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Analyst: GameStop Used Game Sales To Reach $2 Billion
Analyst: GameStop Used Game Sales To Reach $2 Billion
January 22, 2009 | By Eric Caoili

January 22, 2009 | By Eric Caoili
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More: Console/PC



According to new estimates from analysts at Pacific Crest Securities, GameStop's used game sales will account for $2 billion -- 23 percent -- of GameStop's revenue for the fiscal year ending January 31st.

In the previous fiscal year, the specialty retailer's pre-owned business made up for $1.6 billion, or 22.4 percent of its revenues.

During the nine weeks leading up to January 3rd, 2009, GameStop's year-over-year used game and console sales increased by 32 percent to $543.5 million, while revenues from new games and consoles rose by only 19 percent to $1.9 billion.

And in the previous quarter -- ending November 1st -- made up 42 percent of the company's overall profits. Profit from new games contribute only half that number to the total.

The article also notes that GameStop's profit margin was 48 percent for used products for the period ended November 2008, but profits for new consoles and games are just 7 percent to 20 percent.

"When you consider that most retailers operate on single-digit margins, it's astronomical," says Pacific Crest analyst Evan Wilson, an industry analyst with Pacific Crest, according to a report from the Wall Street Journal.

Though GameStop is certainly enjoying the success of its used game business, some developers and publishers have taken issue with the retailer over its trade-in practices, with Frontier's David Braben pointing to it as a revenue leech for video game companies. Take-Two is also exploring new business models designed to discourage it.

GameStop chief marketing officer Mike Hogan, however, defended the company's pre-owned sales at a recent summit and noted that 75 percent of all the credits that GameStop issues are utilized, immediately, to purchase a new game.

He argued that the used game business benefits both consumers and the game industry. "I realize there are other perspectives, but ours is: trades and used fuel growth in the category," he said.


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Comments


Jake Romigh
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To Mike Hogan, Gamestop's chief propaganda spreader: You're full of bull fecal matter. Sure, 75% of the credits go to buying more games, but when you are buying the used game from the gamer at around 10% of the new game price, and then selling said used game at 80-90% the new game price (essentially earning 70% of a new game price), you are cheating the consumer out of money! That consumer, if you paid them a reasonable amount (which Gamestop NEVER does), they could buy MORE new games for less trade ins!



INSTEAD, the gamers give you MORE trade-ins for LESS new games, giving you more profit and developers less sales! THAT'S where you guys are screwing the industry. Your trade-in values (along with other major retailer's) border on extortion, and you reap almost all the benefits. Saying that trade-in money fuels buying new games is laughable.



Problem here is that Gamestop's Trade-In system (and others like it) are convenient and, to a large amount of people, seems like a deal; in reality, if those gamers were to wisen up, they'd see a lot more money if they went through a service like EBay or Amazon, who take a lot less money from the bottom line. Wisen up, lazy gamers! You could be buying more new games if you just sold them yourselves!

John Petersen
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I don't think it'd be a good idea to mess with gamestop to much.



If publishers want to put a stop to used game sales, they have to make they game unplayable unless you have a key. Like Guild Wars does.



I think y'all just need to leave them alone, they're working within the law, providing a service that is needed and ain't buggin' nobody.



If y'all wanna make it right on your end, well... Then make it right on your end.

Luke Icenhower
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Bottom line: it's legal and not going anywhere, so developers need to be creative and think of a way to INCORPORATE GameStop into their plans, not blast them.

Bobby Woodworth
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It's a sad day to see the consumers so upset about a price point (when games arguably give them the best entertainment bang for their buck) that they take actions that ultimately destroy the companies that make the games they obviously enjoy. What the industry needs is smarter more loyal customers.


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