A Look Inside the Profitability of Used Games

March 17, 2010 -

If any doubt remains about how lucrative the used videogame market is, news from a company that specializes in the field should remove such misgivings.

A Maryland-based company called Gamers Factory completed a public stock swap with City Language Exchange in late February, while simultaneously executing a private placement with investors that netted the company $3.9 million. The merged company now operates under the name of Game Trading Technologies and is public, trading under the symbol GMTD on the OTC Bulletin Board.

Armed with the new funds, Game Trading Technologies just acquired more than 320,000 used videogames and accessories from a “national retail firm.”

The company brings a high-tech component to the used videogame business; its “game trading engine” provides up-to-date, real-time market pricing for over 10,000 videogame and consoles. The firm says it has “relationships” with GameStop, Best Buy, Wal-Mart, GameFly, Target, Toys ‘R’ Us, Blockbuster, 7-Eleven, eBay and Costco. These companies also “may use” GTT’s game trading engine.

The ability to go public in such turbulent times should provide some inkling of the company’s profitability and indeed, Game Trading Technologies posted revenues of $36.7 million in 2009, up from a 2008 total of $17.0 million. Net income also skyrocketed in year-over-year results, rising from $325,000 in 2008 to $1.74 million in 2009.

All in all an interesting snapshot of the used game market, especially in light of how tight-lipped GameStop is over revenues it derives from the sector.


Comments

Re: A Look Inside the Profitability of Used Games

The profitability is disappointing, as I hate used games. It bothers me that the used game markets gets bigger every year. I feel this way because, of all the people involved in a game, the ones who deserve the money the most, get the least overall; and this is doing nothing but punishing them.

Re: A Look Inside the Profitability of Used Games

Once everyone realizes the value of a website like Goozex.com, the customer will stop getting screwed with GameStop or [insert used game seller]. It baffles me that the gamer is stupid enough to trade in games for such little money.

With Goozex, say I buy Bad Company 2 and I don't like it (God forbid)... I put it up for trade on the site and I get 1000 points (equivalent to $60) to get another brand new game. Since Bad Company 2 is high in demand, it's gobbled up. No more getting $20 from GameStop for a hot game that they'll turn around and resell for $50.

Feel free to check it out, I've saved so much money on used games already with this.

http://www.goozex.com/referral.asp?idr=6194647584958

 

Re: A Look Inside the Profitability of Used Games

You can do pretty much the same thing by selling a hot used game on ebay and you get real money.

Some people just want the instant gratification.

Re: A Look Inside the Profitability of Used Games

Great, now industry types are even more convinced that they need to kill the used market.

Re: A Look Inside the Profitability of Used Games

A games store dose just that pushes game sales, if you take away their make profitability in used sale you remove the store from existence, remove EB/GS and any other game retailer big or small. Would that hurt publishers any? Now I do not mind taxing the sale of used games, digital storage devices,blank discs and internet service 10% and dishing it out to the media industry as long as fair use is expanded to protected the individual to share freely as long as they do not make or move any money off it.

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Re: A Look Inside the Profitability of Used Games

Actually, the core of Game Trading's business model isn't really buying and selling on the second-hand market. They're actually a service provider that offers other retailers the use of their proprietary "market making" software and algorithm technology to set real-time price quotes on used games, consoles and accessories. That's where they make their profits. 

Re: A Look Inside the Profitability of Used Games

Well when a place like EB buys used copies of new release games for maybe au$20-25 and sells them for au$90-100, its not too hard to make an educated guess as to the profit margin.

New game RRP is $100

Week old game bought from user at $20

Week old used game sold for $90

EB pockets $70 and the developer loses a profitable sale

 

I can see why the industry claims that used game sales are a threat, just such a shame they seem intent on pinning the blame on the end user rather than the real crooks in the matter

Re: A Look Inside the Profitability of Used Games

The problem with this assessment is that it assumes that every transaction is like that and it ignores the piles of copies of used games that they took in and will likely never sell, or sell at a loss, and they have to pay to warehouse, insure, and the opportunity cost of having those games take up space on the shelves.

Don't misunderstand, I'm not saying that used games aren't profitable, obviously they are, but everyone looks at the most profitable case and assumes it's like that across the board, and it isn't.

Re: A Look Inside the Profitability of Used Games

On top of that is subsidizes the New games market. Retailer profits on New games and systems are very narrow. Add on top of that price drops of games and systems and that profit get's eaten pretty quickly. So any profit from used games has to go into recovering costs associated with stocking new games.

Big box stores like Walmart, Target and Best buy don't have to worry as much because they carry enough other merchandise to cover those costs without having to deal in used games.

E. Zachary Knight
Oklahoma City Chapter of the ECA
http://www.theeca.com/chapters_oklahoma

Re: A Look Inside the Profitability of Used Games

I really don't feel there are any "crooks" in this. The RRP is higher that the perceived value of the product - $80 and $90 respectively. EB gives the users options to buy the product at the cost in which they value it.

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