GameStop Spent Most on Nintendo in '07

via Next Generation


On Wednesday, GameStop said in a regulatory filing that in total, Microsoft, Sony, Nintendo and Electronic Arts accounted for 65 percent of the retailer's new product purchases from vendors.

As a vendor, Nintendo accounted for 21 percent of GameStop's new product purchases, Sony accounted for 17 percent, Microsoft accounted for 16 percent and EA accounted for 11 percent.

It's not at all surprising that in fiscal 2007, nearly two-thirds of GameStop's new product inventory is purchased from those companies, considering Microsoft, Sony and Nintendo sell consoles worth hundreds of dollars, and EA is the leading publisher.

But how do GameStop's purchases from those big four translate into actual new product sales to customers?

Wedbush Morgan analyst Michael Pachter told Next-Gen that although 65 percent of GameStop's inventory is purchased from the big four game companies, that doesn't mean that those four companies necessarily make up 65 percent of sales to customers.

Taking into account a slim 5 percent hardware margin and a 20 percent software margin, Pachter said Nintendo, Sony, Microsoft and EA actually account for "closer to 76 percent" of GameStop's new product sales.

The fact that Nintendo tops GameStop's 2007 vendor list can be attributed to hot-selling first-party software and the Nintendo Wii and DS.

GameStop said that it purchases its new products from about 75 manufacturers and software publishers and approximately five distributors.

GameStop's top ten vendors accounted for around 80 percent of new product purchases in fiscal 2007, according to the company.

In the end though, Pachter said it wouldn't matter too much even if GameStop somehow spent less on companies such as Nintendo, Sony and Microsoft.

"It's not like the console makers are going to stop selling to GameStop," he said.

Used game sales continued to be GameStop's most profitable segment in 2007, with gross profit in used games reaching $772.2 million and margins of nearly 50 percent.

Gross profit for new game software was $581.7 million.