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GameStop gets into the digital distribution space

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The last brick-and-mortar games chain heads for the cloud.

While it rules the retail sector when it comes to video game sales, GameStop hasn't exactly been leading the pack when it comes to digital
distribution. Now, it's starting to play catch up.

The company plans to buy Stardock -- and its Impulse digital delivery service -- as well as the game streaming service Spawn Labs to prepare
for its future. In other words, GameStop is putting Steam and OnLive in its crosshairs.

Digital distribution revenues in the gaming world are still dwarfed by retail sales, but they're growing. And GameStop's lack of an obvious path is something that has worried the company's investors.

Stardock's CEO and founder Brad Wardell has estimated his company holds about a 10 percent market share of the PC digital distribution space. (Valve Software's Steam, he estimates, owns 70 percent of the market.)

With GameStop's backing, the company should be able to boost
that number. It won't be easy, though. People have certainly
become more amenable to the idea of owning 'virtual' copies of their games
instead of physical ones, but once they do so, they tend to be loyal to that
service. Convincing Steam users to switch their buying habits will take more
than just good prices and a rewards program.

The Spawn Labs purchase puts GameStop on a relatively even
playing field. Streaming is still a new technology in the gaming space. Until
recently, users have been skeptical if cloud-based gaming was even possible,
given the size of today's titles and the variability of broadband speeds.

OnLive holds the early lead in the field, signing a
distribution deal to include its service on Vizio HDTVs earlier this year, but
the current user base is so small that there's plenty of time for GameStop to
catch up.

While these purchases represent the biggest step GameStop
has taken in the digital space, they're not the first. The company bought web
game portal Kongregate last year to help grow a potential customer base. And
the company has boosted its in-store sales of digital add-ons for gamers, with
a future goal of having those add-ons waiting for customers when they arrive
home with the game.

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