. It was the one that you went to.
You know, that was Bob at the register. Bob had recommended you four games in the last 2 years.
Bob knew what you liked, and he always got it right. Yeah.
Yeah. But, also, because GameStop sold from the websites, their website, because of course they did,

I think a lot of people realized for the first time they could buy online, and didn't have to travel to the GameStop, which during a pandemic was kind of interesting.
Yeah. It
And people also realized Amazon was still delivering, and you could now buy your Halo game through the Amazon. And in 2020, digital downloads were significantly easier. Like, everybody had an internet connection. Look at me. More and more people had an internet connection. I shouldn't say everybody.
Yeah.
The hard drives were bigger. People had had multiple generations of consoles to get used to the idea of buying a digital game as opposed to a physical game. They weren't going to go resell it anyway cuz some of the stores weren't open to go resell it in. Like there were kind of a lot of cultural things.
Yeah.
Um and I think a whole bunch of people who started gaming during COVID or significantly upticked during COVID
Yep.
didn't have the relationship with a physical store

that a lot of the other people did. And so when they decided they wanted their copy of Animal Crossing they might have just bought it right from Nintendo downloading Target which would mail it like all sorts of other ways to get it.
Right. And and like I joke about this as like a a benefit of digital but the I don't have to put on pants factor cannot be overstated in the during the pandemic when going outside was scary for people.
Hold on. Hold on. Okay, I do have pants on. I was just checking.
Okay, great. Actually I had to check. Yeah. Um
Keep going on that. That reminds me I want to see if I can find the legacy from that.
Yeah. Yeah. Yeah. Um Yeah. Correct. Yeah. And I think this is this is pretty common, right? Yeah. Uh So she said I got their switch in 2017. I bought two physical games. That's it and everything else has been digital, right? Um it was only easy It wasn't only easy, it was safe. Yes. That was a big concern for a lot of people. Particularly people

who were aware that not everyone had the same depending on your location, not everyone had the same view of masking. That was like a whole thing depending on your location, right? So in some places it became much safer to just buy it all digitally or people were adopting digital games, right? Um and I think that that was that was a big That combined with the negative perception that GameStop brought on themselves by treating their workers poorly, by not putting safety protocols in place in an efficient and timely fashion. By doing all of these things was like not it. Oh, oh, Jeff, is this your Oh, I got to wait for him to put his Is this your giant stack of COVID games?
There. So, during the pandemic and shortly after, I bought a huge stack of games I wanted to catch up on.
Yeah.
I'm just looking at my stack. And because GameStop had been like there was all these a whole bunch of PlayStation games I'm like, I need to catch up on these. A lot of these are still sitting unopened, by the way, cuz

I over bought. But looking around like GameStop wasn't sounding great. It was hard to get some games in some places, and a lot of people were offering sales, and because I didn't have any particular loyalty to GameStop, I just shopped around, and I was look trying to find like stickers of you know, where did my copy of Persona come from? Like I'm pretty sure
I remember we talked about it at the time. You got a big slug of them on a deep Amazon sale.
Yeah, like and then I think it was like I'm pretty sure a couple came in through GameStop, but it doesn't really I mean, from a consumer perspective, it doesn't matter where you buy them.
Right.
None of like me buying from Amazon versus GameStop versus EB doesn't or Target doesn't give the developer or any better deal. Like I'm not hurting anybody by buying.
Right. And and I also think there's another
anyone.
Yeah, there's another thing too, which is sort of a complicated thing. I have a much closer relationship from the

physical game store side, like by which I mean like war gaming, card gaming,
War gaming.
view than than from the digital game side, but the added benefits of having a store to congregate in and to have community in was one of the reasons that some people consciously made the choice to spend a little more or to wait a little longer and to purchase things in that place.
100%
And when that stopped being a thing during COVID as stores stopped being places to congregate or whatever, that also went out the window. So, a lot of the relationships that people had with particular GameStops, with particular stores dissolved.
And and a lot of the employees left.
Yeah.
There was a lot of movement around. A lot of people saying, "I'm leaving the city or I'm going back to live near my parents or
Right.
other things." So,
Yeah.
But anyway, so big pandemic happened.
Yep.
Very bad for lots and lots and lots of reasons. Also, in addition to all of the bad, shakes up GameStop and where people buy

games. And then more people buy games for a while, don't have the relationship with their physical store, realize they can buy online and it's and also realize it's easy now.
Mhm.
Like they might have never done it before because they weren't, you know, they'd never bought an online game. But once you've bought your first one, they're like, "Oh, that was easy."
Especially because they already have your payment details saved. So, now you can just click go. You don't have to put it in again. Yep.
So, yeah. So, I think that was also one of the inflection points that while people went back to Targets and Walmarts because they were already going there for other stuff, they could browse through their gaming area, I think that was one of the big points that for GameStop people realized that there wasn't as much reason to go there anymore.
By the end of 2019,
Mhm.
Sorry, by the end of 2020, excuse me, we're back down to 3,192 GameStops in

the continental US. By the way, it peaked at um 5,049 in 2015. Right during Right during the thing.
started in 2015.
Uh 2020, excuse me, 2016. I read the wrong column. 2016 it peaks at 5,466 and then just 5 years later we're back down to 3,000.
So, my guess is some of that was also overexpansion.
I agree. But, I think it wasn't helped by the fact that they overextended into a pandemic. Right? Like and and I think and there are some people talking about
were going down well before the pandemic though.
Correct. Right? And that just really like
Yeah.
Yeah. Um Okay, so we would also be remiss if we did not address the 2021 elephant in the room. As GameStop is on the decline, as their as their stock is doing poorly, as the

the pandemic is raging and people are inside on Reddit
Right. And people are wondering, do we actually need physical game stores when I can just order from Amazon or buy directly from Sony, Nintendo
Right.
Right. Microsoft, etc.
Enter enter the quixotic bunch of Reddit misfits known only as Wall Street Bets. We're going to I'm just going to remind everyone that this is the context in which we find the Wall Street Bets nonsense happening. There is an amazing Folding Ideas video on that. You can go watch that if you want like the deep in-depth
Yeah, number go up. We're not going to go deep in-depth into the Wall Street Bets thing. Suffice it to say it did resurface GameStop in the public consciousness in the middle of all of this digital sales as a meme. It was a meme.
And the important setup for this is

because all of these things are crashing analysts were looking at GameStop's price going down and we're starting to basically short it.
Yeah. And so
I said that right, right?
Yeah, yeah, they were Yeah, they were starting to They were starting to short and WallStreetBets figured this out that the short sellers had overextended their position and managed to pull off a somewhat coordinated ridiculous once-in-a-lifetime short squeeze. Um and have been living on that high ever since from what I can tell. Um I do not go to WallStreetBets. It is a silly place. Uh we're not going to get too deep into the details of the actual short
Oops, that's the NFT one. Okay, Dan did a different
Yeah, this is financial advice. Yeah, Medusa put the put the correct one. It's This is financial advice.
Thank you.
Uh and so um but it does cause GameStop to reenter

the public consciousness in a major way as this object of financial curiosity. Right? As this And I actually think this is really important, right? That like it's a meme. It's a weird meme that weird internet people like did this short squeeze thing on because it wasn't doing well and now the stock price is doing better solely because it was a meme, not because there was a substantive improvement in GameStop's business model or in their overall profits year over year. It was because they got attention for the stock price, right? So at this point
And but that does two very interesting things. Number one, people remember more GameStop. Like any word of mouth, honestly, means you're going to get increased sales on this kind of thing. So that strangely enough their stock price going up probably meant they actually started selling more.
Yeah, because they
Number two, they suddenly were better capitalized.

If your stock was say, I'm making up numbers here, $10 and goes up to 20, the amount your company is worth doubles. The amount of money you can borrow to do things that you can borrow against double. Like And so it actually did real things where suddenly GameStop had this huge like spike in how much they were worth and theoretically around that liquidity for what they could borrow because at the time interest rates were like almost 0%.
Right. Cuz
So they suddenly were flush with cash if they wanted to be.
Right. Points at economy during COVID. Because of that. Right.
Yeah.
Um okay. So the this goes on for a while. Yeah. It would Man, this is weird. And this is like and it continues to be weird because the next big note in GameStop story, I would argue, is Ryan Cohen.
Mhm.
And this year.
So who is this guy Ryan?
Ryan is the CEO of GameStop. And he is a

But before that, wasn't he also something interesting?
Uh if you're getting into something I have forgotten because my brain is not
Okay, you keep going. I'm going to look it up. I seem to remember he was there was something um Oh, let's see. Oh.
Penny on the track. My my my train of thought has jumped.
The dog, the meme king. Founder and CEO of Chewy from 2011 to 2018.
Yep, that's right. And then um he sold it to PetSmart. And now has become uh the CEO of GameStop. And he uh did bring the company back to profitability, technically. And now he wants to buy eBay. Which is the weird part, right? But like And here's the horrifying part.

If you ignore the numbers, which is, by the way, a massive oversight. Let's not pretend
Yeah.
like the numbers aren't a major part of why this is such a
No, we said this at the beginning that GameStop is currently worth $10 billion.
Right.
And they own $5 billion in eBay stock.
Yeah.
So, theoretically, half the worth of their company is for the 10% of eBay they own.
Yes.
But that's 50% of their company.
Correct. So, the numbers the math ain't mathing for them to buy eBay. And indeed, when they offered to buy eBay, eBay, um, rejected their offer stay saying it was, quote, neither credible nor attractive, end quote, which is the industry, which is which is, uh, polite business talk for go away, you sad little company. We want nothing to do with you. Uh, um,
And Ryan went on a whole bunch of, um, financial shows like MSN and, um,

CNBC and
CNBC, a whole bunch of those, and kept getting quest questions by reporters and they'd ask him about it and he'd say, oh, you know, you know, we're going to the deal is for, you know, debt plus stock, and they were and all of them looked at him and said, of what?
Right, yeah. What do you
plus stock. And they're like, of what? And like, he there seemed to be this disconnect of they'd ask like, where are the rest of the money coming from? And he would just say this line, and they they wanted to know more than the one line, and he wasn't prepared to answer that.
He he did not get media coaching, or not very good media coaching. Um, so, uh, okay. So, if we ignore all of those numbers that make no sense, I can kind of see why
Oh, yeah.
GameStop wants to head in this direction, and it is, Jeff, what's the current percentage of digital versus physical sales?
Oh, that I don't know cuz I don't run a

research company anymore.
It's It's
sure it's been widely reported. So, why don't you give me the number?
about 90% digital, 10% physical. Give or take depending on the studio and the console, but it's roughly, depending on exact specifics, about a 90/10 split. Maybe 85
So, where 10 years before that it had been 25% digital, 75% retail, you're now saying it's right around 90%.
Correct.
So, that 10 years has seen a massive adoption
Correct.
of the stuff being sold digitally. Not that there's not still physical stuff.
Mhm.
There is. And if you've wandered into a GameStop, you can see they've realized this because GameStop is now where you can go to buy Pokémon plushies,
Pokémon cards,
and um the little bobble pop heads, um
Funko Pops,
Funko Pops, thank you. And all sorts of other things that probably feels like it has more of a footprint than the actual games do.
I actually looked when I So, I went into a GameStop. I know. I know. Contain

yourselves. I, for you chat, went into a GameStop so you don't have to in the year year of someone's Lord 2026. Um and I looked and all of the premium space up near the the cash register, right? That's premium space because in order to check out you have to go to the cash register. If you go near the cash register, you're going to see these items. Everyone in the store who makes a purchase sees these things.
Mhm.
Stuff near the cash register is important. Um is all collectibles. It's blind boxes, Funko Pops, Magic cards, uh Pokémon cards, uh you know, action figures, Legos,
Not all of them are the action figure.
And and more than um I would say that of the perimeter of the store which could have shelving, right? Cuz in them all there's a glass fronting so whole perimeter of the store can't have shelving. But of the perimeter that could, I would say at most half of the perimeter and none

of the floor stands were games.
Yeah.
Right?
Where they all used to be.
Correct. All of that used to be games and now it's not.
Or a majority used Vast majority used to be. I shouldn't say all.
Yeah. And so and it's also really interesting, too, um that the place is not in the best repair. That might be my GameStop specifically, but like it has like lights in the in the Hold on. I We've got pictures of GameStop. I I sourced a bunch of these from all over.
one I went to like 6 months ago was perfectly fine.
Yeah. Um I This
also combined with the fact that malls a lot of malls, not all, but a lot of malls have also had downturns.
Yeah. Oh, Babbages.
Old Babbages.
I'm trying to find Yeah, so like uh in mine, right? You see this This is kind of like mine. Um you see the all this glass frontage? A lot of mine has like these little pot lights uh that are like right there out in in the gaming corner. And all of the other stuff is really well-lit, but like they don't care cuz it's the game corner and no one goes there because that's not

why people are here. Right? Is what it feels like to me. And that might be an anecdotal individual case, but that is my impression of GameStop in 2026 is that they don't care about games anymore because games aren't what's making them money.
And one of the interesting things, too, is with the move to digital, well, remember 40 minutes ago I talked about how people used to pay huge amounts of money
Yeah.
for the signs in the windows and the, you know, hangers at [clears throat] and the end caps and everything else. As less and less people go into physical stores, that means that marketing is less valuable. So in addition to losing the game market, I'm guessing that GameStop has lost at least eight figures, maybe nine figures worth of advertising
Yeah.
money that they used to get by selling this space cuz people would come in and see it. So, if you were a rock star or um EA EA or Ubisoft or any of these others, they'd spend huge amounts of money in there.

All of that advertising money has also evaporated in the same way. So, they got And that's a line most people didn't know that they were getting revenue from.
Yeah. And I think that that is All of this makes sense. It is in line with eBay, right? So, let's let's talk about why this actually makes like a frightening amount of sense besides the numbers, right? Again,
Hey, Will.
Yeah.
Can I say a thing?
Yeah.
So, do you remember a while ago Amazon, that this group we love to hate and hate to love,
Yep.
which I think is both true in both directions,
Yep.
um decided, "Wow, there's a lot of people living in places that were having packages dropped off is not the safest and they might get stolen."
Yeah.
"Maybe we should start putting a locker or ways for people to pick up Amazon packages in big cities and other places."
Right.
And so, they started Amazon lockers and now there's a lot of post offices and schools and just places in the city that are basically lockers where they'll drop off Amazon things and

you can walk a block or two from your apartment and pick them up and know it's not going to get stolen or you don't have to let them let them into your building.
Yeah, Safeway has like a giant bank of them.
Yeah. And um so, Amazon is a place that does delivery of physical things um that need to get picked up.
Yep.
GameStop is also a place that sells at this point, in addition, a lot of physical things. eBay is a place that sells a lot of physical things that like Amazon ships them out. eBay, to the best of my knowledge, does not have this huge infrastructure
Nope.
of lockers where they you can drop off things that theoretically might be more valuable than average because you're getting them either bid or something else off eBay. And so one of the thinking parts is, "Wow, [clears throat] we have all these physical mall locations at GameStops, in malls and other places that people go by. We're used to receiving warehouses or we

have a warehouse in each one. We're used to people coming by to pick up physical goods. What if when you bought a thing from eBay, kind of like Amazon lockers, it could be shipped to your nearest GameStop and you could go pick these up and you'd know it wasn't getting stolen.
Mhm.
And maybe while you're in there, GameStop employees can sell you some more stuff or you might pick up some things. But my guess is they're basically leveraging their huge physical retail presence to turn themselves into a huge set of lockers that all of the stuff off of eBay could be shipped to to encourage more business volume through eBay, greater sense that you're not worried about it getting stolen, and bringing people into a physical location that they could then sell other things.
Yeah.
And since eBay sells a lot of collectibles as well, and so does GameStop, like I see this alignment
Right. There there's like a world in which like you can see the how this makes sense. Now, the the money the money part ain't mathin', but like that aside, right? I also want to point out a very important thing which may have gone unnoticed by many in this conversation,

which is that eBay owns TCGplayer.
Mhm.
And I think they probably would love TCGplayer because it um that infrastructure combined with their Pokémon card thing would also be neat. Um however, I don't know why they would try and buy eBay just for TCGplayer TCGplayer was only worth 295 million. They could if if eBay would negotiate, they could buy them, right? They won't and that's probably why they're trying to buy eBay, but TCGplayer would accomplish a lot of what GameStop wants eBay for, which is a highly lucrative collectibles business that needs a physical location, but
Mhm.
Um Yeah.
Yeah. So, like I actually see I see the strategy behind this.
Right.
Like
I just don't think the direction makes sense. Like why Like why not just go to eBay and be like, "Yo, buy us. Buy us already. Why

won't you?" Right? Um
Yeah. Oh, and they're as well as I said before, their license is pawn shops
Yeah, which is fair.
places, which would fit in with the eBay
Yeah.
buy sell thing. So, there is a lot of alignment. And who knows? Maybe Ryan Cohen's Maybe this was hubris or maybe this was his way to get eBay to pay attention or maybe eBay investors to say, "These guys are making a silly offer. Wait, what if we just bought them?"
Yeah. Well, especially
They already own 10% of your stock, you'd get that back.
Right. And and and the really interesting part, too, is like the way that Ryan went about this to begin with was like slinging so much mud. He was like, "Yeah, y'all are spending too much on advertising. Uh I'm going to cut that. We're going to become a trillion-dollar company."
Mhm.
And I was like, "That bro side and Lord of the Brocean, do you know what the difference between $55 billion and a trillion dollars is? Most of a trillion dollars. Like, that's

not a small number, dude."
I could also see though like Let me give you an alternate line, Will. Ryan goes out, rolls a nat 20 instead of a three, and
And this
convinces a whole bunch of people to again flood in buy GameStop stock, get some private equity interested in this idea that a buyout on here, you know, leads to something um leads to that trillion-dollar company. And at that point, you know, you leverage a VC money, GameStop stock which has shot up even more into enough money to actually do a buyout of eBay. And then if you're successful, theoretically, you know, those people who invested 50 billion dollars worth of stuff in, maybe they get a 5x return on this thing. Like I can see the story he's painting. It's just he didn't roll well.
Yeah.
And therefore didn't get all this extra

money pouring in to do the thing.
And the other problem that we cannot escape
Mhm.
is that the most current data I have from the 2026 uh SEC filings
Mhm.
is that in the United States, there are 1,598 GameStop locations left open.
Mhm.
Down from 5,000 some odd at its peak.
Wow.
Uh and
lost half of theirs again uh
There are fewer GameStop stores open in the United States today than there were in 2004.
That is a staggeringly low number. I want Here's another interesting thing, Will, real quick. Uh that's you said open. I wonder how many
of the leases
paying the lease on cuz they like did a 4-year lease or something else
Yeah.
to get their mall spots because some of the mall spots, I'm not sure, might

require significant lengths of leases. And that part of the eBay thing was like, oh, you know, we have a thousand something open, but we have another 600 spots that we're still paying for that could we could reopen again as
I don't see, but the problem is with the way that the American and I don't obviously we can't
[clears throat]
we live in the States. We can't really speak to other places, right? As as as like US mall culture is going, like it's shifting weirdly. I have a couple of malls near me, one of which is doing fine and getting like new anchor stores as like JCPenney leaves and Sears left and other stuff, but like some of them are not doing well. They have like two stores, right? So I'm not convinced that the space I guess if it's space in a good mall, then it's worth something, but space in a mall is worth less than it used to be.
And it's weird on that that actually that number also may not be as indicative as we think and that So I'm from San Diego.

We have had a good number of malls. There are a couple left that are doing really, really well post-pandemic. Like I was just in a mall this weekend, University Town Center. The University Town Center mall is as good if not better than it's ever been. They put in some investment money. Everything's nice. Everything's plush. They have Wi-Fi everywhere.
Yep.
There's seating around a central fountain. They've managed to get good stores in There are three different car stores for electronic cars in the mall. There's a Tesla, a Rivian, and a one of the other ones. Like in There are cars in the mall in these
Yeah.
Um There are uh There are There's a Uniqlo, the Japanese brand, right next to like Uh There's all sorts of good stuff. There's still an ice rink. Like it's a mall that's actually hopping in a way I hadn't expected to see. There's a couple others that aren't. And so it also might be that we're just seeing malls are less interesting. Or actually there's less demand for There's still demand for a

mall, but not demand demand for this much mall. There's demand for this much mall. They're all like really good ones. And so that might also correspond to the number of GameStops going down is the number of malls are also going down.
Yeah. Also, uh I'm not going to question where Nova got this information. They're very reliable about this. Nova's uh Uh research says that on average GameStop has three and almost a half, 3.4 years left on their leases. So, that'll that'll also be interesting. Uh remind me in oh, I don't know, 2030 to see if GameStop still exists when those leases come up, right? Like Cuz that does that does feel like the big timeline is they got to come up with something before their leases got for renewal.
Mhm.
Um and that's where we're at is it GameStop has turned from a store that was one of the most influential places in video game culture into buy bind blind boxes and Pokémon cards and maybe a game once in a while.

Video game pawn shop.
Video game pawn shop and it's so weird, right? It's just weird. Like it's I think it's kind of sad for a lot of us that remember GameStop fondly, but like at the end of the day corporations are not your friends. Like I think what we really miss is having that place that felt that way that was exemplified by being GameStop, right? It's kind of like you miss like the bookstore, the cafe, or the whatever, right? You miss the camaraderie and the community that was there, not like the the the place um itself, right? I I miss the era. Yeah. Yeah, yeah, yeah.
Yeah, that's that's a good line for it. Like GameStop helped define an era of gaming.
Yeah, and I think that that era
little sad the way it's burned out.
Yeah.
Um
It would have been nice if it had just closed.
I think that's really hard for a

publicly traded company to say, "Oh, sorry, we're done."
Yeah, and maybe that's part of the problem, right? I mean, we've talked about it in other forms of media, right? It's hard to end a series. It's hard to end a like a a movie franchise, right? Cuz there's always got to be a sequel. There's always got to be a next thing.
Well, they're they're equivalently like a live game. It's been going along forever.
Yeah.
And they've had to change their business model a couple of times to
Yeah. So, we'll see we'll see where this goes, but that that has been our uh yeah, just got to this just got to blockbust out of there. Yeah, exactly. Friends, that is going to do it for our our our life and times and rise and fall and fall and fall and fall of GameStop. Um
Oh, if you were looking at the thumbnail I made, the line that kind of does this on there is I believe the last 7 years of their stock price.
Very nice.
superimposed that over the GameStop logo in our like design club treatment.
Yeah.
So, that's specifically what that line

is is their stock price.
Okay. All right.
[snorts]
Uh thank you all so very much for joining us. There will be no breakfast this Friday. Matt is out. Actually, everyone's out. You all are at Gen Con.
Actually, let's talk real quick. So, two important things. If it is July the 28th right now, later this week is Gen Con in Indianapolis. If you happen to be there, Matt and I will both be out there. I'm actually running a I'm doing a panel that I think Matt will MC for me called uh why basically talking about how hard it is to adapt physical board games into video games.
Yep.
And Matt is going to be running a game show that I will be one of the participants on as well. So, come find us. We're in and doing things and we'll be wandering around. Also, we are 1 week into our 2027 Kickstarter our calendar. Excuse me. Into our Kickstarter for our 2027 History Happens Every Day calendar.

Yep.
If you are interested in a cool history calendar because you can't get enough of our 2025 or 2026, both of which are still for sale in the store. This one's half off. This one's Excuse me. This one is $5 right now cuz you're just buying it for the art. This one
The other one.
Oh, they're mixed up. That's right. This one is half off cuz we're halfway through the year, but they are beautiful calendars. Come bid on Kickstarter for our new one. Um it's part of what helps fund our studio and pay all the people that work there and we get and you we get that and you guys get a really nice calendar. And we have some beautiful art this year. Um there should be links in chat
Yep.
to get to the Kickstarter. We would love to have you come join our crew for that.
All right.
That is my obligatory I run the studio and try and make sure everybody gets paid, so I'm going to talk about our Kickstarter for a second.
Hey, it was it was it was a well-done spot. All right, everybody. We will be back next week, I believe, with another design club. Um
Topic TBD.
Yeah, topic TBD. Uh so we will see you all then for that. In the meantime, please take care of yourselves, take

care of each other, and I will catch you all then. Say bye to the people, Jeff.
Bye to the people, Jeff.
[music]