Despite a growing profit base and a lucrative business model, it's a difficult time to be in the used-games business. At least it is if you believe a recent item from across the pond.
Gaming site MCVUK.com posted an item this week from the Develop Conference in Brighton quoting a GameStop spokesperson as saying the company really doesn't like what it does. That would place it squarely in the company of the scads of folks who buy from there.
"We don't like being in the used-games business, but we have to be there," the source said. "We would have to exit the games business otherwise."
That caused a mini Internet tsunami of calls from gamers for the company to at least review its draconian practices of paying pennies on the dollar for used titles while charging near-full retail for popular games. But the company was quick to deny this was at all true.
"These comments from an unnamed and unknown person claiming to be a GameStop employee are inaccurate," a U.S. spokesperson assured the site. "Pre-owned is the cornerstone of our business and, as you say, a key driving force for us. Both the buy/sell model and bricks and mortar retail are extremely important for our business both today and in the future as we continue to grow."
And don't worry, GameStop is growing. In the protracted global economic malaise, more people have turned to feeding the lucrative secondhand market. The company reported a 6.8 percent rise in net earnings in the first quarter of 2010, with a net profit of $75.2 million, a full $4.8 million more in year-over sales. While Microsoft, Sony and Nintendo are reeling (GameStop console sales were down 1.6 percent), secondhand software sales were booming, up 13.3 percentage points.
That says a lot about what people are looking for in this market. Even GameStop's habit of giving you $12 for your 3-month-old copy of yesterday's shooter du jour in exchange for a $54 copy of a twice resold megatitle is worth the hassle. Hey, you could supersize all your friends' lunches with that $6.
(Full disclosure: I often have shopped at Gamestop and find that while the employees are avid gamers who will go to great lengths to help you, the pricing structure is ludicrous at times, especially when trading for newer titles.)
But even GameStop's deathgrip on pre-orders and sales of subscriptions to Game Informer can't stop publishers from trying to thwart the secondary market that keeps the reseller afloat. One-time-only DLC codes are coming into vogue — see UFC Undisputed, The Saboteur and Alan Wake for recent examples — and that could mean the very hardcore audience that populates the used-game racks will be forced to choose to buy new instead. That's fine by publishers, but it means fewer sales for GameStop.
Rob Dyer, Sony's U.S. senior VP of publisher relations, told GamaSutra that such tactics may infuriate gamers, but are necessary in today's business climate.
"I understand why there's a second sale, but I'm not always excited about it. Look, this has been a tough couple of years. People have not been making money, and I think the used-games business has been having a huge impact in that," he said. "I'm happy to debate merits, pros, and cons with folks at GameStop and have that discussion because again, I've sat on the other side and I've seen what can happen. People need to see a way to monetize that second sale."
This is a problem that's been debated since before I traded up my old Atari 5200 for an 8-bit NES back in grade school, but now it really seems to be coming to a head. Considering how much games — especially blockbuster titles — cost to develop, test, manufacture, market and ship, it's almost easy to justify the current release prices hovering around $60 (old Super Nintendo and Genesis cartridges were anywhere from $40 to almost $70 back in the day).
But does that mean GameStop, targeted by virtue of being the largest such reseller, can continue to ignore the damage it is arguably doing to the industry while making gamers pay through the nose for a used, recent release? An easy fix would be to allow publishers a percentage of resales, but that would be such a monumental legal and logistical undertaking that it's almost not worth it, and it would surely make that 13.3 percent net profit evaporate without even more price increases.
Of course, the real specter for GameStop and publishers alike is not the resale of games, but the death of physical media for consoles entirely. I suspect this is a stumbling block, as well, in the development of the next generation of consoles: The technology to have download-only titles is there — I just received an advance download code for Limbo on XBox Live Arcade, in fact — but still is not yet ubiquitous enough to warrant a full commitment to the model. While publishers and developers fret about the timing, GameStop heaves a sigh of relief while living on borrowed time as a bricks-and-mortar business.
Maybe that's what the unnamed gossip hound at Develop was hinting at. Perhaps GameStop is looking to position itself as the practically exclusive distributor of digital content, too. That would surely keep the company alive whenever the eighth generation of consoles debuts.
They just have to figure out a way to overcharge you for it.
— Joshua Gillin writes about video games and entertainment news for tbt*. Feel free to challenge his opinions at email@example.com.