The Investor Portrayed In The Big Short Buys Gamestop Stock

Michael Burry bucked conventional wisdom — and made a few bucks as a result — when he decided he wasn't hot on subprime mortgages back in the mid 2000s. Now he's making headlines again; this time for talking up GameStop stock at a time when the company's never looked worse.

In an interview with financial website Barron's, Burry contended that people are (you guessed it) selling GameStop short, and that the company "will have the cash flow to justify a much higher share price" in the future. He believes that GameStop's business can rebound, because both Sony and Microsoft's next-generation consoles are expected to have optical drives. And be believes that much of the industry's focus on streaming makes GameStop's future "look worse than it really is."

Now here's the part where we wonder if Michael Burry just got lucky all of those years ago.

Physical games are inevitably going to get shuffled out. We've already seen this happen on the PC side of things. Have you tried to buy a physical copy of a PC game lately? They're very difficult to find. And if you do happen to locate one, chances are it's just a box with a digital download code inside. Many PC gamers left optical media behind a long time ago, and as a result, GameStop left PC gaming behind. Try walking into a GameStop to browse the PC section. You'll be lucky if it exists.

And there's evidence that console gamers are starting to ditch the discs as well. Proof: digital game sales on the PlayStation Store are now greater than physical retail sales. It's close now, but that canyon is likely to widen over time. And it's worth noting that Sony managed to achieve this milestone after it removed digital game cards from stores like GameStop. Sony apparently felt it didn't need anyone's help to sell digital games, and that should set off some alarms.

We don't have numbers from Team Xbox, but we imagine Microsoft is experiencing the same phenomenon, and perhaps more so with the company's recent Game Pass push. The fact is, both Sony and Microsoft are betting on digital in a big way, both in digital games and in digital services. Both are incompatible with the kind of business GameStop operates right now.

Can GameStop change? Possibly. There are reportedly new concepts in the works for some of its stores, and if those are a rousing success, Burry will have made the right call. We'll keep an eye on GameStop to see how everything shakes out, and report back if any additional news breaks.