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.

Until lobbying is a hanging offense I choose anarchy! CP/IP laws should not effect the daily life of common people! http://zippydsmlee.wordpress.com/

Copyright infringement is nothing more than civil disobedience to a bad set of laws. Let's renegotiate them.

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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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A house is not a home unless it contains food and fire for the mind as well as the body. Benjamin Franklin
 
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MechaTama31I buy stuff off the eshop because it gives me the convenience of a flashcart without the guilt.09/23/2014 - 5:03pm
Montewell thanks for the info Eisen; try that the next time i need something off the eshop09/23/2014 - 3:54pm
james_fudgere: MP, i've sent tech support a note - thank you :)09/23/2014 - 3:14pm
IanCNah that wasnt directed at you Andrew :)09/23/2014 - 3:00pm
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Andrew EisenOh hell no. No, it took Nintendo a dog's age just to get to the point its competitors have been at for a while! (And it's still not there yet, in a lot of respects.)09/23/2014 - 2:26pm
IanCSame as PSN handles it, fi you are trying to say only nintendo do that.09/23/2014 - 2:23pm
Andrew EisenYou have to try to purchase something first. Pick a game, hit purchase and if your wallet doesn't have enough to cover it, you'll be given an option to "add exact funds" or something like that.09/23/2014 - 2:05pm
MonteI have seen no option for that on my 3DS; anytime i want to add funds it only gives me the option to add in denominations of $10, 20, 50 or 10009/23/2014 - 2:03pm
IanCWhat Andrew Wilson said. PSN is the same when you make a purchase over a certain price (£5 in the UK)09/23/2014 - 2:02pm
Andrew EisenNeither eShop charges sales tax either. At least in California.09/23/2014 - 2:00pm
Andrew EisenBoth Wii U and 3DS eShops allow you to add funds in the exact amount of whatever's in your shopping cart. If your game is $39.99, you can add exactly $39.99.09/23/2014 - 1:57pm
Infophile@Matthew Wilson: As I understand it, any regulations to force tax online would also set up an easy database for these stores to use, minimizing overhead.09/23/2014 - 1:30pm
MonteReally, the eshop just does next to nothing to make buying digitally advantagous for the customer. Its nice to have the game on my 3DS, but i can get more for less buying a physical copy at retail. And that's not even counting buying used09/23/2014 - 1:18pm
MonteIanC, The Eshop wallet system only lets you add funds in set denominations and the tax makes sure you no longer have round numbers so you ALWAYS loose money. A $39.99 game for instance requires you to add $50 instead of just $4009/23/2014 - 1:13pm
Matthew Wilsonbut thats just it those sites, even the small ones, sell all over the country.09/23/2014 - 11:12am
 

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