Video Game Market

Now and in the Future

Tony Bartel

Executive Vice President

Merchandising and Marketing

GameStop Corporation

What is the average age of a “gamer”

A) 17

B) 21

C) 29

D) 32

Gamer Trivia

What Percentage of Gamers are Female?

A) 28%

B) 35%

C) 39%

D) 49%

Gamer Trivia

Which of the Following is NOT a video game

character?

A) Rosco the Raving Rabbit

B) Zero Suit Samus

C) Ezio

D) Nikko Bellic

Gamer Trivia

Gaming Industry

Overview and Prospects

• Overview of 2009 Gaming Category

• Who is GameStop?

• The Future of Gaming

• Supply Chain Challenges

2009 Was a Challenging Year for

Video Games

-11%

-9%

-7%

-5%

-3%

-1%

1%

Hardware Software Accessories

-8%

-10%

-1%

2009 US Category Growth over 2008

Source: NPD

December Sales Surged Due to

Wii Demand, PS3 Price Drop

-30%

-20%

-10%

0%

10%

20%

30%

40%

Wii HW PS3 HW Total Market

-30%

-2%

-12%

40% 37%

5%

2009 US Growth over 2008

Jan-Nov Dec

Source: NPD

Console Gaming Represents the

Majority of Industry Sales

Worldwide Video Game Software Market Size (2009)

PC Games - $4B

Video Game Ads - $1B

Source: PWC Global Media and Entertainment Outlook, 2009

HARDWARE UNITS (CONSOLE + HANDHELD)

100 Million New Units Will Change ‘The Cycle’

U.S. INDUSTRY GROWTH

19,189 15,316

21,300 21,081 20,939 19,796 20,815 23,134

30,972 34,751 34,000

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Un

its S

old

Year

U.S. Annual Hardware Sell-Thru

Source: NPD

$10,937

$8,624

$6,450$6,058$6,240

$5,800

$4,500$4,100

$5,500

$0

$3,000

$6,000

$9,000

$12,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

TOTAL U.S. NEW VIDEO GAME SOFTWARE SALES

U.S. INDUSTRY GROWTH

Launch years Launch years

$9,900

Source: NPD

Call of Duty Launch was the Largest

Entertainment Launch in History

• Nearly 2mm advance sales at GameStop

• Biggest first-day launch in history across all forms of

entertainment, with 4.7M copies sold, $310M in sales

• In first five days, $550 million in sales worldwide, outpacing 5-

day theatrical box office gross figures for such films as Avatar,

Harry Potter and the Half-Blood Prince, and the Dark Knight

Source: Activision and boxofficemojo.com

First Half of 2010 Will Easily be

the Biggest in Video Game History

Who is a Gamer?

• You can be a gamer even if you don’t own a

Wii, Playstation or Xbox

• According to NPD Group, two-thirds of

Americans currently play games on consoles,

cell phones, Web sites and even social

networking sites

• Deloitte estimates six out of 10 U.S.

households own at least one console

New Definition of a Gamer

• Nearly 50% of new

gamers are 35+

• 49% of these gaming

parents are women

• 65% of all households

play computer /video

games

• Half of all parents say

they play video games

with their children

• Gaming industry no

longer dominated by

young males

Growing the Gaming Audience

• Identifying new audiences, staying ahead of curve

• Growing the audience while still serving core

gamers

• Services to meet growth of gaming among

women and families

• Serving the growing Hispanic market

Console Video Gaming is a Leading Leisure

Activity in Our Target Demographic

Q: Which is your favorite leisure activity?

Source: 2009 Frank N. Magid Associates, Inc. survey

Who is GameStop?

World’s Largest Video Game

Retailer

Broadest Assortment in the

Industry (2-3X SKU Count)

Highly Assisted Sale – Heavy

Payroll Investment

Broad Vendor-Led Training –

Annual Trade Show

Unique Value Proposition –

Buy/Sell/Trade

Store Locations

• United States Store Base: 4,431

• European Store Base: 1,297

• Canadian Store Base: 340

• Australian Store Base: 389

Total: 6,457

In 2009, GameStop opened 400+ stores worldwide

In 2010 we expect to open an additional 400+ stores

GameStop’s Points-of-Difference

Unmatched customer satisfaction fueled by:

Category specialization driven by

knowledgeable, passionate sales team

Broadest, largest assortment of games

Largest number of convenient locations

Unmatched customer engagement

Value based on Buy/Sell/Trade model

Access to Stores

and Inventory

• More stores than any other gaming retailer

• Small, intimate locations focused solely on gaming

• Customers ensured access to new games through

early reservation system

• Guaranteed in stock on most popular games

• Pre-sales often tied to exclusive GameStop offers

that customers desire

• Customer Loyalty Program

• Game Informer Magazine

• Midnight Launch Events

• First-to-Play Events

• Contests

• Tournaments

• Pre-order Incentives

• Racing Sponsorships

• Indie Game Challenge

• Community Involvement

• Philanthropy – Make a Wish

Customer Centric in Every Way

Pioneer of Buy/Sell/Trade Model

• Fiscal ’08: 86.5M units traded in

On track to top 100M units in fiscal ’10

• We refurbish almost 90% of everything we

take as trade-ins

• Only 10% goes to other recyclers who reclaim

value and keep out of landfill

Buy/Sell/Trade Benefits Everyone

• Huge customer benefit- $700M returned to customers in 2008

• Huge developer benefit

- Credit used to buy games/equipment

• Huge GameStop benefit- Brings customers into stores, stimulates new game

sales, provides us with inventory of pre-owned

merchandise we can sell

• Huge environmental benefit- 220K tons recycled since 2002

The GameStop Brand Experience

“People and a place passionate about the

world of gaming”

“Simply the best and smartest way to get to

the rich benefits of gaming”

Power to the Players

GME 10-Year Sales Growth

Source: NPD

Gaming is Expanding Beyond

the Console

• 10’ Experience

• 3’ Experience

• 1’ Experience

Internet/Wireless Gaming is Growing

• Facebook claims 65 million+ game players on

its site (Farmville, Farkle and Mafia Wars)

• Millions play on Internet gaming sites

• Almost a third of iPhone owners have

downloaded a game in the last month

• Millions more play on other mobile devices

(Blackberry, Droid, etc.)

Digital Trends – 10’

• DLC is great for gaming but friction-filled and lacks virality

– Less than 15% of gamers have purchased DLC

– Average value of DLC transaction is less than the average iPhone app

– DLC is in need of an educating, assisted sale, frictionless process

• Cloud computing is interesting but must be corroborated

– Latency / Bandwidth

– Business Model

– “The veracity of technological innovation is rarely wrong, but the chronology is almost always wrong”

• E-commerce continues to drive growth

– Online presence must extend the customer experience

– Supply chain flexibility a must

Digital Trends – 3’

• Convergence around browser technology

– Portability

– Low friction

– Social Element

– High Virality

• Key is 360 Monetization

– Micro-transaction

– Subscription

– Purchases

– Ad-based revenue

Digital Trends – 1’

Apple has disrupted the mobile gaming spaceDaily iPhone usage breakdown, % of time spent on each activity, one hour per day:

Voice Call, 45%

SMS, 14%

E-Mail, 12%

Music, 10%

Games, 8%

Internet, 9%

Other, 3%

Source: Morgan Stanley

Today’s Mobile Experience Needs a

Specialist’s Expertise

• Low barriers to entry have created

overwhelming product flow

• Lack of effective merchandising

solution is limiting sales

• Popularity ≠ quality experience

• No authoritative source for quality

• No pre-review and limited objective

post-review

Continued Road to Success

• Be the video game retail aggregator of choice by

offering customers access to games through doors, Web

sites and digitally

• Strengthen our commitment to unmatched service,

selection, engagement, access and value to deliver

unparalleled customer satisfaction as the leading

category specialist in the industry

The methods of playing video games may be broadening,

but we are positioning ourselves to lead the way

regardless of the media or method.

Supply Chain Opportunities

• Delivery flexibility

– Same day delivery

– Efficiency in overnight delivery

– Stronger intra-region network

• Collaborative Efficiency

– Working together to minimize cost, time pressure

– Support green initiatives

• Direct import simplification

– Extend trusted partners into China

– End-to-end solutions