Shares in Game Group gained as much as 16 per cent this morning after the FTSE 250 group was given provisional clearance from the competition regulator to create the UK’s largest video games retailer by acquiring its largest specialist rival Gamestation for £74 million.

The logic behind the tie-up is that while Game Group appeals to the mass market (for instance, women and older consumers enticed into gaming by Nintendo’s Wii), Gamestation is angled at the gaming hardcore, those teenage boys that spend days at a time completing complex shoot-em-ups.

Game Group is being a little coy about the savings it hopes to reap from the deal. It said in May that it expects synergies of £7 million a year following the second full year of operation, by improving inventory management and overheads. However, it has suggested that shop closures are not on the cards.

Rather, the acquisition gives the company scale on the high street. This is important as a pack of rivals – including HMV, Woolworths and rival specialists such as Zavvi – home in on the growing appetite for console-based entertainment.

Analysts at Altium Securities said: "The provisional decision represents a victory for common sense, as we recall what happened in the run up to Christmas 2002 when Game's profits were hit by offers on software from retail multiples."

Game is confident that the deal will finally be cleared next month. There remains, however, a fly in the ointment.

Microsoft’s announcement yesterday that it will launch a film download service in the UK later this month that delivers movies via the web to its Xbox 360 consoles pointed to the current big trend in content distribution.

Gamers are increasingly downloading titles online. Game may have the most impressive set of bricks and mortar shops on the nation's high streets, but indications are that the future lies with gamers – hardcore or casual – buying over the internet.

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