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Retail

Upgrading to new consoles could generate $2.5bn in credit at GameStop

Upgrading to new consoles could generate $2.5bn in credit at GameStop

Mon 03 Jun 2013 8:07am GMT / 4:07am EDT / 1:07am PDT
BusinessRetailE3 2013

US retailer likely to see busy trade-in period at launch of new hardware

Consumers trading in current generation games and hardware for the new Xbox One and PlayStation 4 consoles will generate almost $2.5 billion in credit at GameStop.

That's according to Colin Sebastian at Baird Equity, who met with GameStop management last week to discuss diversifying sales through the pre-owned market, as well as growth in the mobile sales business.

Microsoft's public-facing message on the Xbox One's support for used games has lack clarity, with an expectation that those who buy games second-hand will have to pay a significant activation fee, which could also apply to borrowed or rented games.

Whether new policies will disrupt traditional retailers remains unclear at this point, although GameStop does have leverage with Microsoft - it's responsible for 50 per cent of Xbox 360 sales in the US, boasts a member base of 30 million people and 24 million consoles in its successful Power Up rewards program.

"Used inventory tends to increase into platform launches, and we estimate that GameStop could create nearly $2.5 billion in credits for consumers upgrading to new platforms," suggested Sebastian.

Shares in GameStop have fallen roughly 14 per cent since the lack of clarity on used games following Microsoft's Xbox One reveal. More visibility on second hand policies from Microsoft and Sony is expected at E3 next week, but in the meantime "shares will likely remain choppy near term from headline and sentiment risks".

GameStop has also indicated that mobile device sales account for 10 per cent of operating income even with a limited roll-out across stores, and the mobile market is a multi-billion dollar long-term opportunity for the retailer that will help offset some decline in used games.

5 Comments

Jade Law Senior concept artist, Reloaded Productions

72 291 4.0
Who are the analysts that pull these figures out of thin air?
I can only speak subjectively here but..
Regarding the xbox one.. so far cod and footballz arent exactly a good reason to trade in my 360 and give up my current library of games. Especially when I get nothing for all the downloaded games Ive bought over the years.
I feel like a lot of people will be inclined to keep their current 360s considering theres no backwards compatability.

Ofc theres always going to be a lot of people who do trade in, but given that the 360 is the most popular console of current gen im not sold on the idea people will be running to replace it. Xbox one will have to live alongside the 360 in my home if i even pick one up.

Posted:A year ago

#1

Paul Jace Merchandiser

939 1,418 1.5
I'm with Jade. I'm not trading in my 360 or my PS3. They are the only systems that will play all of my current gen downloaded games and substantial amount of retail games. I actually have two of each system, a launch model and both respective's slim model. But unless Gamestop offers some deal of a lifetime I plan on keeping all four. Now my Wii on the other hand....

Posted:A year ago

#2

Greg Wilcox Creator, Destroy All Fanboys!

2,193 1,170 0.5
Ah, those Dr. Evil numbers, again...

Anyway, I have the feeling that perhaps Microsoft's big surprise plan for the 360 is a huge price "drop" that's actually one of those disguised contract deals with a price that makes it impossible to pass up to those current and future owners not quite ready to make the transition. maybe $79 for a re-re (re?) designed model that plays disc games but may also have a nicely sized HDD to store a good chunk of DLC and other content. Maybe something that looks close to the boxy new model so they can go together in an entertainment center and maybe coming packed with some "free" content...

Eh, we'll see - I hate speculation anyway, as my goofball ideas are almost always better than what eventually pops up at these conferences...

Posted:A year ago

#3

Ian Brown IT Developer / IT Infrastructure

107 26 0.2
Trade in my Xbox 360 and lose all of my Arcade games and any backwards compatibility...nah. To be honest I'm only looking at the PS4 after MS seem to be on a mission to cull its own market.

If anything I'll probably pick up one of the smaller 360's as a replacement for my aging "Arcade" console.

Posted:A year ago

#4

David Serrano Freelancer

300 272 0.9
Methinks the schemers are counting their chickens before they've hatched.

Posted:A year ago

#5

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