You remember when your local video store made all of its money off of late fees? And then Netflix and video on demand came around and all that money washed up. It was fun while it lasted, but now that money is gone.
The rise and fall of the video rental store could be a map of success and failure for GameStop’s market for used video games. That’s what the market thinks as the company’s stock tumbled after Best Buy, Toys ‘R’ Us, and Amazon announced they’re all entering the used video game market. Up until now, GameStop more or less cornered this market. Bring your old video games you don’t like playing anymore and we’ll give you a new one or another used one. It was a very lucrative business for GameStop as 44 percent of its gross profits came from the buying and selling of used games.
GameStop isn’t deterred by the announcements by competitors. They’re banking on its relationships with customers and that people want instant gratification. Amazon’s model is to give customers the option to trade in used games for store credit to buy anything. I think Amazon will be hugely successful. Many of us just give our games away to Goodwill or try to sell them at garage sales. And I believe we are willing to wait. I’ve traded in books to a local book store in my area, Green Apple Books, and I’ve got about $40 credit I’ve yet to use.
Yes, in some cases people want instant gratification, but in other cases we can wait. And with the multitude of options of ways we can entertain ourselves, I think most of us are willing to wait for a game as we amuse ourselves with all the other games, movies, and on demand movies we have access to.
Good Morning Silicon Valley has a great write up that I highly recommend.
This news item is for the Spark Minute week of 3/9/09 which can be heard daily on Green 960 and 910 KNEW in San Francisco, CA.
