As part of a plan to bolster its digital distribution offerings, GameStop may look to acquire or invest in an established company or service already involved in the sector.

At a recent analyst meeting, the videogame retailer outlined three ways to accelerate its digital distribution plans reports IndustryGamers: Increase in-store sales of online point cards, expand GameStop’s current digital distribution platform and make a strategic investment in or acquire a current provider of online games.

In an opinion piece in its newsletter, GamesIndustry speculates which companies/services make sense for GameStop to acquire. Metaboli, which purchased GameTap last year, might be one logical answer, as the French-based company would provide double the pay off for GameStop, offering a way into the European market in addition to its digital catalog of games.

The other acquisition possibility? GamesIndustry writes:

Unconfirmed industry scuttlebutt suggests that Zenimax - the parent company of Bethesda, which made headlines back in June when it acquired legendary PC studio id Software - is still on the acquisition trail, and has been making eyes at Half-Life creators Valve across the bar. Whether Bethesda, a hybrid developer / publisher itself, would want to keep Steam on board, or spin it out to a third party, is unclear - as are many other aspects of a potential deal…

A handful of game companies and retailers are listed within Newsweek’s Green Rankings list, which rates the Top 500 environmental companies in America.

While the list, with 500 entries, is hardly exclusive, each entrant was awarded an overall hard numeric score. The company that fared the best overall? Hewlett-Packard with a Green Score of 100, followed by Dell in second with a 98.87.

In the gaming (and related) business sector, Microsoft came in at #31 with a score of 83.79, followed by retailers Wal-Mart (#59) with a score of 80.38 and Best Buy (#61) with a score of 80.33. GameStop clocked in at #228, with a score of 71.37, with Electronic Arts (#381) and Activision Blizzard (#416) following. EA and Activision Blizzard had scores of 65.58 and 63.80 respectively.

Image via otherpower.com

On the surface, GameStop appears to be doing well, even gathering positive assessments from financial analysts on its prospects for the holidays in a weakened economic market.

But, according to an article on Gamasutra, GameStop Director Leonard Riggio has sold 2.3 million shares of company stock, netting him more than $60 million, and dropping his stake in the company from 6.9 percent to 5.5 percent. Riggio is also founder and board chairman of Barnes & Noble.

From Gamasutra:

"Unless he desperately needs $60 million," it appears that he doesn't think the stock is going to be performing very well, insider trading firm Form4Oracle co-founder Alex Romayev told financial magazine Barron's. "He's got a lot bigger stake in Barnes & Noble. Clearly he thinks selling GameStop is better than selling Barnes & Noble."

Even more interesting was a note at the end of the Gamasutra story:

But Romayev told Barron's that the last time Riggio made a GameStop shares sale not related to options, he divested just in time to avoid a 62 percent loss.

As noted by Joystiq, the ESRB is currently listing the upcoming PC version of Manhunt 2 with an Adults Only (AO) rating.

GamePolitics readers will likely recall that the console versions of Manhunt 2 generated a major controversy in the summer of 2007 when the game was banned in Britain and tagged with an AO here in the States. Rockstar subsequently released a toned-down version that earned an M (17+) rating for the U.S. market.

That was a critical milestone, because the Big Three console makers won't license AO-rated games for their systems, which makes it tough for a publisher to earn a return on its investment. That's why you don't see any AO-rated console games. While the open architecture of the PC negates licensing concerns, an AO-rated Manhunt 2 would still get thumbs-down from major retailers like GameStop and Wal-Mart.

That means that Rockstar is either planning a digital distribution campaign for Manhunt 2 or that it will edit the PC version - as it did with the console editions - to earn an M from the ESRB. Of course, there is a third scenario: Rockstar could ship an M-rated version to retailers while distributing an AO-rated version online.

We wonder how Valve might react to handling an AO game if its Steam service, which currently distributes Rockstar's GTA IV online, is under consideration as a potential digital distribution source for Manhunt 2.

The used game debate rages on...

Joystiq reports that big box retailer Best Buy is testing a used price matching program for new releases at its store in West Jordan, Utah (see pic).

In the pilot deal Best Buy will sell customers new games at used prices offered by GameStop and Game Crazy. This should save game buyers at least five bucks, and maybe more for certain games - and saving money is always a win for consumers.

There's more discussion of the Best Buy test program at CheapAssGamer.

A pair of video game websites weighed in on the controversy over used game trades this week.

Crispy Gamer serves up a well-reasoned two-parter by David Thomas:

The price of a game is, at the end of the day, exactly the balance point between what someone is willing to pay and what someone is willing to sell... The trouble is, the publisher wants back in on the deal, and goes out of its way to convince you that it still owns a piece of that junk you bought from it...

 

The used market, it turns out, isn't screwing [game] publishers... Instead, the used market helps keeps people in the game by letting them play games that they wouldn't otherwise bother buying... Used games help make game fans out of game tourists...

Meanwhile, Destructoid's Jim Sterling has a bit of a rant on the topic:

Have you considered what happens to a publisher when you buy a secondhand game? They lose money! Oh, you might argue that publishers already make money off the original sale of the game, but they don't! In fact, whenever a secondhand game is bought, the original $60.00 transaction disappears from our corporeal plane of existence, erased from history as if it never happened...

The main issue with secondhand games is that no other industry ever has to deal with a similar problem. Think about it -- have you ever bought a used car, or even heard of a store selling used clothes or music? Of course you haven't! The very idea is preposterous...

In a move that has been anticipated for some time, big box retailer Best Buy has jumped into the used game business, reports gamesindustry.biz. Best Buy will apparently be using a kiosk system similar to that now employed by Wal-Mart.

Used game trade leader GameStop is not bothered by the new competition, however. A spokesperson for the retailer told the Fort Worth Star-Telegram:

GameStop understands that trading in used games and consoles is a highly-assisted activity. We are very confident in our business model that allows our expert associates to help consumers trade in product, a fact not addressed with a self-serve process.

Meanwhile, gi.biz reports that analyst Colin Sebastion of Lazard Capital Markets sees no threat to GameStop with Best Buy's move into used:

While we believe that Best Buy’s entry into the used video game market will create a new overhang on shares of GameStop, we expect Best Buy’s initiative to expand the used videogame market rather than take significant share from the speciality channel.

GP: With the Best Buy announcement we can expect the obligatory round of hand wringing from certain game publishers and developers.

If you want to trade in your used games in Broward County, Florida, prepare to give up your thumbprint.

The Broward-Palm Beach New Times reports that the local sheriff's office began requiring game traders to submit to thumbprinting in October, 2008:

Broward County Sheriff's Office spokeswoman Kayla Concepcion said the new requirement comes straight from the Florida Legislature, which enacted a law... that treated video games like second-hand goods sold at pawn shops. Now any store buying used video games has to collect the thumb prints, along with a bunch of other personal info about the seller.

The annual report of game publishing giant Electronic Arts landed in GP's inbox this morning. Typically, reading through these things is a surefire remedy for insomnia, but EA's contains a few tidbits worth mentioning.

1.) EA's failed bid to gobble up Take-Two cost the company $21 million:

As a result of the terminated discussions [with T2], we recognized $21 million in related costs consisting of legal, banking and other consulting fees...

2.) EA uses DRM (you knew that) and is watching for piracy online:

We typically distribute our PC products using copy protection technology, digital rights management technology or other technological protection measures to prevent piracy... We are actively engaged in enforcement and other activities to protect against unauthorized copying and piracy, including monitoring online channels for distribution of pirated copies, and participating in various industry-wide enforcement initiatives, education programs and legislative activity around the world.

3.) Only 3% of EA employees are unionized, and they all work for DICE:

As of March 31, 2009, we had approximately 9,100 regular, full-time employees, of whom over 5,100 were outside the United States... Approximately 3 percent of our employees, all of whom work for DICE, our Swedish development studio, are represented by a union, guild or other collective bargaining organization.

4.) GameStop and Wal-Mart are EA's biggest customers; each accounts for 14% of EA sales:

Worldwide, we had direct sales to two customers, GameStop Corp. and Wal-Mart Stores Inc., which each represented approximately 14 percent of total net revenue for the fiscal year... the concentration of our sales in one, or a few, large customers could lead to a short-term disruption in our sales if one or more of these customers significantly reduced their purchases or ceased to carry our products...

5.) EA worries about game content legislation and its potential effect on sales:

Legislation is continually being introduced in the United States... for the establishment of government mandated rating requirements or restrictions on distribution of entertainment software based on content... Other countries have adopted or are considering laws regulating or mandating ratings requirements...  Adoption of government ratings system or restrictions... could harm our business by limiting the products we are able to offer to our customers...

6.) EA worries about falling victim to a Hot Coffee incident but has taken steps to prevent it from happening:

If one or more of our titles were found to contain hidden, objectionable content, our business could suffer... Retailers have on occasion reacted to the discovery of such hidden content by removing these games from their shelves, refusing to sell them, and demanding that their publishers accept them as product returns.

We have implemented preventative measures designed to reduce the possibility of hidden, objectionable content from appearing in the video games we publish. Nonetheless, these preventative measures are subject to human error, circumvention, overriding, and reasonable resource constraints.

Kotaku reports that a GameStop corporate policy of selling games played by store employees as brand-new may be a violation of federal law:

GameStop's "check-out" policy, confirmed to Kotaku by a number of the chain's managers and employees, could fall under scrutiny of the Federal Trade Commission.

Kotaku cites GameStop's policy, which it reports that it obtained from several employees of the leading video game retailer:

Associates are allowed to check out one item of store merchandise for personal use for up to four days. Merchandise checkout is a privilege, not a right, and may be revoked at any time...

If the product is returned in unsellable condition, or if anything is missing from the package, or if the product is not returned, the Associate must purchase the product...

When asked by Kotaku, the Federal Trade Commission declined to say whether GameStop's practice of selling employee-played games as new might be considered deceptive. The FTC also declined to say whether it was looking into the practice.

This week's news that Amazon, Toys R Us and Best Buy are all jumping into the used game business apparently got well-known developer David Perry (Earthworm Jim) fired up enough to post a bit of a rant on his blog.

Like many others on the developer/publisher side of the business, Perry seems to feel that used game trades are drinking his milkshake. We don't see it that way. Indeed, quite the opposite. Low cost game buying options help build the pastime.

In addition, Perry has specific trust issues with trade-happy retailer GameStop:

"Sure, [GameStop,] let me go make you exclusive content, let me advertise to send buyers into your store, let me pay to put standees and posters everywhere, so you can sell them used games and stab our industry in the back." Now you've shown that the industry won't stand up to you, everyone else can copy this practice.

Trust me, I know these guys I've been in ALL their offices. I just don't hide, and kiss their behinds...

Where the heck is the ESA when we need them? They should be all over this like a rash. Based on the emails I get, you already have the support of the industry!

At least Perry doesn't seem to want to deny gamers the right to dispose of their used games in some fashion:

The gamers however have the right to sell their games to anyone they like, or trade them. I have no issue with that aspect. I've bought plenty of rare games on Ebay, and I have no problem with Ebay, because we're not doing co-promotion with them. Ebay are not our retail partners.

Amazon's new used game plan offers gamers a clear jump in trade value, reports What They Play.

The site analyzed a variety of games across multiple systems and concluded that gamers can get more in trades with Amazon than they do currently with GameStop.

Here's are some examples:

Also of note, Amazon credits can be used for any product offered by the huge online retailer. GameStop credits limit traders to video games and associated merchandise.

Despite what would appear to be a competitive advantage for Amazon, GameStop CEO Dan DeMatteo told Edge Online he was unconcerned about his company's new competitor:

I give the probability of this working at zero... [We tried it...] Electronics Boutique also tried it and failed. There's no consumer acceptance. With consumers, there is an immediacy for currency when they want to buy a new game.

It didn't work for us, and I can't see it working for them.

Investors weren't so sure. News of Amazon's entry into the used game business caused GameStop stock to take a beating on Wall Street yesterday, dropping 14%.

If you're the kind of consumer who finds value in trading used games, for a long time GameStop has been your only option,

Now that other major retailers like Toys R Us, Best Buy and Amazon.com are getting into the used game business, where will you make your trades?

Be sure to vote in the GamePolitics poll at left...

GameStop CEO Dan DeMatteo can't be happy with the news that his firm, which has owned the used game space for years, suddenly has not one, but three major competitors.

Indeed, financial website The Motley Fool reports that the entry of Toys R Us into the used market will hurt GameStop and likely force the retailer to give consumers a better deal - and we're all for that.

On the publishing side, used game sales hater Ben Feder, President of Take-Two Interactive, must be absolutely frothy now that four major retailers - not just one - will be pushing pre-owned copies of GTA IV.

While the news that Toys R Us, Best Buy and Amazon are all - rather suddenly - entering the used game market is terrific for consumers, the timing seems a bit... odd. How do all three happen to get into used games in the same week?

GamePolitics put the question to Entertainment Consumers Association President Hal Halpin, who, in a past life, founded a trade group for game retailers. In other words, he knows the retail side of the business quite well. Here's what Hal told us:

Toys R Us and Best Buy getting into the used games business makes sense because they really serve very different markets than GameStop, demographically speaking. Amazon getting in is especially bright because of their model - they're positioned really well to cut the market wide open.

 

For Toys R Us and Best Buy, it's likely just coincidence [that news of both came this week]. They're victims of the same economic turmoil as everyone else and looking for growth areas. They have examined the used business before, but [then] it was likely too far astray from their core. Now, it's a matter of exploiting high-margin business extensions, of which Used clearly is one.

 

For Amazon, my guess is that it's much more organic a move. I'm excited to see them invest so heavily in games and with gamers. Overall, it'll be really interesting to see how the landscape is changed by the news. And the bottom line is that it's great news for consumers.

Meanwhile, analyst Michael Pachter of Wedbush-Morgan offered his take on the developing situation and agreed that used games are a smart move for Amazon.

It's obviously a great business.
 
Amazon is the only one that matters. The sweet spot of consumers who trade in games are 13 - 18 year-old boys, and they don't typically shop at Toys R Us or Best Buy, but they most definitely frequent Amazon.
 
It seems to me that the Amazon offer is pretty compelling, insofar as there is no cost to ship games to Amazon, and there is an opportunity for gamers to trade in games and purchase other stuff on Amazon.
 
With that said, Amazon's market share of NEW games is only 2 - 3% (around $200 - 300 million annually), and GameStop's USED game business is over $2 billion.  That means it will take a LONG time for Amazon to make a dent in GameStop's business

GP: Going forward, the developer/publisher response will be something to watch. Will a quartet of major retailers selling used games cause the industry to stop rattling their sabers (as they have been doing toward GameStop of late)? Or will it motivate them to fight harder?

FULL DISCLOSURE DEPT: The ECA is the parent company of GamePolitics.

The great debate over used game trades rages on...

Sure, GameStop execs support used game trades; it's a huge piece of their business model.

But it's especially nice to see a member of the game publishing elites step up and support the consumer's right to choose.

Along that line, gamesindustry.biz has a multi-part interview with MS exec Chris Lewis, who comments thusly on used trades:

I'm a fan of the [gaming] ecosystem overall. I can see the positive in [used game trades], because I can see that what you then get is more and more people touching, playing, experiencing a game that they may not otherwise have access to.

I think you've got to try and extract some positive from it, and that's undoubtedly a good factor - a positive swirl of ecosystem that results. Clearly it's a reality, and certain retailers are very focused and spend a lot of time on it. It's good business for them.

 

I think things like premium downloadable content, and that kind of thing, will ultimately play a part in used games - and that's not me saying that it's a great way for us to try and minimise that. I think it will be a great enhancement to the way that people experience games. If some additional content is available via the Xbox Live service, for instance, that further enriches the game experience and might encourage folks to hang on their games for a bit longer.

GP: For showing a pro-consumer attitude on used game trades, we'll toss Chris a white hat...

Utah Rep. Mike Morley has officially introduced video game legislation drafted by disbarred Miami attorney Jack Thompson.

As GamePolitics previously reported, H.B. 353 would amend Utah's current Truth in Advertising statute. If passed, retailers who claim that they don't sell M-rated games to underage buyers could be held liable if they did. The measure would also apply to R-rated DVDs as well as tickets to R-rated movies.

The language of the amendment has changed slightly from that which GP reported on Sunday. It now reads:

[Deceptive trade practices occur when, in the course of a person's business, vocation, or occupation that person:]

 

(u) (i) advertises that the person will not sell a good or service labeled with an age restriction or recommendation to a person under the age restriction or recommendation; and (ii) sells that good or service to a person under the age restriction or recommendation.

For his part, Thompson issued a press release this morning which says that the purpose of the bill is to "punish major American retailers who falsely claim they do not sell Mature-rated video games and R-rated movies and movie tickets to kids under 17."

While Thompson claims that H.B. 353 has no free speech implications, that remains to be seen; the bill clearly targets certain types of media content.

As GamePolitics readers may recall, Thompson also claimed that his 2006 Louisiana bill was constitutional (it wasn't) and that Grand Theft Auto: Vice City was a "device," not a form of speech, (he was wrong about that, too).

So, please excuse us while wait for a real constitutional expert to weigh in.

Hearings on the proposal may begin as early as next week.

GP: Thanks to Nathaniel Edwards of LegalArcade.com for the artwork.

Can someone explain this to me?

Wasn't it just yesterday that video game industry trade group the Entertainment Software Association issued a press release high-fiving itself over record sales of game software in 2008?

Why then, today, do we learn that GTA publisher Take-Two Interactive is griping about used game sales?

Here's what the ESA said yesterday about its record-breaking year:

Overall computer and video game industry hardware, software and peripheral sales climbed to $22 billion in 2008, with entertainment software sales comprising $11.7 billion of that total figure—a 22.9% jump over the previous year— the Entertainment Software Association (ESA) announced today... on the strength of a December sales month in which industry revenue ($5.3 billion) topped $5 billion for the first time in any single month. By comparison, as recently as 1997, the industry generated $5.1 billion over the entire year...

And here's T2 CEO Ben Feder (left) whining (via Cowen analyst Doug Creutz) today:

"GameStop continues to aggressively push their used game business, which is having a meaningful negative impact on sales of new games," noted analyst Doug Creutz, following a meeting with Take-Two CEO Ben Feder this week.

"Management is frustrated with this trend and is examining ways to ameliorate the problem, which includes strategies around online play and downloadable content which extend the lifespan of AAA titles."

GP: We have to ask: how "meaningful" can the supposed "negative impact" of used game sales be with game publishers having just completed their best year ever?

Or, is this another case of a greedy media corporation trying to squeeze every last nickel out of its customers?

UPDATE: I should make it clear that "whining" is my characterization of Ben Feder's position. Doug Creutz merely reports on Feder's concerns in an investor's note detailing his Tuesday meeting with the T2 CEO.

Last week GamePolitics reported on a bizarre incident in which more than a dozen prominent game journalists were sent Animal Crossing: Wild World Nintendo DS cartridges which contained a racial slur.

MTV Multiplayer's Stephen Totilo, who broke the story, reports that he subsequently queried used game seller GameStop and the ESRB as to whether the Animal Crossing incident exposes a flaw in the system whereby embedded user-generated content might exceed the content rating.

Both GameStop and the ESRB view the Animal Crossing episode as an anomaly and deny a larger problem. MTV's Totilo writes:

ESRB spokesperson Eliot Mizrachi, told me... “Just as with online-enabled games that allow features like chat, ESRB ratings cannot anticipate and therefore consider user-generated content in the ratings we assign,” he wrote. “Besides, as you mentioned, saving content to the actual game medium is pretty uncommon in today’s games. Most games are read-only with the saved content being stored on the system and not on the game medium itself.”...

The ESRB may not have much reason to worry that questionable content will make it to consumers because gaming chain GameStop claims to be scrubbing the content from re-sold games. Chris Olivera, spokesman for GameStop, told me in a phone interview that his company has a “proprietary” process that wipes consoles and games clean before they are sold back to consumers...

GP: GameStop and the ESRB make a good case here. It's important to remember that the offending DS cart was not purchased through retail channels, but rather was mailed out by Nintendo's own PR department.

Aeropause wonders whether a by-product of GameStop's practice of displaying unwrapped game boxes inadverently exposes PC activation codes to would-be pirates.

The site's Joe Haygood writes:

A few weeks ago, I was out at a Gamestop.... I decided to pull the trigger on Quantum of Solace, the new James Bond game for the PC.  Of course, the only copy of the game they had was an open copy.  When I said yes to purchasing the game, I noticed the clerk only pulled out a DVD for the game. I asked about the manual and he said it was already in the box. 

 

Doesn’t sound too bad until you realize that the CD code for the game, and to use the Games for Windows Live service was on the back of the manual... 

 

I went back to the shelf and found three other games where the CD codes were smack dab in the package.  Games like Left 4 Dead, Mercenaries 2 and Spider Man Web of Shadows... With this in mind, I decided to canvas the other Gamestop stores in the area... I found at least 10 different CD codes for PC games.

Used game sales and trades have been much in the news of late, with some consumer-gouging game industry types decrying the practice.

But, as Gamasutra's Leigh Alexander reports, GameStop CEO Dan DeMatteo insists that game consumers should continue to have options once they've finished with a game. Here's what the CEO had to say on the topic:

I think [talk of banning used game sales] creates contention not only for us, yes, but also for the consumer. Anything that limits the transferability of a game from consumer to a friend of theirs, to selling it on eBay, to exchanging it and trading it with one of their friends, or selling it back to GameStop -- I think is a bone of contention with the consumer.

 

The consumer has been trained that there is a residual value to their video games. Also, we will give out approximately $800 million in credits this year -- trade-in credits that will go toward the purchase of new video games. The consumer, oftentimes and especially now, needs that residual value from those games as a trade-in to be able to afford a new video game.

GP: Admittedly, DeMatteo has a vested interest, since used game sales are a major part of GameStop's business model. However, from a consumer perspective, he's 110% correct in his comments.