[HN Gopher] Gaming the system: How GameStop stock surged ___________________________________________________________________ Gaming the system: How GameStop stock surged Author : alexrustic Score : 30 points Date : 2021-01-19 18:58 UTC (4 hours ago) (HTM) web link (arstechnica.com) (TXT) w3m dump (arstechnica.com) | 3001 wrote: | People still don't get this. BLM protests, Capitol riots and now | GameStop short squeeze. Social Media orchestrated historical | events works and will continue to in the future. Dismissing or | betting against them is asking for pain. | H8crilA wrote: | At least in terms of the capital markets we know this isn't | really unique to our times. The roaring 20s bubble was in part | attributable to the invention of radio and the ticker tape - | those things are mass media as well. The scale may be unique, | let's take account after it's over :) | syntaxing wrote: | One of those weird Keysian effect that blows my mind. Everyone is | just gambling at this rate which is historically terrible for the | economy in the long term. | temp0826 wrote: | First guess with only reading the title: they got Battletoads in | stock?! | georgeecollins wrote: | Most people don't realize this but GameStop was actually very bad | for console game developers. Games were often resold, with each | time no revenue going to the developer. I worked on a popular | Xbox / PS3 game that was resold like 7-9 times on average. Our | marketing people figured that GameStop made a lot more money on | the game than the developer. | | Why is that bad? Big console games started to need to be really | long, because if you could finish them in a week you would lose a | ton of sales to retail. That's why you started to see games where | you had to wander around, grind, play through a level backwards, | chase achievements. It also caused an emphasis on in game | purchases (in console games) and online play. It just got a lot | harder to make a short single player game on console. | | A lot of those problems go away as console games are sold in a | digital store. | oh_sigh wrote: | Same problem with libraries in my opinion. | georgeecollins wrote: | I am not making a moral judgement, I am saying that the shape | of the business affects the quality and the style of the art. | | Movie theaters are dying and it seems like they may be | replaced by streaming services like Netflix. The truth is, | for all streamers pay they probably won't end up paying as | much as theaters. And it is not clear any of them currently | make money. What if the model that really makes money is | YouTube, and a lot of classic expensive movies are going to | be replaced with mediocre user generated content that is | extremely profitable to stream? That may sound crazy, but | think what happened to radio? | | I am not seriously arguing that I know what will happen, but | you just have to understand that when there is a good | buisiness for high quality, you tend to get quality. | toast0 wrote: | > Most people don't realize this but GameStop was actually very | bad for console game developers. Games were often resold, with | each time no revenue going to the developer. I worked on a | popular Xbox / PS3 game that was resold like 7-9 times on | average. Our marketing people figured that GameStop made a lot | more money on the game than the developer. | | I'm more willing to pay $X for a game if I know I can probably | sell it for $Y when I don't want it anymore. Digital store | games don't have the same value for me, I can't sell the games | later, and depending on the system, might have a big hassle | transferring them to a different system if/when the one I have | goes south. | | Book publishers (and authors) don't get anything when I buy | from a used bookstore, or borrow a book from a friend either. | Neither does a cookware manufacturer get anything if I buy used | pots and pans from a thrift shop. | georgeecollins wrote: | Right, but in that model you got a couple dollars, game stop | gets like 5x and the developer loses a sale that would be | 10-20x. | | Books cost tens of thousands of dollars to make and games | cost tens of millions. There would be no video game business | like the one we know if they were sold the same way as books. | Think about it a second-- your PlayStation game is sold on a | piece of media that is proprietary. Are your books sold on | proprietary paper made specially difficult to copy? | toast0 wrote: | Gamestop certainly wouldn't pay enough for me to sell to | them; I'd rather sell or give to a friend, or sell on a | marketplace for somewhere between Gamestop's buy and sell | prices. Most of the independent used game shops have | tighter spreads as well. | | This past year, I bought Animal Crossing for the Switch; | even though I was pretty sure I wouldn't like it. As | expected, I didn't like it, but I had a friend who wanted | it, and I could mail it to them. That's a "lost sale" in | video game accounting; but if it was tied to my switch, I | would have never bought it, and my friend wasn't planning | to buy it, but is thrilled to have it. | | A book doesn't need to be intentionally made difficult to | copy, because in its natural form, it's a lot of effort to | copy. There's not enough money to be saved by copying a | book to make it worthwhile, except for maybe textbooks. | | Arcade manufacturers don't get a cut of the quarters put | into a machine either (well, maybe they do for some of the | games that now need an online connection to run). | monksy wrote: | > Most people don't realize this but GameStop was actually very | bad for console game developers. | | And I feel 0 empathy for you. With the digital platform you are | stripping away ownership rights from the purchaser. From your | statement I feel that you're whining about missing sales that | you never could have actually had. Do the 7-9 extra sales | translate to 7-9x more sales on digital platforms? No. | mikestew wrote: | I don't read parent as looking for empathy, but rather | explaining why "you like grinding? We hope so, because you're | going to grind for that next $PIECE_OF_CHEESE lest you finish | the game quickly, turn around and resell it." | pizza234 wrote: | Well, if we put things in perspective, there's a paradox | here. | | If we take the case of a game that is resold a few times on | average (not even 7+ times), users are waiving ownership on | their own will - they're effectively renting. | | In these specific conditions, a hypothetical (digital) game | rental would actually serve best both the producer and the | consumers. | | Note that I don't make a general statement, but I'm referring | to this specific case. I'm also not familiar with game | rental, but at least until a few years ago, I've seen a | physical shop offering it. | [deleted] | ABeeSea wrote: | This argument is misleading because even if it's not the full | 7-9, it is certainly greater than 0. We can argue what the | exact percentage is, but saying there was 0 lost sales is | just as wrong as saying 7-9 lost sales. | monksy wrote: | It is slightly more, yes. However, you're going to have a | hard time convincing me that it's as significant as they | claim. The people buying used games don't feel that the | game is worth risking the new game price. Also, it gives | them more freedom to sell if they didn't like it. | | The digital platform is about locking the user in no matter | what. No chargebacks, no ownership, etc. Do a charge back | Sony bans your console and locks you out of the games you | "purchased". End of. | hobs wrote: | The middlemen are just as bad, they'll buy a game for a | dollar and turn around and sell it for 20, so I dont | really care either way - steam sales are saving me me | much more than resales ever paid me back. | proverbialbunny wrote: | Is that why games have gotten shorter? I'm from the NES - PS1 | era of gaming where games would regularly take 60+ hours to | play through. | | FFVII is still one of my all time favorites and is a good | example of that. I think the first real fast game I played | through was Metal Gear Solid. I'd rent, then buy if I liked it | back then, and I played through all of Metal Gear Solid in | something like 2 or 3 days. It was the first game I enjoyed | that I did not buy, because I beat it while renting it. | robrtsql wrote: | It seems to me that you're mostly talking about RPGs. I can't | think of any NES-PS1 platforming/shooter/action games that | had 60 hours worth of content. | | If you look at today's RPGs, they're still _really long_. It | is expected that most players who play Persona 5 Royal will | take over 100 hours to complete it, which is pretty wild | considering it's not a 'grinding game'--players aren't taking | that long because they're fighting the same enemies | repeatedly hoping for a rare item to appear. There really is | 100 hours' worth of contents. | decafninja wrote: | When console games started selling for $59.99 (or more), I | found it difficult to justify purchasing most single player | games unless they really were jaw-droppingly amazing because | the hours to dollars ratio started becoming very low. | | Meanwhile a multiplayer game - whether it be a MMORPG or a | FPS, would net you countless hours of entertainment. | [deleted] | TylerE wrote: | We're obviously remembering different NES games. | | The NES games I remember could generally be beaten in no more | than an hour, if you knew how to actually do it without dying | 1000 times. | | A good warpless speedrun time on Super Mario Brothers is | about 19 minutes. | | If warps are allowed, it's under 5. | | Legend of Zelda? 27 minutes | | Ninja Gaiden? 12 minutes | proverbialbunny wrote: | It's a bit absurd going off of speed runs is a way to | accurately identify a game's normal play length. | | I think all the games I had were 60+ hours, but I just | liked JRPGs more than most genres. | | FFVIII was picked not only because it was one of my | favorites (FF1 too, SMB3, ...), because the remake today | has turned it into 3 games, and even then those 3 games | seem long by today's standards. | pizza234 wrote: | To be noted the famous term "Nintendo hard", which | indeed... doesn't indicate that Nintendo games would be | typically finished quickly (at least, without | considerable skill) :-) | | Interestingly, based on the Wikipedia page1, the | historical difficulty of the Nintendo games is quite | nuanced. | | 1=https://en.wikipedia.org/wiki/Nintendo_hard | TylerE wrote: | There's a bit of difference between an NES and as PSX, | which came out a full 2 generations and 12 years later. | | The NES didn't have any way of saving, for instance. | | The two have about much in common as a PSX and an Xbox1. | asdfasgasdgasdg wrote: | Zelda II the Adventure of Link had a save feature. I | thought Kirby's dreamland did as well. There were a | number of games that had save files although of course | many did not include the needed hardware on their carts. | | FWIW, the SNES also had no storage, and saves were in the | carts. Not until the N64 did Nintendo ship a device with | fungible, non-cart storage. | proverbialbunny wrote: | Most NES games had a way of saving, except the earliest | NES games. | | Most of them had codes you'd type in that was a save | point. Many had actual save states on the cartridge. | | The earlier games got around not having a code by having | a secret early on the game that was revealed later on in | the game so you could skip all of the parts you | previously played. | TylerE wrote: | I wouldn't consider codes a save. They often loss state. | | Basically just an encoding of "start at level X with Y | lives". Maybe not even lives. | | There were only 54 NES releases with actual, battery | based saves, out of 716 officially released and licensed | titles (and heaven knows how many bootlegs). | | So, "most" is an overbid. | proverbialbunny wrote: | Well, most of the ones I wanted to play at least. ^_^ | dx87 wrote: | Yep, they were pretty short, and a lot of them had no save | feature so had to be finished in one sitting (unless your | parents let you leave it running and just unhook the coax | cable so they could watch TV). I remember going to a local | game store that would let you try out used games in the | store to verify that they worked, and I actually beat a | game at the store. | iNerdier wrote: | You say this as if people shouldn't be able to resell | information, as packaged in a disc. Does this extend to other | things, would you want to prohibit used book sales for example, | or cars from being resold? | | The ability to resell books didn't lead to only works the size | of war and peace being sold... | georgeecollins wrote: | I am not saying anyone should of shouldn't be able to sell | information. I am just saying it affected the business. | | Oh btw, the next time you read a non-fiction book with a | thesis that grabs your attention, but that could probably fit | into a long essay.. there is probably a book editor that said | it had to be X number of pages because there isn't a business | in selling pamphlets. | gumby wrote: | This phenomenon affects almost all business books, which, | even for some very good ones, are typically only a few | pages long. In an extreme, Crossing the Chasm which | explains a powerful insght, is basically one diagram. | brundolf wrote: | This is a bad-faith reading. The GP was just pointing out one | non-obvious negative side-effect of having things play out | the way they used to. | anonymousab wrote: | The existence of a second-hand market meaning a few less | sales for fresh/new/retail product seems very self evident | though. | brundolf wrote: | The way it shaped game design is far from obvious, and | honestly fascinating | zdragnar wrote: | That is not a charitable reading. OP wasn't discussing | _should_ or _ought_ , merely real effects. Your book analogy | is flawed, considering that, for the most part, books aren't | obsoleted when the new console comes out every three years. | whynotminot wrote: | Not really comparable. For example, the cost to produce a | major book release does not scale nearly as quickly as the | cost of producing a modern AAA video game. | jasonpeacock wrote: | There is a massive secondary market for cars, and those | costs scale much higher than producing a AAA video game, | but you don't see car manufacturers blaming used car lots? | | Perhaps the game's price should reflect the cost of | production, or they should limit the cost of production to | what's sustainable by sales. | kungito wrote: | You always need a car and it depreciates in quality with | time. You need the game just until you finish it and | every replat is of same quality. Of all the possible | analogies, you could have made a better choice | jasonpeacock wrote: | What's a better analogy? | whynotminot wrote: | Also an entirely different industry, with entirely | different costs, constraints, and production practices. | Can we stop using oranges as we talk about apples? | | While we're here though, actually, yes, car manufacturers | would _love_ it if people would stop buying used cars. In | fact, there were whole lawsuits in the past about planned | obsolescence, and dealers today often run promotions to | get you to turn in your used "clunker" and buy a new | ride. | georgeecollins wrote: | And also, what do you think warranties, dealer repair | shops , and certified pre-owned cares are about? They are | trying to take a cut of that business? If we could sell | our games as a "certified pre-owned" DVD then it would | have made a lot more sense to make a short, tight little | single player game. | grillvogel wrote: | used game sales (as well as used sales of all other media) have | always existed. this was not a cause of any problem for console | game developers until around 2005 or so. the mid 2000s switch | to the "next gen" platforms caused a lot of shittiness for | gaming. mostly from publisher greed due to the potential for | mass profits, and the increased cost of developing at higher | fidelity. games were originally for a more niche audience, used | to focus more on difficulty over "content" in order to get | replay value and lifespan. but if you lower the difficulty you | can hopefully get more players experiencing all of your | "content", and hopefully you can get them to buy some more | after they complete the main part of your game. | chad_strategic wrote: | r/wallstreetbets bets is doing what men and woman in suits and | pant suits on Wall Street have been doing for years. | TYPE_FASTER wrote: | I find myself wanting a modern brick and mortar version of | RadioShack. I buy electronics at Best Buy, Staples (they will | price match Amazon if the model number matches exactly), and more | recently GameStop...I guess the closest approximation for what | I'm looking for these days is a local MicroCenter. | linuxftw wrote: | MicroCenter is great if you live/work near one. | impulser_ wrote: | Short squeezes. You got to love them. | | Welcome to the biggest casino in the world. | FishbowlPrime wrote: | Here are a few pointers from a WSB member with a position in $GME | | 1. Short sellers have been running the stock into the ground over | the past years and have been stupid enough to get to roughly 130% | short interest as percentage of available float. | | 2. There are no more shares available for them to borrow and sell | short, WSB has jumped into this trade following Ryan Cohen (your | dog must know him), buying as many shares as possible, decreasing | the float even further and pushing the price up. | | 3. Ryan Cohen owns about 13% of the company. He founded chewy.com | and is an e-commerce wizard who will turn Gamstop around from a | brick-and-mortar shop to a digital / e-commerce player. He joined | the board last week together with two other former Chewy execs | (COO and CMO). FYI GameStop digital sales are 300% yoy. Shorts | pretend like Chewy never happened, Ryan has nothing to do with | Gamestop and digital sales are nonexistent. | | 4. This short squeeze is inevitable. There are no other moves | short sellers can do. They are trapped and check-mate is near. It | will be similar to VW in 2008 and more aggressive than Overstock | last year. | tyleo wrote: | This has also been a big topic on r/wallstreetbets where users | have organized around squeezing the shorts today. I've been | following with mild interest. | Melting_Harps wrote: | > This has also been a big topic on r/wallstreetbets where | users have organized around squeezing the shorts today. I've | been following with mild interest. | | Maybe I've been in Bitcoin for too long, but 2.5 to 44 is cause | for this much attention? I guess I'm immune to that level of | volatility these days. | | I mean I get the amount of security's fraud and agencies like | the SEC just waiting to justify their inflated salaries and | budgets... but with the level of fraud in the stock market and | banks _this_ is likely what they would focus on as it they | probably don 't have massive lobbiysists in Washington paying | for them to shape legislation to match their grift. | | I've seen several Gamestops shut down and have going out of | business sales for current inventory with long lines, I'm sure | that would add to their liquidity situation in the short term | if it was done at scale for recovering investments on | outdated/old merchanidise. And given that people are less than | prudent with their finances and stimulus checks/uncemployment | and with so many people with nothing but time on their hands | this growth due to lockdowns and massive unemployment isn't | actually a realistic turn around after the initial crash in | March? | | Wallstreetbets is always good for a laugh, and not always a | healthy one; the place reminds you why a guy like Trump could | be elected and gives actual credence to how the following adage | holds true: Repeat a lie often enough and it becomes the truth. | | Those guys are like the epitome of of the 'grater fool' | business model for the low hanging fruit on the Internet that | after spending a few minutes there you just start to feel bad | for what the state of Humanity is. | | Tendies and cuck jokes aside, it's actually really telling what | some people 'with money' are like when they're given a slight | amount of Pseudonymity and are in great enough numbers. | | Kind of makes Jordan Belfort's stories (Wolf of Wallstreet) all | the more poignant. | ocbyc wrote: | Is BTC still in the mid 30k? 2.5->44 is much better return | than 3.5k -> 42k. I guess I've been trading GME too long for | btc's volatility to phase me. | Melting_Harps wrote: | Yes, but I've been in it since 2011. Your humble brag | doesn't apply to me. | | My point being that this doesn't warrant the attention its | getting when you see the bigger picture of outright fraud, | and agencies should look into bank fraud and money | laundering and stock manipulation of things like large | pharmaceutical corps that have made billions from a litany | of scams along the years, Moderna administration in CA | already had to be halted due to patient complications. How | many Corps have made out like bandits from bailouts and | crushing the competition with perpetual lock downs and | doing shady trade deals with politicians? | | I'm so over this, that the paper wealth pales in comparison | to the asset inflation we're all seeing with no real | benefit other than more billionaire wealth accumulation. | | PS: I don't trade, I'm accumulating in order to exit this | insane system. | echelon wrote: | > Your humble brag doesn't apply to me. | | That wasn't a humble brag, it was a counter to your less | than charitable characterization of GME stock behavior. | | If anything, you're bragging. | x3n0ph3n3 wrote: | The Ars article is woefully deficient in not even mentioning | r/wallstreetbets. | gamegoblin wrote: | Another missing piece of information is that Michael Burry, | famous for being the first one to short the housing market | before the crash, also took a long position on GME relatively | early. | | The announcement of his long position single-handedly caused | the price to raise a non-trivial amount. IIRC his firm | currently owns around 4% of GameStop. | toast0 wrote: | If you're a publicly traded company, and the stock price jumps | like this; how long does it take to sell more shares and try to | capture some of the craziness? | | Hertz was able to sell $29 million of stock during bankruptcy | before the SEC asked them to stop. As Gamestop isn't bankrupt, it | seems like fair game to make an offering while the price is high. | 3001 wrote: | Then they bail out the shorts who have been driving done the | price for ages. GameStop also file some form for a shelf | offering for 100M with the SEC recently. Note the 100M is | dollar amount, so you want to sell when you know the stock is | at peak, you will get the 100M but less stock unit. | toast0 wrote: | Everybody hates shorts, but if you can sell for $40ish today | vs $5 6 months ago and $20 last week, and you need/would like | some cash, and you have a shelf offering ready to go, why not | sell today? | | If the price goes up to $80ish next week, then maybe issue | some more shares to sell at that price too. | 3001 wrote: | Continuously issuing shares leads to | dilution(https://en.wikipedia.org/wiki/Stock_dilution). | This has a ramifications for board members like Ryan Cohen | who wants to change the company trajectory and also tend to | have a downward effect on the share price. | Melting_Harps wrote: | > Then they bail out the shorts who have been driving done | the price for ages. GameStop also file some form for a shelf | offering for 100M with the SEC recently. Note the 100M is | dollar amount, so you want to sell when you know the stock is | at peak, you will get the 100M but less stock unit. | | Can I be honest: its exactly this kind of BS that puts me off | so much about the legacy Market systems; these systems create | fake paper wealth that is intertwined with so many convoluted | jargon, and twists and turns to give things the veneer of it | being a _Capitalist_ undertaking but all it really is central | bank enabled gambling frenzy that requires bail outs when it | all blows up. | | How is this desirable, let alone sustainable, to those of you | that I sincerely believe can see the obvious grift unfolding | before your eyes for what it is? | bpodgursky wrote: | There's really no way to understand GameStop stock without | looking at reddit: r/wallstreetbets. | | It's a meme stock, and a huuuuuuge amount of money is being | dumped into it for... basically entertainment value. Roulette. | 3001 wrote: | And I pretty sure most these are tech money. Amazed at the | amount of enthusiasm at team blind. | randomopining wrote: | GameStop is useless lol. They literally sell stuff that's | already/going to be completely digitally sold in a decade. | TheHypnotist wrote: | Fundamentals and normal financial logic should be entirely | disregarded when discussing this stock. This pure WSB. | randomopining wrote: | Yeah so it's confirmed to be basically 99% a pump and dump | meme stock? | FishbowlPrime wrote: | No it's not. WSB is orchestrating a short squeeze. The aim | is to make a transfer of wealth from shorts like Melvin | Capital to WSB. This whole charade is due to the stupidity | of short sellers who shorted more Gamestop shares than | there are publicly traded. Check out the Overstock story | from last year or VW from 2008. This will be exactly like | that. ___________________________________________________________________ (page generated 2021-01-19 23:01 UTC)