GameFly is to gamers what Netflix is to movie lovers. The video game provider offers more than 8,000 titles for rent -- both newer releases and classics -- for entertainment systems such as Microsoft Xbox, Nintendo Wii, and Sony PlayStation, as well as handheld consoles. Some 334,000 members pay a monthly subscription fee to rent games with no due dates or late charges. To support this effort, GameFly maintains shipping centers in Austin, Los Angeles, Pittsburgh, Seattle, and Tampa. Through its Direct2Drive website, gamers can buy video games among 3,000 choices to download to PCs or Macs. Founded in 2002, GameFly counts among its backers venture firms Sequoia Capital and Tenaya Capital.
GameFly filed for an initial public offering in February 2010, looking to raise raise about $50 million and list on the NASDAQ exchange. However, a sour market for IPOs, and presumably other factors, have thwarted its plan to go public.
In addition to its gamefly.com subscription service, the company operates a network of additional video game-related websites including shacknews.com, fileshack.com, cheatfreak.com, consolecheatcodes.com, cheatservers.com, and others. The websites provide relevant content and information, such as industry-specific news, video game tips and cheat codes, screenshots and trailers of new titles, and game reviews and ratings to the video game community.
The online video rental service aims to grow its business through acquisitions and partnerships to better penetrate what it perceives to be a large, untapped customer base for its subscription service. GameFly's target customers are 18-to-34-year-old males. In 2012 the firm partnered with 2K Games to deliver video games to GameFly members via the Unlimited PC Play catalog. It also joined with Future US, a hybrid media group specializing in gaming and technology, to deliver international content.
On the acquisition front, GameFly in 2011 acquired Direct2Drive.com (or D2D) from IGN Entertainment. The deal gave GameFly a presence in digital distribution of video games and allowed GameFly customers to buy games rather than renting. As part of its business, D2D provides gamers with more than 3,000 PC and Mac titles that they can purchase and download. The transaction involved giving IGN a minority stake in GameFly and providing IGN's parent News Corporation with an observer seat on GameFly's board.
GameFly is keeping an eye on competitors Netflix and Redbox, which have the potential to be a thorn in its side. With a similar business model, Netflix has added streaming capabilities to its service offerings and has become a more dynamic provider of movies through partnerships. Also, Redbox, which rents movies and video games through about 33,000 kiosks, has been aggressively expanding the number of its locations nationwide, extending its reach into video game rentals with no subscription and no late fees.
Sequoia Capital owns a majority stake in GameFly. – less