Best Buy Offers 3 Video Games for Price of 2

For consumers looking for the hottest selling video games this holiday season, Best Buy Co. Inc. (NYSE: BBY) has an offer that may help them decide to open their wallets. Shoppers can choose one free game from an extensive list if they purchase two games for either the Microsoft Corp. (NASDAQ: MSFT) Xbox One or the Sony Corp. (NYSE: SNE) PlayStation 4.

Owners of either gaming console could pay $59.99 for Star Wars Battlefront from Electronic Arts Inc. (NASDAQ: EA) and $59.99 for Fallout 4 from Bethesda Software and get a free copy of Call of Duty: Black Ops III from Activision Blizzard Inc. (NASDAQ: ATVI). The normal price of the latest version of Call of Duty is also $59.99, so the savings for each game is equal to one-third of the normal price.

Best Buy’s offer has a least two motives. First, to drive revenue during the all-important holiday shopping season. The impact of this and other low price offers is virtually certain to be negative to the company’s profit, but that was expected. Best Buy has said it expects revenue to decline in the low single-digit range in the fourth quarter, with profit margins taking a hit of 25 to 45 basis points across the enterprise. The company must at least match that lukewarm outlook.

But more important, perhaps, is getting consumers back into Best Buy’s stores, or at least getting them to purchase the full versions of the latest games in physical packages. The holiday season is still the one time of the year that physical sales of video games are higher than digital sales. It is tricky gift-wrapping a digital game.
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The game-makers like selling digital games because their margins are better and the console makers don’t much care. Only brick-and-mortar retailers like Best Buy need to sell physical product, and anything the company can do to keep store traffic up is practically a requirement.

The implied $20 per game discount for the Best Buy offer is matched at GameStop Corp. (NYSE: GME) stores, where both Call of Duty and Star Wars Battlefront are advertised for $39.99. That really underscores how tough it is for retailers to win on price.