Gamestop $GME is having a rough week. On Tuesday (6/4), its latest quarterly earnings report showed slumping sales. GameStop also halted its quarterly dividends. This resulted in almost a 40% drop on heavy volume in early Wednesday 6/5 session. I agree with the Bloomberg article (below) regarding GME's inability to keep up with the trends. Even though it has tweaked its model to be more "online-friendly" it is still lagging behind the fast paced changes in the gaming space. It has to compete with established platforms like Steam, which is owned by the privately owned Valve Corporation. GameStop is a retailer, and the gaming industry does not need retailers anymore. The supply chain is much more integrated. Developers, distributors and "retailers" are all under the same house, like VALVE and Activision Blizzard. Therefore, I think GameStop is facing the same fate that brick-and-mortar retailers like Blockbuster faced a decade ago. It's a shame GME did not learn from this case of active inertia. While I think its game over for GME, I can still see some rebound from the $3.75-$4.00 area as a dead-cat-bounce in the short-term. But I predict that underwhelming holiday sales at the end of this year will deal the final blow. Disclosure: I own shares of Activision Blizzard $ATVI and Electronic Arts $EA GME Daily Chart (click to enlarge) GME Monthly Chart (click to enlarge) Here's what Bloomberg reported: GameStop Slumps 36% to 16-Year Low as Gaming World Passes It By GameStop Corp. tumbled as much as 36% to a 16-year low after posting a steeper-than-expected slide in sales and halting its dividend, signaling that the troubled retailer is out of step with accelerating trends in video games. The latest shortfall for GameStop reflects what analysts said may be a fundamental disconnect between the company’s business model, mainly focused on sales of physical game discs at brick-and-mortar stores, and the industry’s move toward online and streaming games like the free-to-play Fortnite. Comparable sales -- a closely watched measure of performance -- fell 10.3% last quarter, GameStop said late Tuesday. Analysts had estimated a 6.4% decrease, according to Consensus Metrix. Halting the 38-cent quarterly dividend will save about $157 million annually, the company said. GameStop’s percentage decline Wednesday was its steepest since its February 2002 initial public offering, and the stock fell as low as $4.97 in New York trading. That’s its lowest point since February 2003. The retailer has lost about 95% of its market value since its peak of more than $10 billion at the end of 2007, and is now worth about $520 million. ‘Dramatic Pivot’ The Grapevine, Texas-based company “faces the need for a dramatic pivot, wholesale changes, and aggressive action to remain relevant,” Jefferies analysts led by Stephanie Wissink wrote in a note Wednesday. Though GameStop’s adjusted earnings were better than expected, the plunge in sales suggests the company can’t pull out of its decline. Sales of gaming hardware fell 35% -- hurt by slipping demand for the Xbox One and PlayStation 4 -- while software revenue dropped 4.3%. GameStop is embarking on a cost-cutting drive under a new chief executive officer, but investors are pessimistic that its core business can get back on track. Even before the declines late Tuesday and early Wednesday, the shares were down 38% this year. “The combination of the transformation initiatives, ongoing consumer shift to digital gaming, and current console cycle being in the very late stages are likely to make 2019 a very challenging year,” Telsey Advisory Group analyst Joseph Feldman wrote in a note. Earlier this year, Apple Inc. and Google each announced they were launching online services for games. And established game companies such as Activision Blizzard Inc. are moving more of their titles to an online, free-to-play model. GameStop also said it will cut costs at its ThinkGeek collectibles business by consolidating the online operation with the main company website.