GTIS may indeed become a market leader in the distribution of software titles. I know the principals of this company fairly well, considering that we all pioneered the video sellthrough business with mass merchants beginning in 1984.
Joe Cayre, along with his brothers Stan and Ken, are the toughest and fiercest competitiors I have ever known. They built a huge video sellthrough business and dominated the under-$10 market. Obviously they will succeed in the computer software business as well. But every business opportunity is confronted with a different set of obstacles.
From what I understand about computer software; the development costs are outrageous, mass merchants demand an unlimited return priviledge, and if the title doesn't become a "hit" the ability to recoup costs are unlikely.
For my money, I'm not convinced that mass merchants will remain supportive of computer software as a category. Sales per square foot, turnover objectives, and gross profit margins are key considerations. As you know, some of the key retail customers who do support this category are in financial difficulty. I'm waiting to see how they come out of the 1996 Christmas selling season!
My concluding remarks about GTIS; they have built a strong management team, they always have access to money, they are never afraid to invest into projects, they know how to drive sales, they have incredible customer relationships, and they think in billions! These are very significant positive factors.
My only concern....is the computer software business strictly a "hit" business or will catalog sell as well? A distribution company can't live on "hits" alone; i.e. the music and video industries. When you're cold, you're cold!
I suppose I'm too conservative to invest "in front" of an established market. I need to wait to jump on the band wagon. If that works for me so be it! I certainly respect those people who have more wisdom and foresight than I do, and I wish them nothing but luck and good fortune. |
