3 ways GameStop can still win web3

Don't retreat, double down on what you've got

Poor GameStop. The little engine that couldn’t shuttered its crypto wallet product yesterday. The wallet was part of the company’s push into web3 last year which was meant to seize on its meme stock momentum: if the degen kids love us, join ‘em. It was the natural follow-on from since-fired CEO Furlong’s announcement last year that they had lost $160M on their web3 investment and were pulling back on the strategy.

When GameStop got into the NFT business, I had mixed feelings. The overwhelming one was “Oh god, this won’t work out.” The trajectory of the company over the last decade—stonkers aside—has been a rough one. Ten years ago, I was the doofus showing up with digital gaming data saying the space was about to eat their lunch. They said, “Nah, we’re good,” and shoved their heads back in the sand. Then all their biggest investors used our digital data to bet against them, but somehow I don’t have an EP credit in Dumb Money. 

The company predictably slid to the point that its little-known business of owning—for some reason—1,289 AT&T retail stores was one of the few good things on its balance sheet. If it weren’t for regular releases of new consoles and some nostalgic waiting-in-line feels for a couple major game releases, I don’t know that the company would still exist. 

So, with a history lacking in adaptation and innovation, I already felt that this was unlikely to thrive. 

But the other feeling was one of excitement. GameStop, in my mind, was a proxy for mainstream gaming. They’re not a AAA publisher, but their influence on gaming was huge both in business and for consumers. Every publisher kowtowed to GameStop to make sure it had prime shelf space for new launches. E3 itself was basically a show-and-tell to GameStop. Gamers know it as a household name, and for those of us of a certain age it’s the place we bought (and sold!) our favorite games. A public game company showing that NFTs are a-ok would certainly incept that concept into the minds of game makers. 

GameStop has cited regulatory uncertainty as a reason it’s axing the wallet. It’s a viable concern, even amidst some possible good news (STRIKE THROUGH) wait, bad news that was starting to give a sense of security (pun intended) in the future of crypto. It’s also the pitfalls of trying to run your own wallet from the ground up, which isn’t necessarily the right idea, but I’m biased. 

But really, that is the cop-out argument for a business arm that GameStop doesn’t know how to run. Other US-based public companies, including ones with even higher regulatory burdens, from Mastercard to PayPal, have been comfortable continuing and even expanding their work in web3. The company hasn’t said whether its NFT marketplace and content production will also close, but I’m worried it’s the natural next step, especially since their VP of web3 partnerships left two months ago…

The real issue, however, is that GameStop—like many consumer brands over the past couple years—only got as far as the selling of NFTs. Jumping on the bandwagon of OpenSea and the speculative PFP projects and long-shot metaverse collections that drove it, GameStop didn’t pause to answer “why?” Why sell this NFT? What does it mean to our consumer? What does it mean to us as Gamestop? The opportunity for a company that 1) needs digital innovation and 2) still has 4,413 retail locations shouldn’t have been placed on a finicky new line of business, it should have powered its transformation and core business. Here are a few things that I think GameStop’s web3 program overlooked, but could still prove viable: 

Digital x physical collectibles  

As the company’s game-selling business eroded, a lot of the retail shelf space was given over to physical collectibles. Which seemed to be working really, really well—in fact, their collectibles business grew 26% YoY to $223M in Q2 of 2022. $223M sure sounds like it offsets some of that $160M web3 loss. 

So why didn’t GameStop combine these things? Why did its digital collectible business have no relationship to its physical business? Why did the digital items not incentivize me to enter a GameStop retail location, where I might also stumble across a bunch of other things I want to buy? 

GameStop had deep relationships with collectibles makers from incredible IP like Star Wars and beyond. The opportunity to leverage that into a physical and digital ecosystem that would reinforce value in its retail business, extend the reach of its physical collectible makers, and make the IP holders doubly happy was there, but wasted. Instead, web3-native companies (some run by yours truly) snatched up valuable IP licenses that were either disconnected from that brand’s physical collectibles, or required a lot of extra work to connect the dots between merchandisers and newly-minted NFTs. 

Game launcher 

GameStop’s biggest lunch-eater, Steam, has (until Gabe decides otherwise) staked its claim that NFTs don’t belong in games. It begrudgingly allows for web3-based games as long as there’s a hybrid system and the NFTs are neither seen nor heard. In that vacuum, and amidst the chaos of freshly created web3 game launchers vying for market share, GameStop could have leveraged its brand recognition and digital reach of at least 40M consumers to fill the void in web3 gaming distribution. 

The move, which would have even further cemented its ability to serve as the primary and secondary marketplace for gaming NFTs, would have resonated with gamers over the age of 30ish (which represent a boatload of players) who, for years, associated GameStop with the place you go to get your new games, and launched GameStop’s distribution business into the digital era. 

Loyalty program

Even without connecting NFT IP and physical collectibles IP, GameStop could have used the overall marketplace as a boon to its existing (or even a new) loyalty program and retail stores. Do some things on the marketplace (trade, buy, engage somehow), get rewarded with GameStop points, use them online or come on in for something extra special! 

If we want to get extra funky, there would also be an opportunity to run a meta-loyalty program for web3 games (perhaps released on its launcher), that would reward consumers for GameStop buys (physical or digital) with in-game benefits, and vice-versa. 

I really think that GameStop could salvage this situation and reinvent itself into something amazing that is primed for the future of gaming, loyalty, and fandom. But it will take a doubling down on investment rather than a retreat, and a potentially catastrophic reorganization in its institutional thinking and execution that, we’ve seen time and again, it just can’t muster.