The second of two big social gaming acquisitions this week, GameStop's acquisition of social gaming hub Kongregate is a big step for the retailer. While its online site offers digital downloads currently, this is the first step into a larger pool. It also represents a possible change for Kongregate, which has previously focused on its independent developer community. Members from both companies view the shift as a positive one, giving GameStop and Kongregate a chance to grow into something new.
GameStop estimates about 500 million consumers visit its stores with another 10-15 million unique users on its website. With its powerful retail partnerships, the company says it's an "aggregator of great content," much like Kongregate. "We've been talking for a while publicly about where we see ourselves in the future as it relates to our digital strategy," Chris Petrovic, Gamestop's General Manager of Digital Ventures, told Gamasutra.
"They know how to bring mass amounts of community to a destination, as well as get great games from developers and monetize that," Petrovic added. "We feel we're kindred spirits in that way, we both appeal to the core gamers primarily. This allows us to fulfill a lot of what we've talked about up until now -- to be that leading destination across internet-connected devices."
In this tough economy, GameStop has continued to thrive though a combination of new hardware and software sales, and their considerable used games business. Many industry analysts believe that the retail space will be shrinking in the coming years and the company has been positioning itself to catch the digital download and social gaming wave.
"While we have a lot of expertise in the retailing of primarily console games for the living room, we've done a lot of hard work over the past year learning a lot about the casual and free-to-play markets; we're real excited to have Jim [Greer, Kongregate founder] and his team bring a ton of expertise about that market," said GameStop's SVP of Digital Business Shawn Freeman.
Greer explains that the difference between the online markets and retail is the exceptional amount of content. Kongregate has had some 8,500 developers operating around 31,000 games on the service. "If you compare that with the sort of catalog that exists in the console world, it's just a whole different scope," he says. "They're all variable quality, but our model is really to build tools and systems to let our players tell us what the best stuff is. The nice thing about free-to-play is everybody can try before they buy."
GameStop will give Kongregate access to consumers that normally would not have heard of the social gaming hub. "There's a huge offline world of gamers who maybe haven't been exposed [to free to play games]," he says. "I think it makes sense for us to be reaching them in the browser."
Both companies believe that there is considerable overlap between the 'hardcore' console gamers and free-to-play casual gamers. On Kongregate, genres like tower defense and multiplayer shooters are popular, and Kongregate users love console-esque features like achievements. With the acquisition, GameStop and Kongregate can share data to see how to entice gamers to crossover to either side. "I think the way we'll do that -- it's too soon to say [specifics], but from a strategy perspective, it's important that it's the same people playing kindred content in different places,” explains Greer.
"The exciting aspect of this for us is to get an even closer look at how that's done, and how that's done effectively over time, and how that might translate into how we improve our business both on and offline,” said GameStop's Freeman.
Greer notes a paradigm shift in the market when it comes to casual gaming. "A few years ago, if you went to the community of console gamers and told them about Flash games, they'd be like, 'why would I waste my time, I'm playing Call of Duty.' I think that has really changed over the last two years, as we're seeing big publishers like EA and huge companies like Bigpoint investing huge resources into the browser."
For the independent developers, Kongregate's Greer is to quick to assure them that not much will be changing: "The popular stuff on our site... the majority of it continues to be from one and two-person development teams." He compares it to the addition of Netflix's streaming service, where smaller indie films can coexist with multi-million dollar releases and sometimes become even more popular. “It's going to be business as usual in terms of the way we treat [developers] in terms of transparency and access," he says.
Numerous indie developers responded poorly to the news of the acquisition, but Greer believes everything will turn out for the best. "I hear them," says Greer. He believes that the indies will benefit from exposure to a larger audience and explains that the decision to sell to GameStop was carefully considered. "We're at the highest level of the company," Greer says. "That's just not something you ever see when a 20-person company gets bought by a 50,000-plus person company."
"They love the fact that we house this wealth of content from the indie developers, and that we're able to have partnerships beyond what they currently have with the big publishers,” he adds. “They've made it clear to me personally and to the team what their intentions are... GameStop is very focused on our audience, and as an aggregator of games I absolutely can't describe any other company that has big resources that is as similar to us as what they do."
GameStop's Petrovic notes that support of independent developers is key for GameStop, putting forth its continued funding of Indie Game Challenge as one example. The program also drew independent ire as many felt it foolish to believe an independently-designed title could share core market shelf space with games like Modern Warfare 2 and Assassin's Creed 2. However, if both companies accomplish their shared goal, the digital marketplace will make such a dream possible.
