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GameStop logo (Photo credit: Wikipedia)

This article over at CNET strikes a chord with me, so I figured I would make this my first post on my new blog.While I was growing up in the late 80s and early 90s, buying new games as a kid back then was wishful thinking.  If I got anything new, it was during Christmas or a birthday, or at the absolute most I would save up every penny I got and put it towards a game I really wanted.

Most of the time, though, my games came from rental places.  I rented games like no tomorrow.  It did help that I had a sibling who worked at a Movie Gallery, so I was able to get the games for free or cheap, but even when that source ran out, I still rented games whenever possible.

Fast-forward to my teenage years, and I started moving towards the used game market.  I didn’t have a local GameStop, though, so for me it was buying the older games that Movie Gallery was selling off.  When I went to college, though, I discovered GameStop and found my hobby picking up steam again.  Most games I experienced were used, and not new.

Nowadays, I sometimes buy used games.  Most of my gaming content, though, comes from online purchases through Steam or upgrades to MMOs bought digitally.  I do play games on my cell phone too, so there is that digital ecosystem that I purchase through.

I say all of that to say this: most of our content nowadays comes from online purchases.  Was it only a matter of time that this moved to the console systems?  I honestly believed that most console systems would move to a digital distribution system in the next generation of consoles, and remove physical media entirely.  Not only would this (hopefully, although doubtfully) lower prices, but it would also absolutely destroy the used game industry, which even Best Buy just got into.

It appears now, though, that console makers are going to stick to physical media (maybe offering additional options through digital), but are trying to find ways to circumvent the use of used games on their systems.  I was already prepared to mourn the loss of used games; I grew up using them through various means to get my gaming fix whenever I could.  But content is being distributed in vastly different means nowadays, and I can see why console makers would want to get in on that.  When you purchase a game on the iOS App Store, you can’t trade it in, you can’t sell it, you can’t lend it to a friend (you can buy another copy and have it sent as a gift in some cases), you can’t buy it used at all.  It means all purchases have to go through Apple, which means Apple makes money for them all.  Sony, Microsoft, and Nintendo make nothing when a used game is purchased, and they would rather not have that happen.

GameStop supposedly is rumored to be taking a stand against these actions, claiming they will not carry the next-generation Playstation if it has this technology.  The problem, though, is that almost all of the console makers will be trying to add this tech to their consoles, so eventually GameStop won’t be carrying any of the new consoles.  If they did go through with this, it would be a test of whether or not they carry the weight of game sales.  More than likely consumers will find the console through other carriers, causing GameStop a serious loss in revenue.  I don’t think GameStop could carry out their claim and stay in business.

Rental games will probably be affected as well.  I do not see any way for console makers to block off purely used game use and yet somehow allow rental games to proceed.

As with most things in life nowadays, this all boils down to money: who’s getting it, who’s not getting it, and who wants to get it.  Doing this, though, will affect far more than just the consumer, putting possibly thousands out jobs over time.  Realistically, though, this shift was probably going to happen anyway.

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One Comment

  1. GameStop supposedly is rumored to be taking a stand against these actions, claiming they will not carry the next-generation Playstation if it has this technology. The problem, though, is that almost all of the console makers will be trying to add this tech to their consoles, so eventually GameStop won’t be carrying any of the new consoles. If they did go through with this, it would be a test of whether or not they carry the weight of game sales. More than likely consumers will find the console through other carriers, causing GameStop a serious loss in revenue. I don’t think GameStop could carry out their claim and stay in business.

    I was a store manager for EB Games and GameStop for seven years. However, I left the company five years ago, so what I’m about to say may no longer apply.

    GameStop, like every retailer, sells the consoles themselves at a loss. There’s a 1 to 2% margin on the hardware, and when you factor in shipping, warehousing, and depreciation, it costs more to get the console to the consumer than the consumer pays for the system. The margin on new games is better, generally around 10%. That’s why EB Games and GameStop began focusing so much on used sales (where margins are 50% and higher), strategy guides (margins around 50%), the “Game Play Guarantee” (an “insurance” plan for the game discs that amounted to pure profit). If GameStop could only sell new merchandise, they would go out of business. There’s simply not enough margin in it.

    Would GameStop actually say to Sony, “No, we’re not going to carry the next PlayStation”? It could be a negotiating ploy to get more margin out of Sony, unlikely though that result would be.

    Yet, I think it would be Sony that would be more likely to play hardball with GameStop. Year after year at our manager conferences, Sony would say in their presentation, “We don’t need you. You’re not our biggest retail partner. Wal-Mart and Best Buy are more important to us than you.”

    In short, I think we could very well end up with a situation where GameStop doesn’t carry the next PlayStation and Sony first party games for it.

    Would that be bad for GameStop, though?

    The revenue hit wouldn’t be that great; there would be the loss of first-day sales on the console, but if you know in advance that you’re not going to have it, you’re not going to tell investors to expect it. There would be some revenue loss in game sales, too — people buy games when they buy the system, and they tend to buy games from where they bought the system — which was a concern when EB considered dropping the PlayStation 2 console in 2001, and that might cause GameStop to reconsider their position on the next PlayStation

    The big issue to GameStop may be in telling investors why they’re leaving money on the table by not carrying the system, but since a PlayStation that doesn’t play used games is incompatible with GameStop’s business model it would make sense not to carry it.

    All in all, I think GameStop would weather it. GameStop wouldn’t be making things easy on themselves by not carrying an important product, but things are so Darwinian at GameStop’s store level that managers would be forced to step up their game and work their customers.


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