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Nearly 50% of GameStop’s profits come from pre-owned sales

GameStop has released a three-month trading report, which shows a record sales for the quarter totaling $1.9 billion. It turns out that 47.4% of the videogame retailer’s profits come from sales of pre-owned games, totaling $250.2 million. Meanwhile, profits from new games sales totaled $182.4 million (21.7%), while hardware sales accounted for $21.7 million (7.9%).

"Based on brisk sales trends of new software titles and motion controller launches, we are enthusiastic about our business and have raised our full year earnings guidance,” said GameStop CEO J. Paul Raines.

But not everyone in the games industry is happy about the large profits retailers are making from pre-owned game sales as it cuts into profits for developers and publishers. Earlier this year, a Cowen and Company report showed that the average sales numbers for new games the second month after release were down from 2001 by an average of 62%. Sales figures for Final Fantasy XIII during the second month after release were cited, which showed a drop of 93% when compared to the first month of release.

Publishers have attempted to combat pre-owned sales with a variety of online related incentives. EA Sports introduced an ‘Online Pass’ system this year, which requires customers to use a one-time registration code packed with the game in order to play titles online. The incentive was meant to encourage gamers to opt for new copies in favor of slightly cheaper pre-owned ones.

Nov 19, 2010

[Source: CVGMCV]



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29 comments

  • elchamber - November 30, 2010 11:23 p.m.

    I would usually spread some hate on something like this, but I've never had a bad experience shopping at the local Gamestop. No scamming or the attempt to scam me into purchasing something I didn' t come in for. In fact, they offered me a better offer. I've gone to that Hollywood Gamecrazy or something, and they always try to peddle me on crap I can smell a mile away, with the exception of one stupid game. Always trying to get me to get a pre-order. Thinking that a comic book or shirt is going to make me fork over money for a game that I wasn't interested in. "Hey Bro, if you get the pre-order now, you'll get this cool comic book... I mean graphic novel of the game and this cool shirt." "What do you say?" I say, "I only purchase comic books that weren't some gimmick and no on the shirt." And collector's editions are either for fanboys and children.
  • nomnom52 - November 22, 2010 2:26 a.m.

    @xlyesterdaylx: Yes, after tax it's $60, but bought new at $60 you still have to pay tax, and it's 5% sales tax here, so I end up at ~$63 instead of the ~$58 I would pay used.
  • lomaxgnome - November 21, 2010 3:58 p.m.

    Pre-owned sales hurt game companies substantially more than piracy ever will. If the game companies would realize this and change their PR efforts, they might see some real change. But we all know how likely that is.
  • FoxdenRacing - November 20, 2010 10:09 p.m.

    Deadgirls: I wasn't trying to be rude, and for that I apologize. It does sound like we're on the same page though, aside from taking different approaches to get there. Truce? As much as I despise Gamestop, used games resellers do provide a service. They locate [by enticing customers], centralize, store, catalog, inspect (unless the store is run by lazy employees], and promote the product. I don't believe any one party is innocent...just that trying to hurt resellers by screwing over gamers (laws, policies, 'online pass', etc) won't work, as gamers will get upset at the producer for causing them to be hurt, and generate lots of bad PR for the original producer. Meanwhile, the reseller gleefully keeps turning profits. I don't like it, but they're in a very defensible position right now. That's why there's so much burden on the publishers...a few outraged gamers will help but ultimately won't be a blip on their radar, and 'we won't wholesale to you' carries no weight since used copies are where the profit margins are. Publishers have to convince gamers not to sell things back if there's ever going to be a dent in it. To do that, they either have to make better product [stem the tide of 'play for an hour, get bored, sell it back'] or drive prices down. Lowering MSRPs is the greatest weapon they have; Gamestop would in turn have to offer less for trades in order to resell for any appreciable profit, and publishers could push it low enough gamers can say 'not worth it', driving the entire 'buy-and-resell, it's better than renting' group out of the market. Gamers would be able to purchase more product, helping the industry as a whole. Lower MSRPs also means lower 'used' prices, directly impacting just how profitable used gaming is. Combine that with lowering wholesale costs, and the entire market can shift; if new game profit margins match or eclipse used-game profit margins, they won't push used as hard, and things will go back into balance. And in the end, that's what it's about: Balance. With prices pushing ever higher (it wasn't all that long ago that a new game was $40, last year a few publishers wanted to push to $70) for less total play time [initial playthrough + replay value], the cost/benefit ratio has many people seeing used as the sensible route. I personally starve the beast by not doing business there unless forced [last Christmas, they were the only store around with the gift I intended to give; my usual store couldn't get one before the new year], and by never reselling any game. The publisher still gets paid for that one copy, it gets taken out of the pool of available used games. Shuffling the same handful of copies around is where the publishers hurt, as at that point the reseller becomes a rental store that just happens to make money hand over fist on it.
  • g4m3rk1dd - November 20, 2010 2:20 a.m.

    only 50%?
  • xlyesterdaylx - November 20, 2010 1:33 a.m.

    I only buy new games. Used games are never EVER worth it at gamestop. Who in their right mind even buys the 54.99 used games? After tax it's already 60$
  • DeadGirls - November 20, 2010 1:04 a.m.

    @FoxdenRacing: You don't have to be rude. Also, I'm not wrong. Used car lots are a rip-off too, but they preform a service. It's alot more of a hassle to try to sell your car yourself then it is to sell a used copy of a game. I'm glad we can agree that gamestop hurts games. Though I would say that not all of the burden of fixing the problem lies with the publishers. People, in general, need to be more responsible consumers.
  • Lionzest7 - November 20, 2010 12:08 a.m.

    I hate gamestop. Everytime I walk in there, if I ask for something old it's not in stock (They either don't carry it or hold it for employees to buy it). I like going in there thinking I can look through games casually without being bothered, but hell no. Those guys hone in on me quick, I just want them to leave me in peace to browse the games. Then I get up to the register, some guy keeps egging me about pre-ordering some game I'd never touch nor care about. I get offered some silly edge card and game informer magazine subscription. Everytime I go in there it's like an interrogation, just give me the damn game and let me leave. I don't need your pos warranty. Besides that, probably just hoping all these tools that walk in trade their 60$ game for 20$ and they can sell it back for 55$. Protip: buy your games from amazon. There's no one on your back to bother you, the shipping is either free or 1$ for release day.
  • FoxdenRacing - November 19, 2010 11:44 p.m.

    @Crabhand: Nail on the head. As gamers, we can encourage Gamestop to change their model by demanding more of them. Personally, I buy new if : A) I've made the decision to support a studio B) They have no used, and I want the game C) They have used, but the price difference is laughably small D) They have it new and used, but the used one's disc is abused beyond abused, in a generic case, or the manual is missing E) I'm forced to set foot in a Gamestop. F*** 'em. Likewise, I buy used if: A) They don't have it new and I'm not willing to wait (ex: Christmas Gifts) B) It's delisted and they can't order more in C) They have the GOTY edition used, and the normal game new
  • Crabhand - November 19, 2010 11:34 p.m.

    I don't like used games, the cases often come in terrible condition and the disks are usually worse than My old Halo: CE disk. When I go to a Gamestop, I go to buy new games at the least offensive offline location and actually find some older games (since most department stores only stock new games). But the used game sales are shit, like I want to pay $17 for Lego Rock Band rather than $20, it's almost insulting. But yea, people buying used games make me very sad.
  • FoxdenRacing - November 19, 2010 11:26 p.m.

    Clarification: Shamelessly undermining the very companies that supply them in the first place (the way Gamestop does with publishers). My apologies.
  • staplersexits - November 19, 2010 11:25 p.m.

    I guess at that point it could be argued that products sold on craigslist, ebay, or thrift stores cut into profits for manufacturers as well. Thing is, without the pre-owned games market, there would have to be a lot more plastic discs and cases being produced and, in turn, thrown away. As you can imagine, this becomes incredibly wasteful. The pre-owned games market doesn't steal profits from publishers, it recycles all those little plastic bits that are going to stay in that form after the initial users are long dead. Publishers are just being whiny ungrateful little sh*ts because they want more profit, and will continue to want more profit because corporations have an insatiable demand for profit.
  • FoxdenRacing - November 19, 2010 11:22 p.m.

    @Deadgirls: Bzzzt, wrong. By that logic, used car lots shouldn't exist either. Nor any retailer, for that matter. Retailers buy from wholesalers, then sell to customers...middlemen. Gamestop is a sleazy, shameless 'flip' company, but blame them for what they actually do rather than being emotionally charged about the concept of a retailer. [Used is still retailing, but the 'wholesaler' is the gamer selling something back]. By being a digital product, you're not getting less for your money. You're getting the same bits and bytes that the last guy got. Hate them for being shameless, hate them for trying to pervert the industry for profit, hate them for buying exclusives, but don't hate them for thinking of something their competition didn't. Games, like cars, are in an odd situation; they not only sell to their retailers, they also have to compete against them. Publishers have the power to make the used market not a threat to them, but instead they choose to punish the gamers, who in turn get mad at them and don't buy future products. Reward new purchasers, rather than punishing used purchasers. Produce games that gamers don't want to resell, and they'll be less used games on the market. That sort of thing. Blizzard did it without a problem by not gambling on successes to make the money back for games they deemed 'destined to fail'; they gave every game a chance to become a hit. Does Gamestop hurt games? Sure, because Gamestop is absolutely shameless in the way they do business. But this is one place where laws, policies, and the like won't help, because it'll punish the gamers, whom will take it out on the publishers, while the reseller reaps profits all the same. The publishers have to out-maneuver the resellers, rather than whining about it and punishing the end customer. Used in general is good for the industry; it's free advertising for upcoming games in a franchise. Shamelessly undermining the very companies that supply them in the first place (ala Gamestop) is not.
  • FoxdenRacing - November 19, 2010 10:59 p.m.

    @hlcy0n: I ran out of space, but I feel your pain. Gamestop especially is infamous for sabotaging new game sales in favor of used [I've had employees try to dissuade me from a new copy], going so far as to require employees to move so much high-markup product in a month or lose their jobs. That's unethical and sleazy, and not something I approve of. But some people's attitudes that used in its entirety is deadly sin destined to end gaming completely is just hysterical. Really, neither Gamestop nor [big publisher you dislike] is wholly innocent or wholly guilty. Rather than conduct business ethically, we've got an entire generation raised on the idea that businesses are entitled to massive profit margins [rather than having to earn them], and taught that no act is dishonorable, sleazy, or generally 'bad' so long as it makes money. And personally, it sickens me; the world would be a much better place if there was more honor and less shameless greed out there.
  • DeadGirls - November 19, 2010 10:59 p.m.

    @Scoob: I can tell you are not understanding the core element of the entire issue because of the analogy you used. Buying a used couch from somebody is not at all the same as buying a used game from GameStop. GameStop is making a profit from used games. Buying a used game (or couch) from a friend does not make a profit from selling you the used game (unless he is charging you more than he paid, which means you are getting ripped off). By acting as a middle man, GameStop is taking profit away from the people who did the work, AND giving you less for your money. If they can't make money from legitimate sales then, yes, they should go out of business.
  • FoxdenRacing - November 19, 2010 10:51 p.m.

    Apples and oranges. Until we know how much of those sales was used copies of this year's games competing against new copies of this year's games [Used Reach vs New Reach, etc], it's statistics manipulation. Zone of the Enders counts as a used game. So does Smash Brothers Melee, Prinny: I can be the Hero, and Splinter Cell [all for platforms my local Gamestop still carries used games for]. Someone picking those games up might also be buying a new game the same day, but is also looking to catch up on games they missed. I'm gonna go the opposite direction from hlcy0n: Rather than get insta-protective of the business we love, I'll admit the industry has its problems, its cancers, its festering sores that need cut out before they bring the entire industry to collapse...again. The publishers need to think long and hard about WHY the used-games business is so huge, then do the capitalist thing and compete. They're not only competing with each other, they're also competing with their entire back catalog. But I suppose it's easier to whine to the press and buy off politicians than it is to acknowledge, identify, and fix the problem internally. Publishers tend to forget that not everybody has the bankroll...or the free time...to pick up every game they want to play on launch day. People may not consider a game until they play it at a friend's place, hear about it from somewhere else, or see it on a shelf for the tempting price of 'if it sucks, I'm out a couple bucks'. And if it happens to be delisted by the time they find it, for a system they didn't own until they picked one up at a yard sale, or the like, they can't exactly get it new. But those sales create new fans of series, whom may buy the sequels new. Read that again: Used Gamers, if they like the game, may buy an upcoming sequel new. Used sales encourage new sales in the future. Forcefully eliminating the used market and stunts like EA's "pass" not only violates the First Sale Doctrine (which may be a US-based concept: the right to re-sell something you've purchased...not just part of it, all of it), it also keeps new generations from discovering the games of the past. It prevents hand-me-down games ["You liked that game you borrowed? I haven't played it in years, keep it."], and is generally a bad idea. Rather than whining about it, and buying laws to try and make it go away, the publishers should address why people buy used. Some things...age of a game in question...is beyond their control. But other things, such as price point, angry gamers using it as a loophole in a boycott [by buying used, a publisher they hate won't see any money, but they lose out], and the like are things they *can* change. In case they haven't noticed, the boom economy is over. $60 (plus $30-$40 for DLC packs) is no longer throwaway money; gamers will continue to game, but they'll do so within their budget. And if that budget means being late to the party, so be it. Really, they've brought it on themselves. $60 for a game that's over in 4-8 hours with no replay value? Resellers are going to jump all over that. By offering high trade-in values, 'used gaming' has all but replaced 'rental gaming'...the cost to buy a game, beat it, and sell it back to the store is on par with renting, after an initial investment that gets rolled over from game to game. And since it's easier to criticize than it is offer ideas, I'll throw mine out there. - Quit with the media blitzes that cost more than the game itself. I'm not saying go dark completely, but do they really need to be giving away $30,000 Jeeps, buying hours of TV airtime, splattering their crap all over websites, buying off the less scrupulous reviewers, sponsoring sporting teams/events, and the like? On a $100m game with a matching marketing budget, even cutting the budget in half would save $50 Million. Assuming it wholesales for $50 (an unreasonably high number), that's one million less copies they have to move before it's profitable. Most low-budget games (like Blood Bowl) are lucky to move 100,000 total, let alone moving one million extra to cover advertising costs. - Trim the budgets. Throwing money at a studio doesn't guarantee a better game. - Cut executive salaries. When a publisher's executive list is 3-4 times longer than the studio's whole team [including the studio's execs!], you've got a problem. - Stop gambling. The 'We know these 9 games will bomb, but it's ok, [megahit] will make us profitable overall!' is playing russian roulette. One poorly-timed bomb when the publisher gambled on a hit has ruined companies in the past. Instead, be realistic and try to make every game break even. - Look for the pricing sweet spot between cost and sales, rather than throwing a tantrum when gamers go '$60 for something I'll finish in an afternoon? No thanks.' - Quit screwing, milking, or outright p***ing off the customers. Bad PR = lower sales. Lower sales = Lower Profits.
  • Overlord153 - November 19, 2010 10:44 p.m.

    Also I just laugh when I see moms asking for "that one Naruto game" and seeing the looks on the employees faces. I'm probably going to hell for that. reCAPTCHA offered bouffes Must be a new thing GameStop is doing
  • Overlord153 - November 19, 2010 10:39 p.m.

    Would pepole stop hating on Gamestop! Without it I never would have found Psychonauts for $20.00 Some people don't realize a classic on their hands when they have one.
  • hlcy0n - November 19, 2010 10:25 p.m.

    @Scoob: I don't work for Gamestop, and my shop was doing perfectly well without pre-owned before it was introduced in recent years. The main reason being that when you wanted a game before pre-owned games were so freely available, you bought it new. The problem for me is that people will blindly pay (in extreme cases) $2 less for a second-hand copy, while the management of these chains gleefully extol tales of higher mark-ups on pre-owned than brand new games.
  • Scoob - November 19, 2010 10:16 p.m.

    @hlcy0n: Seeing as you work in a Gamestop, you do realize that new games have very little markup, right? I think it's 20% last I checked (retail average is about 50% for most other products). Gamestop would go under if it relied only on new game sales with such a small markup. And there is nothing wrong with buying used. I'm not sure what kind of vacuum many young gamers these days live in to start to think the buying and trading of old products is wrong. I bought a used couch off of someone once. You think the manufacturer is owed a cut of the money I paid my friend?

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