October 01, 2005

Best Buy Testing Used Videogame Sales

Best Buy has confirmed it is testing used videogame sales in a few markets. Analysts have found four stores in Illinois and California that are trying it out. And it's not limited testing either, one store had 5000 used games for sale. A Wall Street analyst has said it expects Best Buy to roll it out to over 700 stores in the next 2 years. Our sources say the offering has more reasonable prices than EB or Gamestop.

Developers of games are not happy with this new development as it cuts into sales of new games. Publishers may be forced to sell games through digital distribution like the Steam interface Valve has been so successful with in sales of Half-life 2. However in Best Buy's defense, they have little choice but to compete as the merger between EB Games and Gamestop will create a used-game colossus. The used game business is very high margin as it rip offs kids selling stuff who don't know any better or don't want to deal with the hassle of selling games on eBay. The neat benefit of this service is any used games traded in at Best Buy will give you credits to buy other Best Buy merchandise, not just videogames.

Mark Rein, vice president of Epic Games, creators of the "Unreal" franchise as well as the upcoming Xbox 360 game "Gears of War," has vociferously argued against retail sales of used games in the past. The expansion of a major retailer into the field, he said, is disheartening.

"We pay to be in Best Buy's flyers," he said. "We pay market development funds. Publishers drive gaming traffic to these stores. To have them resell the games, with developers having no participation, that's just wrong. That's just fleecing us."

A substantial rise in used game sales may lead to the expansion of digital distribution -- in other words, downloading games rather than buying a disc. Valve Software saw tremendous success with this model for "Half-Life 2" last year. The game was sold two ways: Through traditional retail channels and via a proprietary digital distribution system called Steam. While Valve consistently declines to give hard numbers for Steam sales, founder Gabe Newell has said that digital distribution is responsible for half of Valve's revenues from the game.