Shares of GameStop (GME) are down $1.77, or 7%, at $25.04, which some observers today have been attributing to�a report�by the staff of Edge that Microsoft‘s (MSFT) next model of its Xbox game player could be connecting to the Internet at all times, which might limit the market for follow-on sales of used games for the console, a traditional domain of GameStop.
Piper Jaffray’s Michael Olson, who has an Overweight rating on the stock, and a $28 price target, late this morning came to the stock’s defense, writing that digital downloads of games won’t erode packaged and used games sales:
The bottom-line is that it is incumbent on Microsoft and Sony to reduce purchase “friction” of their new hardware in order to build a critical mass as quickly as possible. Blocking pre-owned software sales only adds friction to the console purchase. That said, we agree that online digital downloads will continue to grow as a percentage of total game purchases, but that full digital downloads will not be a material percentage of game purchases during the next 3 plus years.
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