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

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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

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.

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

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.

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