Gamestop Looks To The Future With Streaming Service

GameStop's move to offer a streaming game service for tablets may be a bid to stay alive in a cloud-based game market.

Gamestop hasn't run into problems yet, but it is clear the company sees its future in the digital marketplace. In March, CEO Paul Raines told MarketWatch, Two years ago, DLC (downloadable content) was a niche business. What's happening now is this is becoming a mass market. This holiday, we introduced a lot of moms and dads to DLC.

In its last earnings call, Gamestop said digital sales totaled $290 for the last fiscal year, or about 3 percent of overall revenue. That is not a large percentage but it is a 61 percent increase over the same period in 2010.

Via the new service, GameStop will allow Power Up Rewards members to stream games directly to tablet computers like the iPad and Motorola Xoom. The company is also considering creating its own line of tablets optimized for the service, as well as compatible bluetooth controllers.

GameStop's announcement came a day after its acquisition of Spawn Labs, a peer-to-peer game streaming service launched in 2009. Offering much of the same functionally as OnLive, Spawn Labs's technology allows users to play console games without the actual use of consoles. The company also said it is buying game distribution platform Impulse, which features a library of over a thousand games for download. The service also allows developers to implement a number of extra features, including achievements, chat, and cloud storage.

The acquisitions of Impulse and Spawn Labs come not long after its purchase of Kongregate, a games-hosting and social networking site launched in 2006. With Kongegate, Impulse, and Spawn Labs, GameStop is giving the clear indication that it intends to survive if the video game industry moves away from physical media.

Analysts so far have applauded the move.I think GameStop has made its strongest case yet for its future viability, said Sterne Agee analyst Arvind Bhatia to IndustryGamers. These acquisitions should provide them with the initial platform to grow their digital revenue and compete with the likes of OnLive, Gaikai, Steam, Direct2Drive etc,

But others have been less convinced. M2 Research analyst Billy Pidgeon said that GameStop's success in the packaged video game business does not automatically spell success for the company in the cloud streaming sphere. In fact it's more likely a barrier to entrance, he said. Still, GameStop must try to bridge this transition or approach obsolescence.