Pachter says Best Buy's new games at used prices program will fail

by Richard Mitchell on Aug 10th 2009 9:30PM

Best Buy surprised the gaming public last week with the revelation that it was testing a new pricing program that would see the retailer selling new games at used prices. Specifically, the test store in Utah will match the used game prices of both GameStop and Game Crazy. According to Wedbush Morgan analyst Michael Pachter, the program isn't likely to last very long.

"I don't think it will do well," Pachter tells Game Politics, adding that price matching forces Best Buy to "either cuts their profit per game in half, or wipes it out altogether." He expresses the opinion that Best Buy can't afford to chop $10 off the price of a $60 game, saying that such a practice won't be effective "in the long run." Furthermore, even if the program does take off, Pachter believes GameStop will simply lower its used game prices "to the point where Best Buy can't match without losing money."

He has a point, but, from the consumer perspective, it's hard to see a downside. Whether Best Buy's program succeeds or not, it still means lower prices, if only for a short time.

Source

Tags: analysis, analyst, best-buy, game-crazy, gamestop, michael-pachter, used-games

Reader Comments (91)

Dear God! It must be the end of the world! Patcher actually makes sense!

THE END IS NIGH!!

He watches over us... but who watches HIM?

The Comedian watches him, because this guy is a joke!

*ba dum tish*

Nah... Hes making sense about something that is complete common sense, from when i first read the article about best buy doing this I thought the same thing. Pachter still = Fail.

If he looked into Rorschach's face, he'd be confused.

Pachter is an genius for figuring this out. I would have never thought that selling games for less equals less profit.

Patcher must be an idiot. The gamer in all of us wants this situation to pan out. Big retail will hurt on both sides and benefit the consumer. Best Buy will sell us new games at 5-10 dollars off and then Gamestop will eventually be forced to sell their used games at reasonable prices and not at 100 percent profit.

Except Gamestop doesnt lower prices. New games costing the same or less than what Gamestop charges used hasnt stopped them before and its not going to stop them now. $55 is not hard for retailers to swallow, many places do it already and those that dont have sales worth $5-10 on new titles (not counting Gamestop of course).

He should have predicted that Gamestop will always screw people regardless of what competitors do.

so you rather have high prices than lower prices? the world has indeed gone mad.

Who cares about Best Buy? they make tons of profits, the can do this.

If they HEAVILY advertised this deal and every gamer knew about it. It would definitly take off. Imagine if they just cut $5 off every game in their library. I would exclusively go to Best Buy because MY GOD, I get 5 extra dollars. That's gas money right there.

+1 Pachter

Former Patcher Record = -125646546.
Current Patcher Record = -125646545.

"Furthermore, even if the program does take off, Pachter believes GameStop will simply lower its used game prices "to the point where Best Buy can't match without losing money.""

This. I was thinking about this earlier today. Best Buy is trying to sabotage Gamestop, and this could be the best way for Gamestop to fire back. Atm, most $60 games are being sold used for not even $5 less. If Gamestop began to lose business from this, they could lower the price for the used games no problem. Then Best Buy would have to price match that for a new game, and then they wouldn't really be profiting at all.

But if this does happen, at least we'll all be getting new games cheaper!

There is part of the equation you are all forgetting. If GS lowers their used game prices to underbid BB, I doubt it will come from their bottom-line. They will just buy back the used games from customers for less.

Status Quo - new game $60, used price $50-55, exchange value $35-40.
New program - new game $50, used price $50, exchange value $25-30.

This is not good for customers at all.

gib...

"New program - new game $50, used price $50, exchange value $25-30. "

Did you mean "new game $60"? Imo it'd be easier to compare 2 new $60 games...

And also, less than 2 weeks after Resistance 2 came out, I called Gamestop and asked how much I'd be able to get for it if I sold it. They said $22, I checked online and they were selling it for $54.99. I don't know where you're getting your numbers from, but I do get your point.

Either way, that wouldn't effect people who don't sell games to Gamestop. Well, it won't effect me at least. =P

I work at GameStop and would love to see Best Buys new program take off.

Best Buy doesn't make money off games anyway, so they can price match all they want. Can't reduce profit, if you don't sell anything to begin with.

GameStop needs to lower prices on used games. Even more so on games that don't even have a case. Used games are pure profit for GameStop, and it wouldn't hurt their bottom line selling them for less.

Someone buys a new game... $69.99 later. Trades it in for $40, but uses the money for another game(Forced to buy a game on the spot where I live.) So now GameStop will sell the game for $64.99.

The publishers are probably desperate to cut off used game sales too. I wonder if Best Buy cut a deal with publishers that the margin on every undercut used game sale would be born somewhat or entirely by the publisher. That would still be better for them than a used game sale that they don't make any margin on.

So when was the last time Gamestop lowered the price of a used game in response to competitors selling new games for cheaper?

Gamestop follows MSRP and nothing else. Gamestop will not lower prices of used games, they have more than enough suckers to take advantage of. If people start wising up then theyll probably just do more shitty trade-in promotions that trick people into thinking theyre getting a deal.

@ fox

I meant the price-matched cost of a new game would be the same as used, but the poor kids returning a game would be the ones feeling the biggest hit. You can replace the $35-40 in my example with $22 if you like, but that just means the tradein value would drop to $12 for a two week old game.

@ Eh, we're not talking about Gamestop lowering the price of used games just for the heck of it. We mean, Gamestop COULD decide to lower the price of their used games, therefore forcing Best Buy to price match that and lower the price of the new games.

But then again, where would Gamecrazy fall into this? I'm curious as to what would happen if Gamestop lowered the price for their used games and Gamecrazy didn't. What would Best Buy do then? =/

@ Gib, $12 for a 2 week old game just sounds too unlikely. And I'm sure nearly everyone who would ever sell a game at Gamestop would be smart enough to not sell a 2 week old game for $12 bucks there, when they could sell it for $40+ on ebay, etc. And if people stopped selling their used games to Gamestop, they'd being to suffer even more.

BestBuy, this plan is just diabolical enough to maybe slightly work...kind of... depends on how Gamestop/Gamecrazy reacts to it though.

No one should be dumb enough to trade games into GameStop anyway. I once took a brand new, sealed copy of Forza 2 into GameStop (after being unable to return it Wal-Mart or Target) that I received as a gift - GameStop offered me $22.00 for it.

Forza 2 had just come out 5-days earlier.

I have been buying older NEW games for years from Best Buy that cost less than the same thing used at Gamestop.

Might not work for new titles, but for the slightly aged titles Gamestop is a complete rip-off.

Hmm... Makes sense... Bravo Pachter, bravo...

+1 for the obvious column ?

The profit margin on new games is so ridiculously small, that's why Gamestop doesn't pimp them out at all.

Bestbuy could bank on the fact that more traffic in the store, from this program, means more add-on sales. But F that, people going to BestBuy to get a new game that came out that day, are buying the game, and going straight home.

Once Gamestop (potentially) lowers the new price by $10 ? BestBuy is easily losing money per new game sold, and more than likely not making it back on other add-on sales.

At least it's only a trial program, and not fully rolled out in each store.

"He expresses the opinion that Best Buy can't afford to chop $10 off the price of a $60 game"

Best Buy's reported revenue last year was 45 BILLION dollars.

Gamestop's reported revenue last year was 7 BILLION dollars.

who do you think can afford to charge less for a game: The company who makes money off of just games, or the company that makes money on games, TVs, cameras, etc.?

I was just about to post this. GameStop (mostly) sells video games, except for MovieStop of course. Best Buy sells many things other than video games. GameStop will have to try to make their prices low enough to make Best Buy suffer, but still make a profit.

Since GameStop makes I think it was around 40 or so percent of their profit from used games it will be difficult for them to do so.

Gamestop's margin on the games that this will probably affect, new games prices at $55, is fairly large. If they wanted, they could charge $40 for the used version, still make $10, and BestBuy would be standing there holding their dicks charging $39.99 while losing $15 just because.

They'll bank on people spending money in the store while they're there, but who wastes time at BestBuy when you're buying some AAA title ? F that, I scurry home to play my game :P

Instead of this new program, Best Buy should get into the used game market. A little competition could lower prices and increase trade-in values.

I believe some stores offer this and even have trade-in kiosks.

They do. I've seen used games at best by. The prices don't seem all that impressive, and i usually avoid used games unless i can't find a game anywhere new, so i don't remember too much. They're pretty visible since they're wrapped in urine-yellow plastic.

I'm not sure. Getting people to come into Best Buy for games could be more effective than Pachter thinks. People that know about this deal may not be casual shoppers, if you will, but getting traffic in your store automatically boosts sales. If someone goes in hearing about this promotion and ends up looking around, Best Buy may end up having a handful more sales. I know people here will think, "Well, only somewhat serious gamers may know about this deal, so I think they're smart enough to fall for Best Buy's higher prices on electronic accessories and all that," but who knows. Whether those sales will end up covering the cost of the price matches, if not earning them more money, is the question in my eyes.

I'd have to agree, even if Best Buy doesn't make a profit on each game sold at "used" prices, they're going to make money just because people have come to their store instead of Gamestop. Even though a lot of electronics are a lot more expensive at Best Buy, I've noticed pretty much all gaming related products are the same as other retailers. Not as good as online prices, but the same price as Fry's, Target, or Gamestop.

Obligatory stop posting whatever crap comes out of Pachters mouth.

I'm no Pachter or anything but I believe that this could only fail IF Gamestop goes by way of what SpaceFox said.

Think about it - A lot of these games eventually go on sale at Best Buy either online only and/or in stores to try to move units, anyway. I don't think BB is moving that many units becuz it is now being reported that recently the console gaming industry isn't so "recession proof". This is to drum up biz and I gather that BB better thought of the pros/cons of this situation far more than Pachter has. They would rather get more money with this new biz model by moving more units (of course making more $$$) than much less with their current/old one.

Now, if GS does make a move to counteract this BB move, if BB is serious about playing this out, it could get interesting and of course, we the consumer WILL benefit from this potential war in the making.

I hope it tests well enough for this to go national cuz I would definitely go the way of BB but, actually, just thought about the fact that I get even more off with my Edge Card at GS. Hmmm. Did BB consider those who own those cards?

Exactly. Consumers benefit from competition most of the time (MOST of the time, notice how I didn't say ALWAYS) until one company stops playing the game. Companies need to battle for lower prices. If Gamestop lowers the prices of used New games to say, $40, they're still making a good profit while Best Buy is hurting. If Best Buy drops out of the competition, Gamestop would almost certainly raise it's prices, simply because it can. I hope this works out for Best Buy and we start seeing some new games for $5-$10 cheaper. It may not sound like much now, but about 5 or so new games purchased at that price means I could afford another game.

Agreed, Toad...

That sounds about right, but if it gets Gamestop to lower used game prices (especially early on in a title's lifespan), it will have been worthwhile.

precisely! even if this does fail, gamestop takes a critical blow. if they raise prices back to the old ones, best buy's program could just come back. it's a great way of bullying gamestop (which is easier said than done), even if it does cut into best buy's bottom line a bit.

I'm sick of hearing about this guy.

I wonder if publishers would be willing to sell new games to Best Buy at an under-the-table discount just to compromise Gamestop's business model? Seems like it would be worth losing a bit of profit in the short term to stop the hemorrhaging of cash that is the used-game market.

Interesting.

I feel that this is no more than a brilliant PR stunt from Bestbuy. As Richard pointed out, either way the consumer wins. So when it comes time to buy a new game (even if this deal is over with by then), are you going to think about buying it from Gamestop who rips you off, or Bestbuy who got you that new game for five-ten bucks cheaper.

So I get actual new, UNOPENED games for used prices?

Best Buy, please, buy GameInformer from Gamestop and I'll be a customer for LIFE.

Wait... someone actually subscribes to GI?

Yes, I am, but only because I read the magazine more than I go into the store. But when I do happen to go in there, I want dirt cheap games. So hence, I get (slightly) cheaper games with this Edge card I'm holdin' right now at this moment as a bonus.

(Disclaimer: I have been subscribed to EB Games/Gamestops's official magazine for about 6 years now, and both GMR and GI are GENIUS. I also have a very good memory, for I was 6 and laughed like crap when Game Geezer called out Xbox Live and renamed it Xbox Dead.)

Yay, hopefully they will kill themselves off.

I'm sorry, I didn't realize Best Buy was some small time strip mall store. Come on guys, don't drink the Patcher Kool-Aid.

Either way, buying used online is where the deals are anyway. Gamefly baby, new games are usually $47 with no tax after a week or two.

Personally, I think it can do enough to alter the videogame marketplace. I'm certainly on board for it, as it allows me to get a recently released new game at, say, $54.99 from Best Buy, rather than the same price at GameStop used... or at full price where you pay for the same thing - a "new" game, that's opened, for full price, what a joke.

If he thought to read the sign, though, it says BB will just match used game prices. I'm sure they won't do anything as radical as beat GameStop each time they lower a price by a couple bucks, but enough to get consumer interest in the matter... because, as I said, I for one would rather pay a lower price for an unopened (see: new) game, rather than either a used or new price at GS for an opened game either route you choose.

If the publishers side with Best Buy on this, which would make sense for them, Best Buy could potentially get better deals from the publishers so they take less of a hit on their profit margin. So it really kind of depends on if Best Buy has publisher support here or not.

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Pachter says Best Buy's new games at used prices program will fail

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