GameStop details game-streaming service

GameStop closed out March with two high-profile acquisitions designed to keep it competitive in an increasingly digital landscape. First, Stardock subsidiary Impulse is joining the GameStop corporate family and will see its digital distribution storefront integrated into the retailer's own online presence. Meanwhile, the specialty retailer signaled its intent to enter the on-demand game-streaming race with its purchase of Spawn Labs.

In a conference call today, GameStop further expounded on its plans for Spawn Labs, saying that it will offer demos and full-game streams on Internet-connected devices.

"Spawn Labs provides a very publisher friendly and consumer-friendly way to come to market in a way that is monetizable both to us and our publishing partners by providing a try-before-you-buy plan as well as a subscription service for PowerUp reward members that allows them to stream their GameStop-purchased games," said GameStop president Tony Bartel.

The try-before-you-buy model, according to Bartel, will let gamers play approximately 15 minutes of a game before giving them an option to make a purchase. "Let's say you're at work, you have a lunch hour, you pull out a Bluetooth-connected controller and you have a highly immersive experience playing one of the latest games that have come out. Given the fact that there's no need for porting, we can literally have first released games and thousands of games that can be available to our consumers," he said.

"The other way we look at it that we're very excited about is a subscription service that we would offer to our PowerUp Rewards members where based on the games they purchased from GameStop and have in their library, we would offer them a subscription service to stream those games and play them on any Internet connected device," he continued. "We've already demoed that we can do this on PCs. We also have on our road map to stream to tablets in the not too distant future."

Bartel said that they plan to offer two private betas of the service to selected PowerUp Rewards members in 2011. The company plans to follow this up with a more broadly available service in 2012.

In a note to investors today, Lazard Capital Markets analyst Colin Sebastian believes that GameStop's most recent purchases will lead to a substantial expansion of the retailer's digital market space. Factoring in fellow digital-facing purchases Kongregate and Jolt Online, Sebastian said that he expects GameStop to hold a 4 percent share of the digital games business by 2014, bringing in $1.5 billion in the process.

"Essentially, GameStop is in the process of redefining itself as a distributor of both online and disc-based games, a loose analog to Netflix, but with a much more challenging technology hurdle in the form of interactive entertainment," Sebastian wrote. "GameStop is creating a new platform for online games, leveraging the company's retail stores, core gamer customer base, recent acquisitions, and websites."

GameStop is also very keen on its PowerUp Rewards program, which it introduced in 2010. The program has 8 million members, 5 million of which pay $15 per year for the Pro service. Since its inception eight months ago, members spend roughly $65 more per person than non-members, and they also shop at GameStop twice as often.