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Video game rental firm to establish Tampa base

GameFly plans to build a Southeast distribution site.

By Madhusmita Bora, Times staff writer
Published February 21, 2008

GameFly, the Netflix of the video game world, todayplans to announce the opening of a new distribution center in the Tampa area.

The location would help the Los Angeles-based company serve its members in Florida, South Carolina, Georgia, Alabama and Mississippi, said Sean Spector, co-founder and senior vice president of business development and content at the online video game rental company.

The company declined to disclose the location, size and number of employees in Tampa, citing competitive reasons. But the company said it chose the city because of GameFly's customer base and proximity to airport and postal locations.

"Florida is one of the top five states for us, and it's a good base of membership to grow over time," Spector said.

The Tampa location makes sense, said Sean Lux, an instructor at the Center for Entrepreneurship at the University of South Florida. "This will allow them to reduce cost and have a faster turnaround."

Computer and video game software sales touched $9.5-billion in 2007, according to the Entertainment Software Association. But most people like either owning their games or renting from brick-and-mortar stores.

Video game industry analysts say GameFly operates in a tough business. Although not much is known about the private company, there's little doubt that it is the only player of their size.

"The value of video games depreciates pretty fast," said Jesse Divnich, an analyst with the Sim Exchange. "They have to rent out a lot to recoup costs."

Edward Woo, research analyst at Wedbush Morgan Securities, said he was a little surprised that the company survived.

"They have carved themselves a niche and because of the challenges involved, no one wants to get into it," he said.

GameFly

Founded in 2002, GameFly operates using prepaid mailers, sent via the U.S. mail. Rental fees are $15.95 per month for one game and $22.95 for two games.

[Last modified February 21, 2008, 00:19:07]