GameStop: 'We're Introducing Mom And Dad To DLC'

In a Thursday earnings call, GameStop executives emphasized the retailer's growing digital sales, as the games industry continues to transition away from a strictly packaged goods business. "There's going to be tremendous acceleration in the digital business," GameStop president Tony Bartel said. "We see that growing over 20 percent [in the industry overall]. We see DLC in particular very much as a very strong growth vehicle next year." "We believe we're going to significantly outpace [the 20 percent industry forecast] and grow with a growth rate similar to what we saw in 2010," he added. In an earnings announcement Thursday, GameStop said for the full 2010 fiscal year, customers purchased $290 million worth of digital console and PC content, a 61 percent year-on-year rise. To supplement its packaged goods business, the company sells digital games on its website, owns web gaming hub Kongregate and sells points cards and downloadable content in-store. "We're on pace to sell more DLC in the first quarter this year than we sold all of last year," as GameStop continues to implement new programs to facilitate the sale of digital content, Bartel said. Company CEO Paul Raines said GameStop customers are becoming more familiar with the concept of buying a packaged game, then later coming to a physical retailer to buy a digital add-on. "GameStop is introducing mom and dad to DLC," said Raines. "Lots of consumers who've never even understood what DLC is are getting introduced to it. They're liking it and buying more and more DLC at GameStop stores." Bartel said GameStop attached Call of Duty: Black Ops' recently-released First Strike map pack to 28 percent of the company's total Black Ops sales on Xbox 360 in the add-on's first week of availability. He added that trade-in credits from used games represented 23 percent of the currency used towards purchases of the Xbox 360 First Strike map pack. Bartel also said that over half of the people who buy downloadable content also purchase a physical good in the same transaction, highlighting the ability for packaged and digital content to coexist. GameStop plans to soon accept preorders for digitally distributed content that will be "digitally-fulfilled" at the time of launch for members of the retailer's Power Up Rewards program, Bartel revealed. Although the retailer sells full-sized downloadable PC games via its website, the company's digital strategy on consoles remains focused on smaller downloadable content that adds on to full-sized games. "The download of full-size games is a very difficult proposition, given the broadband limitations that exist in the United States, and frankly, just globally," said Bartel. "... That's the reason we decided to move so strongly into the DLC business, because it's not taxing to today's infrastructure. It's a very simple download." Bartel also said its Kongregate website is seeing "strong traffic and revenue growth," with fourth quarter traffic rising 55 percent with revenue growing 47 percent. Earlier today, the Grapevine, TX-based company reported annual sales of $9.47 billion for the fiscal year ended January 29, up 4.3 percent year-on-year. Profits for the period were up 8.1 percent to $408 million.