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GameStop Corp. (GME) is Living on Borrowed Time

New console concepts like the Ouya, the SHIELD, and the Steam box are wholly digital. And, as more and more consumers embrace them in place of traditional consoles, the market for physical games declines.

Apple Inc. (NASDAQ:AAPL) could deal a blow to GameStop Corp. (NYSE:GME) if it decides to release its long-rumored TV anytime soon. With Apple’s move to support third party controllers, any Apple TV that appears would likely be a force in the video game industry — and it probably wouldn’t rely on disc-based games.

GameStop’s decline

GameStop Corp. (NYSE:GME)’s management has pledged to return 100% of free cash flow to its shareholders. The company has a solid 3% dividend yield, and for the next few years should continue to post solid earnings.

But the video game industry is clearly in the midst of a transition to wholly digital. It seems to be a question of when — not if — physical disc-based games will disappear entirely.

When that happens, it’s hard to see a place for GameStop’s business.

The article GameStop is Living on Borrowed Time originally appeared on Fool.com and is written by Salvatore “Sam” Mattera.

Salvatore Mattera is long GameStop puts dated January 2015. The Motley Fool owns shares of GameStop and Microsoft. Salvatore “Sam” is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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