One of the more interesting tidbits to come out of Gamasutra’s recent analysis of the state of GameStop was the huge profit GameStop makes selling used games. It’s not rocket science how they do it. They buy back nearly mint games from gamers for pennies on the dollar, slap a big price tag on the units and stick them up on the used game shelf. GameStop makes 48 cents on the dollar on used games, accounting for a whopping 43% of their profits. This lucrative trade-in model hasn’t gone unnoticed by Walmart, Amazon or Toy ‘R’ Us. GameStop is no doubt feeling the pressure from these new players in the used game game as well as from expanding digital distributors like Steam. Hopefully this will squeeze a few more bucks out of our friendly GameStop counter person the next time we belly up to the bar to trade in our gently used games for the latest and greatest.
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GameStop claims that their business model is safe despite the large retailers elbowing in on their trade, but I’m not convinced. As you say, Scout, the company’s made billions by selling used games for five bucks less than new, usually at a 1000% markup from what they offered the original owner in trade.
The real key is digital distribution. As online retailers like Steam get savvy to the immense unit sales increases they see when they cut prices on certain games, and as broadband becomes more ubiquitous, we may well see a slow end to the classic retail distribution model – and, by extension, used games. And to be honest, I wouldn’t really mind, so long as the prices stay reasonable.