Video game retailer Game Group has gone into administration (a form of bankruptcy in Britain) today with 277 of its 600 U.K. and Ireland stores closing immediately. Administrator PricewaterhouseCoopers (PwC) has said that 2,104 staff will be let go this week, as the embattled company waits to see if a buyer will step forward.
The true scale of Game’s problems became clear last month when the retailer revealed that it would not be stocking Electronic Arts’ highly anticipated Mass Effect 3. The title still topped the charts in the U.K., as other retailers picked up the slack, but the prospect of having no dedicated brick-and-mortar retail outlets in many parts of the country is still a concern for the games industry.
While most gamers are savvy enough to find alternative places to shop, there will still inevitably be some lost sales, and shoppers could find a narrower range of games being stocked in other, non-dedicated, retail outlets.
Speaking at an investment conference earlier this month, EA Chief Executive Officer John Riccitielo appeared unconcerned when asked about problems in the retail sector: “I’m really confident that the consumer that wants to buy Mass Effect or Madden or FIFA or whatever, if a particular retailer is gone, other retailers will absorb the business. We might lose 20,000 copies of Mass Effect 3 in the U.K. for the consumer that can’t figure out another store to go to, but that would even surprise me. If one [retailer partner] goes away, the other guys pick up the slack. I really don’t see it as anything other than a very temporary dislocation.”
Game reportedly owes over £180m ($287m), including £40m ($64m) to suppliers. If a buyer for the business does not come forward quickly, it could mean permanent closure for the retailer.
Mike Jervis, joint administrator and partner at PwC, said: “The group has faced serious cash flow and profit issues over the recent past. It also has suffered from high fixed costs, an ambitious international roll-out, and fluctuating working capital requirements.”
“Despite these challenges, we believe that there is room for a specialist game retailer in the territories in which it operates, including its biggest one, the UK. As a result we are hopeful that a going-concern sale of the business is achievable.”
With a lot of U.K. towns and cities having multiple Game and Gamestation stores — both part of the same group — many believe that the company reached too far with its expansion plans at a time when retail sales have been slowing and digital consumption has been on the increase.
Simon Kilby, founder of online gaming marketplace Playr2.com, said, “It’s extremely sad to see such a staple of the U.K. video games industry go into administration. Unfortunately gaming, along with everything else, seems to be moving online. Whether or not this spells the end of video game retailers on the high street is anyone’s guess at the moment, but it certainly doesn’t bode well.”
Details of closed stores have been appearing on Twitter today, including an image of the Lewisham store in Greater London, posted by Twitter user @Dwaynsta (pictured). Store closures have not been limited to smaller branches though, with Game’s flagship Birmingham store being one of the high-profile victims.
Game has noted the immediate implications of administration for its customers on its official Facebook page. Online services are currently down, no pre-orders are being taken, and no refunds or exchanges are being given out. Any deposits paid for pre-orders are not refundable at present.
In addition, the use of all gift cards and Reward points (Game’s loyalty scheme) to make purchases has been suspended.
The official statement from Game regarding administration reads as follows:
“Further to our announcements of 21 March, the Board of GAME has completed its discussions with lenders and third parties without resolution, and has therefore today appointed PWC LLP to act as administrators for the Group. This decision is taken after careful consideration and ceaseless interrogation of every possible alternative. The Board would like to thank the teams of GAME and Gamestation colleagues around the world for their exemplary dedication, passion and professionalism.”
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