Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

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 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.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.