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Sony patent speculation leads to GameStop share drop

Analysts call wary trading an "overreaction" and doubt limitations to 2nd hand market

GameStop's share prices closed at a loss of five per cent last night after speculation over a Sony patent filing regarding second hand games affected trading.

The retailer's stock has fluctuated considerably over the last six months, climbing over the Christmas period before dropping by $1.30 a share to around $24.40 over the course of yesterday's trading.

The news of, and rumours surrounding, yesterday's patent centred around a tech patent which would potentially see Sony closing out the second hand game market by using RF tags to tie discs to a single console.

Despite Sony refusing to comment on the patent filing, many assumed that the next PlayStation would be fitted with the tech, a move which would be a considerable blow to GameStop's used game business.

Various analysts have advised on the phenomenon, with most urging that a pinch of salt be taken with any suggestion that Sony could be looking to shut down second hand sales entirely, something which the company has previously said it has no interest in. In fact, given that a similar cycle of news and share price damage occurred before the launch of the PS3, many have labelled the GameStop stock as a smart buy before the new console cycle begins.

"While it is possible that Sony intends to block the playing of used games, we do not think it is a likely result," read a note from Wedbush analyst Michael Pachter.

"Perhaps most importantly, Sony is on record as saying that it has no desire to limit consumer choice. Our more rational view is that Sony intends to put the ID matching technology into its consoles to provide individual publishers with the ability to block the playing of used games. The news has negatively impacted GameStop shares, and we think the reaction is overblown."

Whilst the market in second hand games is considered by many to be damaging to the business of both platform holders and publishers, many retailers still consider it an important source of income, leading to both tensions and attempts at commercial bridge-building between the two parties.

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