Doug Creutz with Cowen and Company said in a Friday research note, "Digital remains [the] biggest threat [to GameStop]."
The analyst agrees with GameStop's management, which claims that full-blown, widespread digital distribution is "not coming any time soon." But he adds, "...We believe that downloadable content is starting to take off now, and could slowly pressure [GameStop's] growth rate as packaged goods business begins to slow."
Creutz continues, "Publishers see digital/online as a way to kill two birds with one stone–boost margins and thwart the sales of used games–and are starting to experiment with ways to sell [downloadable content] directly to the consumer."
GameStop's used business is substantial. Analysts estimate that fiscal 2008's used business (hardware, software, accessories) brought in $2 billion in sales out of $8.8 billion in total revenues for fiscal 2008.
While GameStop's used games drive around 20 percent of revenues, they drive 40 percent of gross profits, thanks to used games' 50 percent gross profit margin.
Creutz also says that the casual nature of the Wii could mean that the core audience-focused GameStop may lose share of the Wii market.
"...The console will not be supply-constrained in 2009, and more likely to be picked up by casual shoppers at big-box retailers like Wal-Mart, Target, Best Buy, etc."