Will GameStop’s new NFT marketplace be a winner after all?
The new non-fungible token (NFT) marketplace from GameStop (GME -6.74%) has a fast start just one week after launch. While the numbers won’t turn around the primary business or catapult the video game retailer into the top ranks of the NFT world, it has had a surprising bit of success amid a collapse of the cryptocurrency and NFT markets.
However, early gains don’t make it a long-term viable platform, and GameStop still needs to figure out how it’s going to survive in an increasingly digital and online gaming world.
Image source: Getty Images.
A crypto future
The GameStop NFT is part of the retailer’s response to an industry undergoing a transformation, with the most visible parts of the plan being a foray into the crypto markets. At the end of May, for example, the company launched the GameStop Wallet, a digital asset Ethereum (ETH -3.30%) wallet that a user controls and can access without leaving the browser.
But it’s unfortunate timing for the video game retailer as crypto winter has set in and could cover the landscape for some time to come.
About $2 trillion in value has been lost since the market peaked last year, and while many will point to the stock market crash as a way to say these things happen, the supposed strength of crypto was to be a stable anchor to protect financial assets under turmoil. Because people are “investing” in crypto rather than using it as a store of value, it has become difficult to distinguish it from other booming asset classes.
The nascent industry is already experiencing some high-profile bankruptcies, the latest being the collapse of Celsiusa major crypto lender, which owes users around $4.7 billion.
A promising start
It is against this background that GameStop dives head first into the pool. The NFT marketplace generated just under $2 million in transactions on its first day, and a week later, the top 50 collections have seen more than $7.5 million worth of transactions.
Of course, not all of this is GameStop’s money. It receives a 2.25% royalty on all transactions, which means it has earned around $169,000 so far. It’s not going to turn the business around, but it’s a start. While we don’t know how much it cost GameStop to invest in the marketplace’s creation, the question is whether it can increase the total significantly.
According to the game page Kotaku, by sharing GameStop’s $6 billion in revenue last year at the nearly 4,600 stores it operated, the video game retailer generated about $3,600 per day. In contrast, the NFT market is making over $4,600 per day so far, and probably at much lower costs as well.
Winter has come
GameStop’s NFT potential is limited. It only deals in “art” at the moment, and the best-selling collection is from MetaBoy, who specialize in heavily pixelated GameBoy gifs. The collection has generated nearly $1.9 million in transactions, or a quarter of the marketplace’s total.
While this is only part of GameStop’s transformation, the timing is problematic. Betting heavily on crypto amid a rapid devaluation is not encouraging for the future. Transaction volumes may rise or fall, but OpenSea, the largest marketplace GameStop hopes to compete against, had $116.6 million in volume in the past week. Worth noting, however, is that June’s total of $695 million was a 73% drop from the previous month.
Almost three weeks into July, OpenSea’s volume stands at just $375 million, which is not an encouraging sign for GameStop.
Much ado about nothing
GameStop NFT is doing better than many expected, and the marketplace could increase its top and bottom line gradually, though it won’t be a game-changer for the retailer.
The bigger question is whether GameStop can turn the rest of its business around in time, or whether the entire machine will run on exhaust fumes until it collapses under its weight. I don’t expect the latter possibility to happen. But I also don’t expect this NFT marketplace to be more than a niche business at best, one that will be little more than a footnote to Gamestop’s business.
