GameStop CEO Q&A: From Retail to Digital

>>Video Games Lose Another Life in June

TheStreet: How long will it take to build up GameStop's digital presence?

Raines: We are looking at other successful multi-channel stories like Netflix(NFLX). The technology is clear -- what's not clear is the chronology. We are getting a good picture of how to balance digital and physical content. We have studied Netflix a lot, and most of their users still absorb physical content rather than streaming. Now we are looking to see how gaming compares. We are focusing on consumer acceptance. The world won't be all digital tomorrow, even though that's what people are claiming. In this business, users still want physical content.

TheStreet: How has the mindset of the video game user changed?

Raines: The audience, for one, is evolving. Currently, 40% of new gamers are women and the average age of video game players is mid-30s. Video gamers are also spending more time playing games on multi-platforms like Facebook or mobile phones, not just on consoles.

What products are you most excited about coming out of this year's Electronic Entertainment Expo?

Raines: There were some great titles coming out of the Expo. Motion-based gaming is also exciting. Nintendo announced MotionPlus for Wii. Microsoft's Kinect is great technology. We played the games and think it will be a big hit with families. It uses your image to make an avatar that is very life-like. Sony's(SNE) Move [for PlayStation] lends itself better to action and sports games.

TheStreet: Competition is heating up in the used video game business. Where does GameStop stand?

Raines: Used games is a great business for us. You don't understand GameStop unless you understand the buy, sell, trade method. In tough economic times the consumer doesn't want to spend $59 for a new game. That's why our value proposition of buy, sell, trade gives consumers the most access. They may not have $59, but they may have $40 and an old game under their bed that they can trade in for a new title.

There is competition out there that likes to dabble in this segment, but I'd like to remind people that we have seen this many times before. Both Wal-Mart(WMT) and Best Buy(BBY) have launched and canceled programs. [Editor's Note: Best Buy announced in June that it will begin selling used video games in stores this summer.] There is a lot that goes into perfecting a used game business. Pricing buybacks and sales is complex. We have a refurbishment facility and last year recycled 100 million units. This system is difficult to replicate.