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Extra Lives: Can GameStop Avoid Blockbuster's Fate?

How the video game chain is beating the odds in the Digital Age
Extra Lives: Can GameStop Avoid Blockbuster's Fate?
Photographer: Dolly Faibyshev/Bloomberg Businessweek

Tim Brooks claims to know 98 percent to 100 percent of the people who visit his store, a GameStop on a scruffy city block in northern Philadelphia. On an October afternoon, it doesn’t seem like he’s exaggerating. Brooks, a thin 25-year-old with thick-framed glasses and an aura of perpetual enthusiasm, has been working for the video game chain since he was 16. When customers walk into the branch he manages on West Chelten Avenue, he can remember what titles they have at home. Brooks tells a cop who’s bored with Destiny to try Shadow of Mordor. He banters with a parking enforcement officer and asks about the younger brother of a teenage customer who’s here to buy a few Skylanders action figures. He nods at a heavyset man whom he knows as “Jeff, from the water department” and doesn’t engage him further. “He’s a loner,” says Brooks, watching Jeff from across the store. “He wants to look where he looks, and then comes back to you.” After a shift spent glad-handing as though he’s pouring drinks for regulars at a corner watering hole, Brooks often heads home, powers up his own console, and plays online with people he’s met in the store.

This is the surprisingly happy face of GameStop, the chain of 6,700 stores worldwide that sell new and used video games. Many outsiders assume the company is doomed. Like music, books, and movies, video games are changing from physical objects that people buy in stores to digital products they download at home—a trend threatening to render all brick-and-mortar retailers obsolete. GameStop, in theory, has even less going for it than bookstores or record shops. Its customers aren’t the type to wax poetic about the musty smell of paper or the tactile pleasures of vinyl. The company is the most heavily shorted stock in the Standard & Poor’s 500-stock index, according to Bloomberg, with more than 40 percent of its shares borrowed in hopes they will lose value. “The comparison everyone wants to make is Blockbuster,” says James Hardiman, who covered the stock as an analyst at Longbow Research until November. “They’ve just been dealt a very difficult hand.”