Amazon Used Games Biz Predicted to Succeed
A new EEDAR report predicts Amazon's foray into used videogame sales will be "successful and profitable" thanks to the struggling economy but won't cut into GameStop's dominant position in the market.
GameStop will retain its place atop the used games market through its ability to offer "instant gratification" for users who want to trade in their old games, the report said. The current economic climate increases the appeal of game trade-ins to customers looking to cut back on entertainment expenses as well as retailers, who enjoy significantly higher profit margins on used game sales than on new. Amazon announced its entry into the pre-owned videogame market on March 5.
"Based upon our research, we believe Amazon's used program will be both successful and profitable," the EEDAR report said. "We also believe that most of Amazon's new business will come from the expansion of the used videogame software market rather than from stealing market share from competitors like GameStop, Game Rush, EBay, or Game Crazy."
Developers and publishers, many of whom are strongly against used game sales, may not be pleased by the news but the report notes that there's not much they can do about it right now. "The unfortunate truth for videogame publishers and developers is that retailers are in the driver's seat. With retailer's commanding control of the videogame retail environment, there is little that publishers or developers can do to curtail the sale of used videogames in the short-term," the report continued.
GameStop CEO Dan DeMatteo earlier predicted Amazon's test program for used game trade-in would fail, largely because it lacked the "immediacy" of GameStop's in-store program. Noting that GameStop had tried and failed with a similar program in the past, he said, "I give the probability of this work at zero." Nonetheless, GameStop's share price was strongly affected, dropping 20 percent in the immediate wake of the Amazon announcement.