GAME Australia in sale discussions following financial troubles

Things aren't looking good down under...

GAME Australia could be up for sale in light of parent company The GAME Group plc’s suspension of trading, local managing director Paul Yardley told GamesRadar AU.

GAME Australia, which has 95 stores nationally and employs 600 staff, is a wholly-owned subsidiary of The GAME Group plc, effectively making it an asset of the UK Group, which yesterday announced its intention to appoint administrators.

“We communicate with the UK very closely, and it will impact upon us structurally,” Yardley told GamesRadar AU. “However, it’s not as if we go into administration straight away if they do.”

There were three viable business options for Australian operations if The GAME Group does go into administration, he said. The company could sell the business outright, source an investor and keep the GAME brand. Alternatively, they could find a solution that combined the two.

“The model we’ll follow depends on who decides to fund us and when. We’ve been in discussion with a number of parties and those are ongoing.”

Yardley refused to disclose whom the investors might be. The future of the Australian business would be uncertain if no ‘white knight’ investor materialised.

The Australian arm of the games retailer might have enjoyed more settled economics than, say, the UK and Spain, but it’s still on shaky ground. The company’s latest interim report recorded a turnover of £26.2 million, or AU$39.9 million, for the six months ending July 2011. That’s nearly a fifth less than the same period in 2010, which turned over £32.9m (AU$50.1m).

Ubisoft, one of its lead suppliers, does not currently have a credit limit with GAME Australia. Itself a global company, Ubisoft’s insurer will not cover it to supply GAME Australia. However, Bianca Silingardi, Ubisoft’s sales manager, told GamesRadar AU that the local team was keen to continue doing business with GAME and was investigating using a distribution channel.

“We’ve got big releases coming this year and we want to stay in business with them,” she told GamesRadar AU. “However, we’ve got very strict rules from a global point of view and so for February their credit is $0.”

Australia has a vibrant gaming market, but that’s not to say the group hasn’t faced challenges locally. We’re at the bottom of the cycle - it’s been six years since the last console release, which has left consumers “reticent” to spend, Yardley said.

Grey imports have also hurt, he says. “There are lots of cheap imports coming into the company. Having said that, people still like buying advice and the ability to return a product.”

You can also blame a weakness in Wii console and software sales, which were down 50% year on year in 2011, Yardley says.

“For a games market that was worth north of $2 billion in 2008, we’re now worth $1.5 billion.”

The Group business is in a state of flux that will clearly affect GAME Australia in one way or another but, for the moment, it’s business as usual. Stores are open, shelves are stocked and publishers are keen to re-establish credit terms with the embattled retailer.

“We will keep stocking the latest releases, as well as honouring all our pre-orders,” promises Yardley. “Our aim, as always, is to ensure we remain as the destination of choice for our customers and continue to deliver great customer service and knowledge.”

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