Things just keep getting worse for Gamestop (GME). Toys “R” Us recently moved into the used video game trade, and now Amazon (AMZN) is getting into the game with the beta launch of its Amazon Video Games Trade-In service.
Here’s how Amazon’s service works: Gamers can search online for the trade-in value of a game (an early PS3 game like “Resistance: Fall of Man” only gets $7, while a recent release like “Fallout 3” commands $25.50). Amazon then provides free print-at-home shipping labels, and when the e-tailer receives the game, it deposits an Amazon store credit into the gamer’s account.
That aims right at the heart of Gamestop’s business: Gamestop earns razor-thin margins on new games, but has set up a hugely lucrative trade in buying used video games for $20 or so a pop and reselling them for $50 or more.
Of course, going to Gamestop still provides gamers with instant gratification, the fun of hanging out in a gaming store and talking with the clerks etc etc. But if Amazon can seize even 10% of the used games market that’s a huge loss for Gamestop’s bricks-and-mortar stores.
The booming business in used video games also re-emphasises the need for game publishers to offer long gaming experiences, online play, and to continually release new “downloadable content” for existing titles. That keeps discs off the used games market as long as possible, where they cannibalise new game sales.
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