A lot of people are down on Gamestop because they don't have a significant downloadable offering. I think for the time being that is not needed, and when it is, they will have the brand to help them. The Wall St analysts are going batty talking about downloadable content, but here is a gamer named Francis on investorplace.com in the comments section of an article about Gamestop. I find his views extremely apropos.
"Music CDs aren't even near the file size of a game. People have an option of downloading a whole album or just a few songs. You can't do that with games. A huge number of people don't even have good internet connection, and you'd expect them to easily download a game? There's no problem downloading smaller games like Plants vs Zombies or Limbo or Echochrome. But what about games like God of War 3, Sims 3, or other "blockbuster" titles? Those games vary in sizes from 8GB to a whopping 50GB. Digital downloads still has a lot of catching up to do... How is digital download cheaper for console makers? You do know companies would need to use servers to store and distribute their games, right? So yes, they won't have to spend on game cases and discs, but the cost is just transferred to running servers. The price won't still go down. I could even argue that digital download would cost the consumer even more than buying hard copies. Instead of being stored on discs, digital copies are stored on hard drives. Consumers are forced to upgrade to bigger hard drives. There's also the issue of damage. Any damage done to a hard drive would put dozens of games inside it in danger. Yes you can re-download them again, but that would just mean going through all that wait for downloads to finish again. You have a hard drive full of games with sizes higher than 5GB? Have fun re-downloading them. With discs, you damage one, the others aren't affected. Another plus of owning hard copies? Resale. You're stuck with whatever game you bought through downloading. With hard copies, you have the option of trading it for another game or for cash. The industry of hard copies isn't dying."
Meanwhile GME is doing things like hosting midnight release parties and giving gamers chances to win trips to E3 in LA every year, loyalty programs.
But even just forgetting about how Walmart and Amazon are trying to cut into Gamestop's business (which is not that different from the past) the P/E is about 8, and the company just announced a $300 B stock buy-back, and even better, over the next few months and for the Christmas season, Microsoft's Kinect and Sony's answer to motion gaming are being released. And many kids who now have wii's are going to want to upgrade.
So this fall should actually be a pretty good one for the video game industry. Gamestop is one way to buy into all of that, since it's a pure play and benefits from hardware, it's not the politics of a game studio and which genius is going to make which new game, it's just an extremely popular and profitable franchise with lots of gamers who love going there.
My preferred vehicle for this trade is to buy $21 October calls around .20 - .25.