Microsoft's Xbox deal with GameStop includes a revenue share agreement that gets the ailing retailer a foot in digital retail (GME, MSFT)

Xbox Series X and Xbox Series S

Summary List Placement

As part of a
newly announced deal between Microsoft and GameStop
, the ailing
video game retail giant will earn a share of digital sales revenue
from every new Xbox the company sells.

That’s in addition to a variety of other measures, GameStop
confirmed to the investment firm DOMO Capital Management this
week.

The agreement “includes revenue sharing on all downstream
revenue (i.e. digital downloads and digital content) from any
device that GameStop brings into the Xbox ecosystem,” DOMO
Capital tweeted
on Tuesday. “GameStop now meaningfully
participates in digital.”

In other words: For games or other content purchased from an
Xbox device GameStop sells, GameStop will get a cut of the revenue,
even though that purchase was through Microsoft’s Xbox store after
the console was purchased.�

Microsoft confirmed the revenue sharing agreement in a statement
to Business Insider. “We have an incentive structure with GameStop
as we do with many of our partners across multiple channels,” the
statement said.

Despite being the world’s largest video game retailer, GameStop
has struggled to stay afloat amid increasing competition from
digital game stores.

Like Blockbuster Video and Tower Records before it, video game
retail faces major challenges to its business model. As more people
buy video games through digital storefronts like Steam or the Xbox
Store, fewer buy games on physical discs from GameStop.

That trend was a huge problem for the company — until the
coronavirus pandemic forced millions of people indoors. Many of
those people, with loads of free time on their hands suddenly,
turned to video games. Sales of video-game hardware, software,
accessories, and game cards
topped $1.6 billion for March
, according to The NPD Group’s
monthly report — “the highest reported spend for a March month
since the $1.8 billion achieved in March 2008.”

Moreover, with new Xbox and PlayStation consoles scheduled to
launch in mid-November, GameStop is more relevant than ever.
There’s no way to download a new game console, and millions will no
doubt turn to their local GameStop for the chance to buy a
next-generation PlayStation or Xbox. 

Microsoft is assuredly hoping, through its new partnership with
GameStop, that many of those GameStop shoppers will opt for a new
Xbox rather than Sony’s PlayStation 5. And, by tying Xbox sales
from GameStop to a digital revenue sharing plan, GameStop employees
will assuredly be encouraged to sell new Xbox consoles.

Both Microsoft and Sony have new, next-gen consoles scheduled to
launch on November 10 and November 12, respectively. Sony’s
PlayStation 5 starts at $400 for the Digital Edition, and goes to
$500 for the version with a Blu-ray disc drive. Microsoft is
releasing two distinct versions of the next-gen Xbox: The $300
Series S, and the $500 Series X. Though both Xbox consoles play the
same games, the Series X is capable of producing higher resolution
gaming.

GameStop did not respond to a request for comment.

Got a tip? Contact Business Insider senior
correspondent Ben Gilbert via email (bgilbert@businessinsider.com), or Twitter DM (@realbengilbert).
We can keep sources anonymous. Use a non-work device to reach out.
PR pitches by email only, please.

SEE ALSO: GameStop
partnered with Microsoft to sell a new Xbox bundle and upgrade its
stores, and its shares spiked 44%


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Source: FS – All – Entertainment – News
Microsoft's Xbox deal with GameStop includes a revenue share
agreement that gets the ailing retailer a foot in digital retail
(GME, MSFT)