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Nearly 1 in every 3 game sales at GAME Group is pre-owned

By on April 22, 2009
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Game Group announced its preliminary results today and for the first time separated out the gross margin of its pre-owned sales. At the revenue level, roughly one in every three pounds spent on a game is spent on a pre-owned title, and as the table below shows, the margins are nearly double those of new sales.

Game Group Gross Margin

New hardware and software

22.3%

Pre-owned

39.1%

Peripheral and other

31.4%

Total

26.2%

53 weeks ended January 2009

I imagine that GAME is trying to justify why it participates in the trade-in business (margins at close to double the new hardware and software business) but it is being a little disingenuous:

  • New hardware has lower margins than software, but GAME lumps them together(although it does break out the revenue split: hardware £555.4 million, software £873.8 million)
  • I understand that most major games retailers make substantial profits not from the selling of new games or hardware but from charging publishers for in-store marketing: gondola ends, window promotions, that sort of thing.

On the other hand, as the chart below shows, GAME not only makes more revenues from new software than pre-owned (44.3% versus 17.9%) but last year, new software growth outstripped pre-owned sales growth, albeit only just. That’s a surprising figure given how much hysteria there is about the way in which pre-owned sales are cannibalising the new software market.

 

2009

 

2008

 

YoY

 

(£m)

(%)

 

(£m)

(%)

 

growth

New hardware

555.4

28.2%

 

466.2

31.2%

 

19.1%

New Software

873.8

44.3%

 

633.8

42.5%

 

37.9%

New hardware and software

1,429.2

72.5%

 

1,100.0

73.7%

 

29.9%

 
Pre-owned

353.4

17.9%

 

257.3

17.2%

 

37.3%

Peripheral and other

189.3

9.6%

 

134.6

9.0%

 

40.6%

Total

1,971.9

100.0%

 

1,491.9

100.0%

 

32.2%

Finally, although GAME didn’t break it down explicitly, Gamesbrief has calculated the gross profit by product line.

Gross profit

(£m)

 

(%)

New hardware and software

318.7

 

61.7%

Pre-owned

138.2

 

26.8%

Peripheral and other

59.4

 

11.5%

Total

516.3

 

100.0%

Overall, I’m slightly surprised a) that pre-owned is such a small part of GAME’s revenues and profits and that it is not growing faster in these straitened economic times.

About Nicholas Lovell

Nicholas is the founder of Gamesbrief, a blog dedicated to the business of games. It aims to be informative, authoritative and above all helpful to developers grappling with business strategy. He is the author of a growing list of books about making money in the games industry and other digital media, including How to Publish a Game and Design Rules for Free-to-Play Games, and Penguin-published title The Curve: thecurveonline.com
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