Toys R Us to make a re-branded comeback after cancelling bankruptcy auctions but does its initial crash point to a digital future for video games?

Posted by Dakota 'DarkHorse' Hills • October 3, 2018 at 4:01 p.m. PDT | Comments: 39

The last time we talked about Toys R Us, the company was shutting its doors for the final time in June and closing down their remaining stores after announcing plans to file for bankruptcy. New proceedings have now taken a bit of a different turn this week, however.

A revival of the Toys R Us brand is now in the works after cancelling bankruptcy auctions this week, as the lenders in control of Geoffrey, LLC now believe that relaunching the toy store will prove to be more valuable than splitting up its remaining pieces. There was a multitude of reasons that the company sank, but does its initial demise point towards things to come for the video game industry?

Toys R Us was not exclusively a video game store by any means, but many children โ€” myself included โ€” used to be quite excited to visit the place to see what games and related merchandise we could find that seemingly wouldn't be at other large chains like Walmart. There used to be aisles filled with all manner of games, magazines and accessories like cases, special controllers like arcade sticks and special items like the GameShark.

Things are much different now than they were even a decade ago. The Xbox 360, PlayStation 3 and Nintendo Wii laid the groundwork for digital gaming storefronts along with platforms like Steam on PC which appear to be growing every year.

Physical and digital game sales have already reportedly inverted in the past decade with 79 percent of video game content sold digitally in 2017 though that also factors in mobile gaming purchases. Now, every retail game that's released onto the market that's available on disc or cartridge is also available digitally plus there's many smaller games that are only available digitally.

One only needs to walk into a GameStop now or notice that their local game store is no longer around to see that the industry is changing rapidly, and we may not be buying our fighting games on discs for much longer.

Digital game sales from 2009-2017 from Statista image #1
Click images for larger versions

GameStop has needed to change their business approach multiple times over this console generation because digital games inherently takes away from their original core business model centered around used games. If people aren't buying discs, then there are no used games to re-sell.

The massive gaming retailer now appears to have incorporated non-video game physical goods into their approach with shirts, toys, collectibles and more taking up a large part of shelf space where video games once resided. This move has left them profitable though their stocks have still dropped substantially since the PS4 and Xbox One launched in 2013.

A look at GameStop Corp's stock values over five years via Google

GameStop closed 150 of its stores in 2017, and former CEO Michael Mauler left the company in May though there are still over 7,000 locations worldwide.

Toys R Us' financial troubles came to a head in March of this year when the company announced it would be unable to recover from its $5 billion debt from a leveraged buy out. The made the decision to close their remaining 700 stores around the United States and the world โ€” except for Canada.

More than 30,000 workers lost their jobs following the final stores closing in June many of whom criticized the current owners for the company's shuttering and handling of the situation.

The lending groups in control of the company told the bankruptcy court that it hopes to create "a new, operating Toys R Us and Babies R Us branding company that maintains existing global license agreements and can invest in and create new, domestic, retail operating businesses under the Toys R Us and Babies R Us names, as well as expand its international presence and further develop its private brands business."

Digital gaming, on the other hand, appears to be the way of the future for gaming with some analysts predicting to see its sales reach 90 percent of the market around 2021 or 2022. Digital platforms also save / make publishers and developers more money because they do not need to produce as many discs, and they don't need to think about the retailers' cut on top of the console makers' cut of sales.

"Cutting retailers big and small completely out of game software sales will likely not sit well with stores like Target and would likely spell doom for GameStop as we know it now."

Obviously, there are still hurdles that need to be overcome before an all digital future can become a reality with internet speeds around the world and especially around the United States still needing to properly advance to make such a move feasible and not take an entire day to download a AAA game that goes against their data cap.

Console manufacturers also still rely on retailers to move their actual gaming hardware, so cutting them completely out of game software sales will likely not sit well with stores like Target and would likely spell doom for GameStop as we know it now.

There's also still plenty of consumers who prefer to buy their games physically whether they be collectors or people who do not wish to tie their game ownership to online servers that may not be around forever. It will likely be a losing fight for those wishing for physical games to stay because all we need to do is look at how the PC gaming market has evolved since Steam took off.

It certainly won't be an overnight change, but it's certainly looking like video games will be making the move to mostly digital distribution in the future. Is that a future you're looking forward too or one that makes you uneasy? Have you already made the switch over to digital? Let us know in the comments section what you think about the future of digital gaming.

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