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GameStop CEO: 'Disc-based games will be around forever'

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Owen S. Good is a longtime veteran of video games writing, well known for his coverage of sports and racing games.

GameStop's chief executive remains bullish on the future of physical format video games, telling Fortune in an interview that "disc-based games will be around forever."

Though an analyst projects digital revenue, worldwide, accounting for about 1/8th of an $82 billion market, Paul Raines feels the steep declines seen in sales of physical format music and movies will not be repeated in video games.

"I see a complimentary business where we sell discs plus download like the current console mode," Raines said, adding that virtual reality "will also likely follow this model."

That said, GameStop has taken steps to protect its interests in the push-pull of physical-versus-digital sales. Last month it refused to carry an Xbox One console bundle that contained a download code for Madden NFL 16. Instead, GameStop insisted on — and was given — a modified bundle deal that allowed them to sell the new console at the bundle price while including a free copy of that game.

Digital sales, of course, cut into a big portion of GameStop's business — the sale of used games — because there's nothing to trade in and therefore nothing to buy used. Used sales account for about a quarter of GameStop's revenue, and Raines thinks this will rise as more gamers make the transition to current-generation consoles and more used games enter the stream.

As for digital business, GameStop doesn't eschew it altogether — doing about $1 billion in sales of codes, gift cards and the like. That's more than a 40 percent share of the downloadable games market.

In June, GameStop beat out Hot Topic to acquire the novelty retailer ThinkGeek, further diversifying its offerings and revenues.

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