Last week GameStop announced a new partnership with Microsoft, which would see them push the Xbox All Access subscription service and transfer their business operations to Microsoft cloud-based services like Dynamics 365 and Teams. Ah, but it seems the partnership goes much deeper than that!
According to the folks at DOMO Capital Management, under their new partnership GameStop will get a cut of all digital revenue produced by the Xboxes they sell. So, if you buy an Xbox Series X from GameStop and then download a digital copy of Assassin’s Creed Valhalla? GameStop gets a cut. Or sign up for Xbox Game Pass? GameStop gets a cut. Buy a movie or pay-per-view…well, you get the idea.
Today $GME confirmed with @DOMOCAPITAL that the agreement with $MSFT includes revenue sharing on all downstream revenue (i.e. digital downloads and digital content) from any device that GameStop brings into the @Xbox ecosystem. GameStop now meaningfully participates in digital.
— DOMO Capital Management, LLC (@DOMOCAPITAL) October 14, 2020
Needless to say, every Xbox sold at GameStop being an ongoing source of revenue for them heavily incentivizes the retailer to push Microsoft products over their competitors. Do not be surprised at all if the Xbox Series X and S are placed front-and-center in stores going forward, while the PS5 and Switch are shuffled to the back amongst the Funko Pops.
It will be interesting to see what kind of Pandora’s box this might open. Will Sony also offer GameStop a cut of digital sales in order to ensure equal treatment? Will other major retailers like Walmart or Best Buy demand Microsoft also give them a cut of digital sales? If this becomes an industry standard thing, will consumers end up paying for it with higher prices for digital content? We shall see.
The Xbox Series X and S hit the most visible shelves at your local GameStop at November 10.