Gamestop definitely will have to downsize quite a bit. They don't necessarily have to die off, but they might anyway mostly because their leadership has been pretty bad. Even going back to Generation 7, they emphasized XBox and Playstation games over Nintendo games. I'm sure this is because those types of games tended to get traded in more often and Gamestop had higher profit margins on used games. It was a profitable decision at the time, but it was also short sighted. Now XBox and Playstation are trying to abandon physical games as fast as possible while Nintendo is still committed to physical media. On top of all of this, Gamestop has gotten a bad name with a lot of people.
They need a huge turnaround in leadership, with the understanding that they are still going to downsize even in a best case scenario. If I were them I'd make one more big (and hopefully final) round of downsizing where they keep their most profitable areas and focus on a Nintendo oriented business model. After downsizing, I'd throw a bunch of money at Reggie and ask him to be CEO for a while. People like Reggie. He would help restore their reputation, and he would definitely help them make strong connections with Nintendo of America. Nintendo is sticking with physical media, so they need to pivot hard toward partnering with Nintendo and away from Sony and Microsoft. Gamestop needs new leadership and they have a very capable leader sitting on their board, even though he is technically retired.