Microsoft’s Xbox deal with GameStop includes a revenue share agreement that gets the ailing retailer a foot in digital retail (GME, MSFT)

Xbox Series X and Xbox Series S

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As part of a newly announced deal between Microsoft and GameStop, the ailing video game retail giant will earn a share of digital sales revenue from every new Xbox the company sells.

That’s in addition to a variety of other measures, GameStop confirmed to the investment firm DOMO Capital Management this week.

The agreement “includes revenue sharing on all downstream revenue (i.e. digital downloads and digital content) from any device that GameStop brings into the Xbox ecosystem,” DOMO Capital tweeted on Tuesday. “GameStop now meaningfully participates in digital.”

In other words: For games or other content purchased from an Xbox device GameStop sells, GameStop will get a cut of the revenue, even though that purchase was through Microsoft’s Xbox store after the console was purchased. 

Microsoft confirmed the revenue sharing agreement in a statement to Business Insider. “We have an incentive structure with GameStop as we do with many of our partners across multiple channels,” the statement said.

Despite being the world’s largest video game retailer, GameStop has struggled to stay afloat amid increasing competition from digital game stores.

Like Blockbuster Video and Tower Records before it, video game retail faces major challenges to its business model. As more people buy video games through digital storefronts like Steam or the Xbox Store, fewer buy games on physical discs from GameStop.

That trend was a huge problem for the company — until the coronavirus pandemic forced millions of people indoors. Many of those people, with loads of free time on their hands suddenly, turned to video games. Sales of video-game hardware, software, accessories, and game cards topped $1.6 billion for March, according to The NPD Group’s monthly report — “the highest reported spend for a March month since the $1.8 billion achieved in March 2008.”

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Moreover, with new Xbox and PlayStation consoles scheduled to launch in mid-November, GameStop is more relevant than ever. There’s no way to download a new game console, and millions will no doubt turn to their local GameStop for the chance to buy a next-generation PlayStation or Xbox. 

Microsoft is assuredly hoping, through its new partnership with GameStop, that many of those GameStop shoppers will opt for a new Xbox rather than Sony’s PlayStation 5. And, by tying Xbox sales from GameStop to a digital revenue sharing plan, GameStop employees will assuredly be encouraged to sell new Xbox consoles.

Both Microsoft and Sony have new, next-gen consoles scheduled to launch on November 10 and November 12, respectively. Sony’s PlayStation 5 starts at $400 for the Digital Edition, and goes to $500 for the version with a Blu-ray disc drive. Microsoft is releasing two distinct versions of the next-gen Xbox: The $300 Series S, and the $500 Series X. Though both Xbox consoles play the same games, the Series X is capable of producing higher resolution gaming.

GameStop did not respond to a request for comment.

Got a tip? Contact Business Insider senior correspondent Ben Gilbert via email (bgilbert@businessinsider.com), or Twitter DM (@realbengilbert). We can keep sources anonymous. Use a non-work …read more

Source:: Businessinsider – Tech

      

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