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