First it was Sony and Microsoft who witnessed a major decline in console game sales, now the Game retail chain has been placed into voluntary administration with up to 500 people set to be laid off across Australia.
The Company that was placed into voluntary administration has 92 stores in Australia is believed to have lost access to funding from either banks or their UK parent Company who earlier this year was facing a similar fate before it was rescued by investment firm Opcapita.
Customers who have ordered and prepaid for games face losing their money claim administrators PricewaterhouseCoopers (PwC), who said that GAME will continue to trade on an “as close to business as usual” basis while PwC gets a “clearer understanding of the current state of the business”.
In Australia the Game operation is owned by TGW Pty Limited a NSW based Company, Managing Director, Paul Yardley, is refusing to comment on the failure. Recently Sony Australia was forced to cut PS3 prices in an effort to stimulate sales. Last week Sony Consumer Products and Services division suffered an operating loss of US $2.8bn for the full year ended March 2012.
Sales were down 18.5 percent to US $38.2 billion. Sony’s price reduction of the PlayStation 3 and lower sales of the PlayStation 2 was a major contributor to the divisions downturn.
Sony was not alone in reporting a downturn in gaming consoles, Microsoft’s Xbox division reported disappointing results, recording a 16 percent drop in revenue, to $1.62 billion. The unit also reported a $229 million operating loss, versus a $210 million profit a year ago.
Just 1.4 million Xbox consoles were sold, down 48 percent from a year ago.
At Sony hardware and software sales were down across the board compared to last year, with Sony selling 13.9 million PlayStation 3 units compared to 14.3 million the previous year.
PSP hardware sales were down from 8 million to 6.8 million and PlayStation 2 console sales dropped from 6.4 million to 4.1 million.
PwC said that Game stores would remain open “at this stage” and continue to have the same opening hours as before but it could not provide any assurances on whether customers’ game pre-orders would be fulfilled. It was, however, “intending on honouring” certain pre-orders placed on the Diablo III and Max Payne 3 games, both of which are due to be released in Australia this week.
Fairfax Media said that PwC had put conditions on the use of gift cards, gift vouchers and credit notes, stating that in order to use them a customer had to spend in cash more than what the card was worth. GAME would honour them “on the basis that these can only be used for 25 per cent of the total purchase price,” it said on its website.
“For example if you have a $15 gift card, you are required to spend at least $60 in store or online, in order to redeem the gift card, with the balance of $45 to be paid in cash.”
GAME’s loyalty program had similar conditions placed on it.
“Points can be used for up to 10 per cent of the purchase price of existing products (for example if a game was purchased for $20, this would need 1000 points worth $2 and $18 of cash).”
In a statement, PwC partner Kate Warwick said that PwC was still investigating the cause behind GAME going into administration in Australia but suggested that the impact of the administration of its parent company, an “ambitious” national roll-out, combined with the current “soft” retail environment, all appeared to be key factors.
Warwick said prior to PwC’s appointment in Australia the company’s management had been exploring interest in investing in the GAME business “with a number of parties”. PwC would now look to see, Warwick said, whether this interest could be “harnessed to continue the business or part of it through the voluntary administration process”.
News Online said that the news comes as a shock to many consumers, as this afternoon the company was still advertising out the front of its Sydney city store that it was the last day to pre-order the Diablo III game.
Some customers who pre-ordered the game claimed the company refused to give them their money back when they applied for refunds upon hearing the company had entered voluntary administration.
“I preordered a CE 5-6 months ago and my store (innaloo, WA) apparently is getting no stock at all,” wrote on Facbeook user.
“Thanks for taking my money Game, I can see why you went broke.”
GAME Australia reportedly texted customers today informing them that they will not be stocking Diablo III and anyone who pre-ordered the game will not receive a refund, The Verge reported.