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The video game industry is in a transitional period, and the future is uncertain for a lot of related businesses.
One of those uncertain business is GameFly, which laid off some employees this week. Joystiq first reported that GameFly laid off 15 percent of its workforce as part of a restructuring effort to become more efficient. The video game rent-by-mail service found a strong niche in this current generation, but it uses a model that doesn’t have a clear future in an industry that is increasingly focused on digital goods. [Disclosure: GameFly also runs one of our competitors, Shacknews — Ed.]
“We studied our business and determined that we could operate with a smaller team while continuing to provide the same high level of service to our customers,” GameFly chief executive officer Dave Hodess said in a statement. “Aside from a greater focus in our software development efforts, we’re not making any significant changes in our console subscription or digital download businesses. GameFly remains profitable with a strong balance sheet.”
While the company’s butters its bread with its rent-by-mail service, it does have a digital PC-gaming service that it has built up over the last year. GameFly subscribers can access a wide number of games, while others can purchase and download titles from the store on a game-by-game basis. But that is a market owned by Valve’s Steam with strong competition from Electronic Arts, Ubisoft, and GameStop.
GameFly may have started out as gaming’s version of Netflix, but it doesn’t have as clear of a path to a digital solution as that movie service had. Netflix started a film-streaming business that’s propelled it to a $188 stock price. GameFly’s PC offering isn’t as revolutionary and isn’t making a dent with a wider audience.