Analyst: GameStop Used Game Sales To Reach $2 Billion
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.