GameStop Corp. creates a division to develop a non-fungible token marketplace and build cryptocurrency partnerships, according to people familiar with its plans pushing the company into much hyped areas as it seeks to transform its core video game business.
The retailer has hired more than 20 people to run the unit, which people say is building an online hub for buying, selling and trading NFTs of virtual video toys like avatar outfits and guns. The company will ask select game developers and publishers to list NFTs on its marketplace when it launches later this year, people said.
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GameStop is also about to sign partnerships with two crypto companies to share technology and invest in developing games that use blockchain and NFT technology, as well as other NFT-related projects, people said. The retailer expects to enter into similar agreements with a dozen or more crypto companies this year and invest tens of millions of dollars in them, people said.
GameStop, based in Grapevine, Texas, has been working to roll back its business after years of losses. The company was at the center of a stock market frenzy over the past year that drove its share price soaring, driven by a surge in interest and optimism among individual investors.
Many saw potential in GameStop, despite the negative impact of the pandemic on pedestrian traffic and even though consumers increasingly chose to download and stream games over the internet rather than buying the kind of hard copies the company specializes in.
Last year, GameStop revamped its leadership team and board of directors, appointing activist investor Ryan Cohen as chairman. Mr. Cohen, who co-founded online pet products retailer Chewy Inc. and sold it for $ 3.35 billion in 2017, has advocated making GameStop more technology-minded.
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The turnaround efforts have not yet shown any significant results in GameStop’s financial performance. In the quarter through October, the company announced that revenue was up, but its loss was up compared to the same period last year. The sales growth resulted from hardware and accessories sales, while game software sales decreased 2%.
“We believe our focus on the long term will enable us to build what will ultimately become a much bigger business,” said Matt Furlong, GameStop chief executive, on a conference call with analysts last month. Mr. Furlong, who joined the company from Amazon.com Inc. last year, then mentioned that GameStop is exploring business opportunities related to blockchain and NFT technologies.
There are signs that some investors are losing patience. By Thursday’s close of trading, GameStop shares had fallen more than 45% in the past six weeks, despite the fact that the stock is well above when investors started investing in GameStop shares a year ago. After the news was published by the Wall Street Journal, the stock rose more than 20% in after-hours trading.
Delving into the crypto and NFT realm puts GameStop on a rapidly growing list of companies trying to capitalize on these emerging and largely unproven technologies. There are already a handful of NFT marketplaces and some feature tokens from game publishers. Earlier this week, a marketplace called OpenSea announced that it had raised $ 300 million in venture capital and is now valued at $ 13.3 billion, more than GameStop’s nearly $ 10 billion worth.
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According to analysts, the video game industry is likely to play an important role in the adoption of cryptocurrency, NFTs, and blockchain technology. Gamers are expected to be among the first to adopt the technologies as they are already spending a lot on virtual goods. Video game virtual real estate, as well as video game collectibles, is a rapidly growing segment of the NFT market.
In the past few weeks, some of the largest publicly traded video game companies in the industry have launched or announced plans to sell NFTs, including Ubisoft Entertainment, Zynga Inc., and Square Enix Holdings Co. However, some industry executives and players have concerns about the value of voiced NFTs and the motives of the developers for their creation.
By entering the crypto and NFT space while it is still in its infancy, GameStop hopes not to miss any opportunities to be part of a burgeoning trend, such as was the case with computer game downloads about a decade ago, who are familiar with his plans said. GameStop tried to get into streaming video games at the time, but gave up the effort. Downloading and streaming games are fast growing trends these days.