It would be easy to mark GAME Group as simply yet another victim of the recession but in reality the seeds of the retail group’s destruction were sown long before the economic downturn. To the casual observer it might be hard to understand why GAME went under, when in the same week as it filed for administration the announcement came that videogames sales had overtaken the sales of film, TV and the music industry in the UK. The sense of disbelief by some gamers that the problems that dogged GAME group have finally crippled it seems to be echoed by the company’s CEO, Ian Shepherd, who resigned after breaking the news that administrators were taking over the specialist retailer.

“It breaks my heart to see a business made up of such magnificent people come to this and yes, I think we should have been able to avoid it.” Shepherd, tweeted to his followers as news of GAME going into administration spread, leaving angry staff and customers demanding answers on why things had come to such a dismal end.

Was Shepherd overly optimistic; could GAME have been saved? With the proper management it could well have avoided having to call in the administrators but it’s debatable whether it could have ended any other way, given the problems that dogged the company in recent months. It would have been an uphill struggle for anyone to turn around GAME’s ailing prospects after the years of aggressive expansion under previous boss, Lisa Morgan. Not so long ago, GAME was considered one of the titans of the UK’s high streets, its growth fueled by swallowing up its once numerous rivals in various takeovers which lead to it buying its main rival Gamestation in 2007. It was after this large expansion and the substantial increase in GAME’s estate that the problems which would eventually hobble the retailer began to pile up.

It was not uncommon to come across two or more stores within a mile of each other, with often a GAME and a Gamestation simply doors away from each other, eating into each others takings whilst doubling the overheads the group had to pay. In Glasgow city centre alone in an area that was a one mile radius there were five GAME stores all vying for custom. Once management realised they had too many stores open to be viable they made an attempt to close those outlets failing to perform back in 2010. However, in many cases penalties for bringing a lease to an end early proved too expensive and a number of the stores earmarked for closure remained opened as the search for a solution went on. This continued into 2012 when the quarterly rent bill of over £21 million finally broke the back of GAME Group.

After months of rising costs and slowly declining sales GAME’s lenders withdrew the Group’s credit insurance; between the disappointing Christmas period and the reduced levels of disposable income of their core market of 18 to 30 year olds had simply left their lenders cold. After that it didn’t take long for GAME’s suppliers to feel uneasy and soon the biggest publishers such as Microsoft, Nintendo, Capcom and EA refused to do business with the company. This left GAME without the biggest releases of the year such as Mass Effect 3 and Streetfighter X Tekken.

Once it became apparent that GAME was going to be unable to honour pre-orders of the latest titles and would be without the most desirable stock its customers turned to the chain’s rivals. The supermarkets which had encroached on GAME’s territory over the years upped the ante; Tesco offered the recent release Battlefield 3 for £26, nearly half the price that GAME was selling the same game for, tempting away GAME’s customers. As news of the gaming chain going into administration broke, Sainsbury’s was promising consumers the latest titles and consoles all heavily discounted, essentially kicking GAME while it was down.

GAME’s decline has made clear that the gaming market is undergoing a seismic shift as technology has evolved. Like film and music before it, the videogames industry is evolving and the methods of distribution have changed. Where once there was the only option of buying a physical hard copy from a high street store, consumers were now able to order cheaply from online retailers or download games directly via digital distribution services such as Steam. In addition, many game publishers offered exclusive content for download that bypassed retailers completely, cutting them out of a lucrative market that added to the shelf life of game titles.

All of these difficulties added to the situation GAME currently finds itself in and each in its own way contributed to the company’s misfortunes; every change in the market and the industry cutting into their business before GAME finally fell on its own sword. The combination of lack of foresight, poor management, rash decisions and a rapidly changing market all brought GAME to the position it is in now.

Will GAME rise from the ashes? Most likely it will. There is still a place for a videogame retailer in the UK and the administration process has achieved what should have been carried out in 2007 after the group bought its Gamestation rival. A less flabby, more streamlined and ultimately more forward thinking GAME Group has great potential and it is expected that the group will soon exit administration with potential buyers such as RBS, the American gaming chain, Gamestop, Comet owner Opcaptia and even the global behemoth that is Walmart expressing an interest in buying the beleaguered chain.

Any buyer who takes on GAME will need to learn from the past mistakes to rebuild the company’s fortunes and take into account that GAME will need to diversify and offer something new if its to avoid the same fate again.

UPDATE 1250 1/4/2012: Opcapita have bought GAME Group’s assets in the UK for £1.They had previously tried to buy GAME before they filed for administration on last Monday.