GAME is ”potentially missing out” on around £6m-£7m of revenue, they claim. This could well snowball as consumers lose confidence and work to avoid ”a similar inconvenience.”
EA is refusing stock at GAME because they lost their credit insurance. This led to GAME emailing customers informing them of cancelled pre-orders and giving out vouchers.
”Working on the assumption that a decent triple A title sells 0.8m-1m titles in the first few weeks of release in the UK and assuming Game has around 20% share, we calculate that by not stocking Mass Effect 3, Game is potentially missing out on around £6m-£7m of revenues in the UK given the title will retail for £39.99,” said analyst Mark Photiades.
”With new software margins of around 24% this could result in £1.5m-£2m of lost gross profit in the current year. It is also worth noting that margins will suffer as a result of the reward card points being offered in compensation. We estimate this could amount to another £0.3m of forgone gross profit as typically pre-orders account for around 30% of initial sales. So in total there could be £2m-£2.5m of lost UK profit in a year where we are already forecasting losses of £8m.”
This hiccup could start a vicious cycle as customers lose faith that more pre-orders won’t follow suit and be cancelled, rendering fans unable to get the editions of the games they wanted. In the UK GAME had exclusivity to Mass Effect 3’s N7 Edition which contains numerous goodies, but now other retailers are selling it.
”With the well documented issues that the business is currently facing customers may look to other channels and retailers to make pre-orders in the future to avoid a similar inconvenience,” said the Singer Capital Markets analyst.
”This latest development is further evidence of just how tough the situation is for Game right now. We continue to see short term earnings risk from a challenging market and medium term structural pressures give limited comfort in our forecast return to profitability in outer years. The focus very much remains on pure survival as opposed to revival at this stage.”
Others are more optimistic saying publishers can’t afford to lose powerhouses like GAME as otherwise they’ll shed too much revenue and lose chart positions.
”We expect Mass Effect 3 will suffer as a consequence of not supplying Game, noting other titles that Game has not stocked recently, while lower profile, certainly failed to impress in terms of chart position. We understand Game is now selling the Ubisoft Vita titles, illustrating both the fluid nature of events and the importance of Game to suppliers in the UK video gaming market,” said John Stevenson at Peel Hunt.
”Given recent events, further speculation and the loss of key titles will clearly not help customer confidence, future pre-order levels or Game’s overall negotiations with banks, suppliers and wider stakeholders.”
”That aside, the group is continuing to develop a strategic plan, which we believe will likely result in the disposal of international operations and some UK store closures.”
As an apology to those who pre-order Mass Effect 3, GAME issued vouchers or coupon codes to redeem £5.
