New threat to GameStop: XBox Game Pass subscription service

Shares of Grapevine-based GameStop fell the most in nearly four months after Microsoft said it was introducing a subscription service that would let customers play games online and avoid a trip to the video game store.

The stock (ticker: GME) dropped more than 11 percent — the biggest intraday decline since Nov. 2 — before closing down $2.08, or more than 8 percent, at $24.44.

Microsoft said Tuesday it began testing the Xbox Game Pass, a $10-a-month service with access to more than 100 titles, including the company’s Halo 5: Guardians, as well as products from other publishers such as Take-Two Interactive’s NBA 2K16. The games will be available for download through Microsoft’s Xbox consoles.

The download feature represents a threat to GameStop’s business of selling new and used discs, Robert W. Baird & Co. analyst Colin Sebastian said in a research note.

“As such, we continue to highlight the importance of GameStop’s diversification strategy for shares to move higher, with non-gaming categories helping to offset potential market share declines in games,” he wrote.

Threatened by digital downloads, GameStop has been rapidly diversifying its business in recent years, acquiring hundreds of AT&T Wireless stores through its Spring Mobile division and boosting sales of toys and other video-game accessories in its namesake shops. The company sells games online and publishes its own titles.

Last month, GameStop announced plans to close an undetermined number of stores this year after holiday comparable-store sales plunged by 18.7 percent. In addition to its headquarters, GameStop also has its refurbishment operations center in Grapevine.

Sony and Electronic Arts also have subscription services. Microsoft’s new offering, which will roll out more widely by mid-year, would be on top of the $60 a year customers pay for the company’s Xbox Live feature, according to Sebastian.

This story was originally published February 28, 2017 at 4:47 PM with the headline "New threat to GameStop: XBox Game Pass subscription service."