GameStop Corp. (NYSE:GME)‘s stock has undertaken an incredible rise over the past year, shooting up more than 83%. While investors have profited, however, this company has faced threats to its present and future. The video gaming industry has turned down as current-generation consoles show their age, and while next-generation consoles in Microsoft Corporation (NASDAQ:MSFT)‘s Xbox One and Sony Corporation (ADR) (NYSE:SNE)‘s PlayStation 4 are set to be released later this year, even bigger challenges for this stock have arisen.
Microsoft’s console won’t block used game sales as earlier rumors had predicted, but the company has promoted a digital future for its games that could circumvent GameStop Corp. (NYSE:GME)’s reliance on the used games markets. All eyes turned to Sony on Monday at this year’s Electronic Entertainment Expo, or E3, where the company was set to release new details about the PS4. Did Microsoft Corporation (NASDAQ:MSFT)’s rival take a similar action and pound another nail into GameStop stock’s future?
Sony rides to the rescue
Sony Corporation (ADR) (NYSE:SNE) released a number of details about its PS4 on Monday, but a few points hit home for GameStop Corp. (NYSE:GME) investors. The company statedthat the device will support used games, much as Microsoft did, but Sony made an important distinction from its rival. The company announced full support for trading, lending, or reselling games, without releasing any sort of restrictions. Furthermore, Sony said that the PS4 won’t have any sort of online verification system like Microsoft Corporation (NASDAQ:MSFT)’s Xbox One, which requires games to be connected to the Internet once every 24-hour period in order to continue working.
Why are these details such a big deal? Although Microsoft announced a murky support for used games, the company released stipulations: Customers can only lend each individual game out once and can only do so to others who have been on their online “friends” list for at least 30 days. Additionally, game publishers can choose to add in fees or other terms in regards to loaning out their games. All of that hurts GameStop’s future with Microsoft Corporation (NASDAQ:MSFT)’s Xbox One.
Sony Corporation (ADR) (NYSE:SNE)’s announcement came as a breath of fresh air for GameStop. While the company could certainly release restrictions at a later date while not in the spotlight of E3, as for now, Sony’s used games model is little more than a rehash of the current video game economy. That’s appealing to change-averse customers looking to upgrade to the next generation with a minimum of adaptation, and maintains the environment that provides the foundation of GameStop’s business.
Nintendo Co., Ltd (OTCBB:NTDOY) has struggled mightily with its newest console, the Wii U, but its latest product also supports used games. That gives GameStop Corp. (NYSE:GME) a route to continue its current business with two of the three major consoles of this next generation. However, investors shouldn’t count on Nintendo Co., Ltd (PINK:NTDOY) being a huge player in the future once Microsoft and Sony Corporation (ADR) (NYSE:SNE) launch their new systems. The Wii U sold just 75,000 consoles in April, a double-digit fall from March. Worse, the console, released just last year, sold less than half the number of Xbox 360s or PlayStation 3s sold during the month — and each of those consoles are at least six years old.
Unless Nintendo Co., Ltd (PINK:NTDOY) releases something mind-blowing soon, the battle for next-generation dominance will be between Sony Corporation (ADR) (NYSE:SNE) and Microsoft Corporation (NASDAQ:MSFT).