GameStop is the dominant video game retail shop in America today. While big box stores like Best Buy, Target, and Wal-Mart still offer somewhat decently-sized gaming sections, GameStop is the only large retail chain devoted to it. They rose to power on a business model featuring used game sales over all else. To this day, if you walk in and try to buy a new game you may get offered the used equivalent for a cheaper price. They also often have a bigger selection and they’re the easiest store in town to pre-order all your favorite upcoming titles.
But are they actually hurting the industry?
Ask a gamer their opinion about GameStop and you’ll hear a wide range of responses. Hardcore gamers tend to love it as they can pre-order the big-budget titles months in advance and get their hands on them during special midnight release parties. (Publishers often make GameStop-exclusive collectors’ editions, too.) On the other hand, you’ll hear complaints about getting brand new games that aren’t sealed and botched pre-order handling. (They have a tendency to over-promise and under-deliver.)
Personally, I don’t like going into their stores. They seem to attract the type of gamer that just doesn’t seem to enjoy games as much as be slaves to them. Yes, I’m basically saying that I stereotype the GameStop shopper as someone who’s pre-ordered Call of Duty twice a year. Fair? Probably not. I’ve likely just sidled up in line with too many of these cretins. 😉
The biggest argument that they’re damaging the industry, of course, revolves around the concept of used games sales.
Game Developers Make Nothing on Used Games
No matter what you think about the used game industry, the fundamental truth to it is that game developers (and publishers) make no money on these sales. In fact, just about everyone else gains on these transactions. When you buy a game on eBay, they’ll rake in 13% of the price of the game in fees. Nintendo makes nothing. If you buy a game at a flea market or on Craigslist, the buyer gets a good deal but the game adds nothing to the developer’s bottom line. Microsoft makes nothing. And, of course, if you go into a GameStop to buy Little Big Planet 3 for $60, then get talked into a used copy for $45, all the profit goes to GameStop. Maybe $30! Sony makes nothing.
Logically, these companies accept used game sales as expected. In the early days, this often was between friends. Eventually, eBay and GameStop turned these into cottage industries both online and offline respectively. Nowadays, if a game is a year or two old and I want it, I’ll even turn to eBay before hitting the local stores just to see if I can get a better deal. In the lifetime of a single game disc, it might see 2-3 owners, and that loses at least 1-2 sales for the original developer.
Compounding the problem is that, to compete with used game prices, publishers are forced to lower the prices on their new games. Often, this happens rather quickly after launch. (Nintendo is famously resistant to this, however.) So, not only are their sales numbers being cut, but profit margins on the games they do sell are reduced as well. And as these profits sink, GameStop’s soar! Recent annual reports show GameStop profits are between one- and two-BILLION per year! Whoa!
These numbers are primarily generated by used game sales. The way the process works is that customers, and perhaps parents deluged with their kids’ old games, trade in the older games for pennies on the dollar and then get put on sale for 10 times what they paid. Since these prices are going to come in at least $5-$10 less than the new price, many customers will opt for these used versions. GameStop essentially makes quick and easy money on the hard work of others simply by being a “convenient” middle man. Buyers don’t have to wait for their bought items to ship and sellers don’t have to risk their lives on Craigslist.
A key difference here is that not even the seller is benefitting! GameStop can’t even compete with what a seller might fetch for a game on eBay, Craigslist, or even other retail chains. So, why do they sell to GameStop? Simple…the public appearance and convenience. Many folks aren’t comfortable selling online or even know that they can sell their used games to Best Buy. And smaller mom-and-pop shops are getting harder to find because of these larger chains. The end result is a massive availability of used games that saves buyers money.
But at what expense does it come to the industry as a whole?
What do you think about used game sales? Should publishers lower prices on new games to discourage used purchases? Is GameStop capitalizing too much on unsuspecting sellers? Leave your comments below!