EB+Games


 * EB Games**, formerly known as Electronics Boutique, is a division of GameStop Corporation, the world's largest video game and entertainment software retailer. The company was founded by the husband and wife team of James and Agnes Kim in 1977 as a small kiosk named Electronics Boutique in King of Prussia Mall, northwest of Philadelphia, PA. In the following decades, the company sold a variety of electronics merchandise before focusing its attention on video games software, a market characterized by its fast growth and high rate of obsolescence.

Despite the market's rapidly transforming landscape through the turn of the 21st century, Electronics Boutique (EB) expanded both domestically and internationally. Under the astute management of its founder James J. Kim, the continued success of EB Games is the result of controlling the domestic and international market share at a crucial time of industry consolidation, a feat that is demonstrative of EB's ability to repeatedly adapt to new competition and remain relevant to consumers worldwide. =Transformation of the Software Industry=

An understanding of how the software industry evolved in the second half of the 20th century reveals the rise of EB Games as a socially constructed response with both cultural and technological implications.

Since its beginnings in the 1950's, the software industry has grown from a handful of contractors developing for a few specialized machines to include producers of corporate software packages and eventually mass-market products and recreational software such as video games. Each of these three sectors—software contracting, corporate software products, and mass-market software products—emerged at a moment when computer technology created a business opportunity for a new mode of software delivery (Campbell-Kelly 3).

The change that took place in the 1970's was not wholly culturally or technologically deterministic, but rather a combination of the two. A new cultural awareness of the benefits of data processing and the technological ease with which semiconductors could be manufactured combined to make a mass-market for software possible. This transformation of the software industry in effect established software retailers as profitable middlemen between the manufacturers of the product and the mass populations to whom stores such as EB Games would become relevant. =Founder James J. Kim=

Background
James J. Kim's eventual success as an entrepreneur in America can be traced back to the socio-economic context of his childhood in a war-torn Seoul, South Korea. In fact, Kim's initial foray into economic studies was an effort to help Korea recover from the war he witnessed as a teenager. In 1955, Kim immigrated to the United States at the age of 19. Heeding a friend's advice, Kim enrolled at the Wharton School at the University of Pennsylvania where he later earned his master's degree in economics. Following approximately a decade of service in academia, a return trip home to South Korea in 1968, which had achieved great economic progress since his departure, inspired Kim to start Amkor Electronics, Inc., a semiconductor assembly company in Valley Forge, Pennsylvania (SOURCE). In the early years of EB Games, Amkor would prove to be an invaluable asset to Kim as he expanded the two companies.

Amkor Technology, Inc.
After a brief stint as the American marketing agent for his father's South Korean company, Anam, James J. Kim set up an office in his garage and incorporated Amkor Technology in 1970. To this day, the company provides contract semiconductor assembly and test services, serving global customers such as Intel, Philips, and Sony. Between his role as marketing agent for his father's company, Anam, and his role as CEO of Amkor, Kim had a hand in the production, assembly, testing, and distribution of semiconductors at an international level. While the extent of this vertical integration increased risk for Kim as a young entrepreneur, it also allowed him to maximize profits throughout the several stages of semiconductor manufacturing. Literally meaning “American-Korean,” Amkor provided Kim with crucial international expertise and funding that would benefit EB games for decades to come.

The Early Years as Electronics Boutique
Agnes Kim, the wife of James J. Kim, laid the foundation for the future EB Games by opening a mall kiosk called Electronics Boutique that sold digital watches, calculators, and radios in the late 1970's. In the following decade, the early fads of the digital age came and went along with seasons of high and low sales, an early sign that remaining relevant in an industry of obsolescence would be a hurdle that the Kim's would have to face time and again. As more computers made their way into American homes, James Kim adjusted his inventory to reflect the novelty of personal computing hardware and software before eventually narrowing his focus on video games in the late 1980's. Kim, a relentless adopter of new technology with an insider's knowledge of the semiconductor industry, was able to keep EB alive through a commitment to riding out business cycles. For a typical entrepreneur of a fledgling company, this strategy may have led to a quick demise, but Amkor provided Kim with a steady flow of income and served as a financial rock of stability that allowed him to take more risks with EB early on and ride out product cycles without fear of bankruptcy.

Kim's "Brain Trust"
Since the conception of Electronics Boutique, James Kim had always viewed EB as his “other” company (second to Amkor), and stated on more than one occasion that he would sell the company if the right offer came along. After getting EB off the ground, Kim's presence in the day-to-day operations of the company became noticeably absent as he trusted the operation of his company to a select few who he claimed “knew more” about the job than he did. The hiring of Joseph Firestone and Jeffrey Griffiths would prove to have long-reaching implications as this "brain trust" would play a crucial role in expanding the company into the 21st century (Fernandez C01).

An important effect of the brain trust was that it allowed Kim to maintain a certain level of detachment so that he could make purely business decisions in regard to EB without personal investment getting in the way. This mindset would later come to fruition with the financial success of the EB-GameStop merger in 2005. =Expansion and Diversification=

Domestic Expansion
When Kim decided to expand Electronics Boutique into a store chain, he followed closely the example set by the initial mall kiosk. Growing up in shopping plazas and strip malls across the country, EB capitalized on its store locations and used the stores to advertise themselves rather than investing in pricey marketing campaigns. EB also continued its practice of carefully adjusting store inventories to reflect the hottest new software releases, while relying on hardware and consoles to provide a stable flow of income. In July of 1998, with over 450 stores worldwide, the Electronics Boutique Holdings Corporation was formed and shortly after made its initial public offering (Covell). This decision benefited EB in two ways by dispersing risk across a greater number of people while simultaneously increasing the capital available with which to increase expansion.

International Expansion
As the number of domestic stores in the EB chain approached 100 in the early 1990's, the company decided to expand internationally. The initial expansion outside the United States was focused mainly in Europe, but would eventually reach into Canada, Puerto Rico, Australia, New Zealand, and South Korea (SOURCE). The success of the international expansion was likely the result of Kim's previous experience with Aman and Amkor, and the international presence would prove its long-term value going into the EB-GameStop merger.

Identity Crisis, or Failed Attempts at Diversification
The amount of revenue being pulled in by over 600 stores coupled with the limited liability as a public company allowed EB to comfortably investigate potential new markets in the late 1990's. BC Sports Collectibles was EB's short-lived attempt at capturing the market for sports merchandise, while EB Kids was marketed as a kid-friendly, educational version of its older brother, EB Games (Von Bergen). Both of these experiments under-performed and were later described as “distractions” by company officials, who decided to sell what was left of them and focus strictly on video games. EB learned the hard way that novelty has a price, but you've got to break a few eggs to make an omelet. =Response to Industry Consolidation=

While market adaptation and the novel nature of EB's merchandise help put it on the map, nothing beats competition like sheer dominance in market share during a time of consolidation. In the mid 2000's, the video game industry began returning profits that rivaled those of the movie industry, triggering a sort of consolidation reminiscent of the one that took place amongst Hollywood movie studios in the 1920's and 30's.

Larger software retailers like Babbages absorbed smaller store chains such as FuncoLand while all-in-one stores such as Best Buy and Wal-Mart also threw their hats into the ring of video games retail. It soon became clear that the competitors who owned the biggest market shares would be the ones to survive the consolidation. Fortunately for EB, steps taken toward domestic and international expansion in the 1990's set them up in a comfortable position in the early 2000's when the games industry exploded thanks in part to a new generation of consoles released by Sony, Microsoft, and Nintendo. As consolidation died down, only GameStop remained as comparable competition for EB Games in brick-and-mortar retail. =EB-GameStop Merger=

In 2004, EB Games returned sales of $1.59 billion, barely edging out GameStop's return of $1.58 billion, establishing EB Games as the world's largest specialized retailer of video game software (Belden). Talks of a merger began to brew, and James J. Kim held true to his word that he would sell the company if the price was right. In April of 2005, Kim leveraged the international market share held by EB Games as a powerful bargaining chip and accepted a cash-and-stock deal that amounted to a 34% premium of its closing stock price (Carless). The terms of the merger resulted in EB Games becoming a wholly-owned subsidiary of GameStop, and as such has adopted the name GameStop for most of its existing locations and all of its future ones. =New Challenges in the Era of Digital Distribution=

Increases in bandwidth thanks to broadband and optical fiber networks have made it possible to download video games through digital distribution services such as Valve Software's Steam and IGN.com's Direct2Drive. While digital distribution has put a dent in PC gaming sales, brick-and-mortar stores like EB games still have a commanding lead of overall sales due largely in part to the necessity of selling console-based games on discs (Hutsko C6). One service that cannot be converted to digital means is EB's wide selection of pre-used games and trades that offer in-store credit. Used sales accounted for 44% of EB-GameStop's gross profit in 2007. The high percentage of profit reflects the fact that EB-GameStop makes 50% gross profit when selling a used game as opposed to just 21% on new games (Orland). No web site can take that away. =Legacy=

The international expertise of James J. Kim and his clever use of an existing company to get a second one off the ground combined to give EB Games an advantage from the outset. Furthermore, the maintenance of a large market share in the face of digital competition exemplifies today the same adaptability that has driven EB's expansion over the last 30 years. While the name “EB Games” is becoming less visible in storefronts due to the GameStop rebranding in existing locations, the EB-GameStop merger has cemented the company's role as the premiere video games retailer for the foreseeable future. =Bibliography=

Abelson, Reed, "Native Korean Plugged in to U.S. Electronics Market," __Philadelphia Business Journal__. 17 Nov. 1986: 10. Nutt, Christian. "GameStop 2008: The Mega-Interview." __Gamasutra__. 21 Jan. 2009. . Sulaiman, Hazimin. "What the future holds for video games." __New Straits Times__. 22 Mar. 2007: 8. Von Bergen, Jane M. "New Store Also Has New Target Electronics Boutique Is Opening EB Kids." __The Philadelphia Inquirer__ 1 Oct. 1999: C01.
 * Primary**

Belden, Tom, "Electronics Boutique Reports Record Revenues, Profits for Fiscal 2004," __The Philadelphia Inquirer__, March 16, 2004. Carless, Simon. "GameStop To Buy Electronics Boutique." __Gamasutra__. Mar. 14, 2009. . Campbell-Kelly, Martin. __From Airline Reservations to Sonic the Headgehog: A History of the Software Industry (History of Computing)__. Boston, Massachusetts: MIT Press, 2003. Covell, Jeffrey. "Electronics Boutique Holdings Corporation." __International Directory of Company Histories__. 20 Jan. 2009. . Croft, Martin. "Electronics Boutique Buying Rival Player In Games Market." 13 Apr. 1999: 27. Fernandez, Bob. "Amkor Founder's Relentless Push." __The Philadelphia Inquirer__. 1 April 2001: C01. Hutsko, Joe. "Downloading: That Other Way to Get a Video Game." __The New York Times__. 6 Mar. 2008, late ed.: C6. Orland, Kyle. "Gamestop's used game sales data in beautiful chart form." __Joystiq__. Mar. 14, 2009 . Strauss, Marina. "Best Buy to enter used video game market." __The Globe and Mail__. 17 Jun. 2008: B5.
 * Secondary**

"EB Games." __Wikipedia, The Free Encyclopedia__. 22 Jan 2009. . "Steam (content delivery)." __Wikipedia, The Free Encyclopedia__. 22 Jan. 2009. .
 * Reference**