GameStop’s Sweet Deal With Microsoft

After the word came out early last week that GameStop had negotiated a sweet deal with Microsoft, it seems the deal was much sweeter than most realized or even thought.

The video game retailer saw a significant boost in its share after the initial announcement.  GameStop will reportedly now focus heavily on the use of the back-end solutions offered by Microsoft as a means to meet customer needs better.

What went mostly unnoticed in the announcement is the sentence stating both companies, GameStop and Microsoft, will “benefit from the customer acquisition and lifetime revenue value of each gamer brought into the Xbox ecosystem.”

This statement drew the attention of Domo Capital Management, and with that intrigue, the company decided it needed to dig a little further. According to an article posted on the Ars Technica website, the private equity firm reached out directly to GameStop, confirming with the retailer that it “will receive a portion of the downstream revenue from any device we will bring into the Xbox ecosystem.”

What this boils down to is that GameStop has secured itself a pretty sweet deal, in that it will get a cut from any digital download, content downloaded, any microtransaction or subscription paid made through any of the digital gaming consoles that GameStop sells.

At first glance, this appears to be a development of significant proportions.  But as many suspect, the actual percentage that will be received by GameStop doesn’t appear to be amounting to all that much.  What is apparent is that GameStop is now being given an incentive to sell all digital Microsoft consoles and those that still accommodate physical media.

Analysts do not expect GameStop to receive all that much from the agreement because Microsoft isn’t offering an incentive that will give away that much money.  Whether or not Microsoft made the deal, they would undoubtedly do quite well in the selling of their consoles, GameStop withstanding.  Either way, the retailer is able to remain engaged and connected to the gaming community through entering into the deal with Microsoft.

Upon the deal’s announcement, Microsoft stated that it viewed GameStop as a vital component to its ongoing gaming ecosystem and added that it was “pleased to elevate our partnership.”  After much closer inspection, it seems that this refers to meaning both financially as well as through their back-office support.

So, the question still remains out there—how sweet of a deal is it really for GameStop, and exactly how much of a cut does the retailer stand to garner from it?  Neither of the two companies seems to be forthcoming, and no one has been able to acquire a concrete answer.  When Ars Technica reached out to GameStop, and the retailer has yet to receive a reply or comment.

A PR representative for Microsoft offered: “We have an incentive structure with GameStop as we do with many of our partners across multiple channels.”  This reply appears to be the closest to a tactful confirmation as we are going to get at this time, without offering any real details.