Game falls out with EA

Shares in Game, which has battled to keep its head above water in recent months and employs 5,800 staff in the UK, fell more than 16pc to 4.92p. EA is the video games developer behind some of industry's biggest titles. These include popular sequels due out in the coming months such as Mass Effect 3, The Sims 3 Showtime and the new Tiger Woods golf game. It is unclear whether EA will stop supplying just Mass Effect 3 or all of its forthcoming titles. Game had gathered all of its suppliers together ealier this month to ask them to support it during its financial difficulties. It is understood they asked suppliers to accept less good payment terms either by cutting prices, agreeing to being paid less promptly or paying the retailer what in the industry is known as a "supplier rebate", or cash payment. Game had thought it had won the backing of all of its major suppliers, and a source said they were shocked by EA's change of heart. The falling out between EA and Game could not come at a worse time for the retailer, which earlier this month said it had struck a crucial deal with its lenders giving it a lifeline, and ensuring it did not breach its banking covenants. Customers that want to buy these EA games will have to buy it from Amazon, Zavvi or the supermarkets. Game has offered a £5 voucher, as a gesture of goodwill, to customers that had pre-ordered Mass Effect 3 with the retailer. It would not say how much this would cost the company. Game Group's banks hire PwC to help it play on 10 Feb 2012 Game group thrown lifeline, shares jump 03 Feb 2012 Game shares crash as video games fail to fire 10 Jan 2012 A statement from Game did not elaborate on how much it had asked EA to cut its prices or pay as a rebate. It merely said: "We currently have a supply issue with regards to Mass Effect 3, which means that GAME and Gamestation will not be able to fulfill orders for Mass Effect 3 at this time. We want to give customers as much notice about this as possible and provide them with a range of options ahead of launch." It then directs customers to rival shops, including Amazon. A memo sent around to stores from Tom Devine, Game's group channel director, suggested EA had refused to either amend its terms or change them sufficiently for Game to make an adequate profit on selling the titles. The memo said: "Last week we held an event for out partners in the industry and explained the challenges we are facing in the short term – and we asked for their support. We asked them to trade with us using manageable credit terms, and for them to continue to do that whilst we work through the strategic review and refinancing our business. “We gave the industry commitments – we committed to integrity and openness in our dealings, and working with everyone equally. “We committed to only stocking products on which we could get the right credit terms, regardless of the title or the supplier. We will not stock products if the terms are not right for our business – we will not sacrifice long-term credit requirements for short-term sales opportunities. “As a result of us taking this position – a position that we believe is critical to our long-term health as a business – we have taken the very difficult decision not to stock EA’s March releases, including Mass Effect 3. “As a specialist retailer dedicated to games and gaming, it is never easy to make a decision not to stock a title, particularly one with such a strong fan base, it is imperative that we treat every supplier evenly, that we stick to our commitments, and that we don’t sign up to payment terms that will hamper us further in the future." Philip Dorgan, analyst at Panmure, said: "It's unbelievable. How will customers ever trust them again?" Last published accounts show Game owed £295m to suppliers at the end of January last year, normally settling its bills within 30 days. The deal struck earlier this month is understood to have involved suppliers assisting Game through generous rebate payments, easing short-term pressure on the retailer's finances. A source said there were no signs that other video games developers would follow EA's lead. The company, operates 1,274 stores around the world, including 610 in the UK.