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Best Buy To Sell Used Video Games

by Rainier on Sept. 30, 2005 @ 3:22 p.m. PDT

Electronics retailer Best Buy has begun testing the sale of used video games in a handful of its stores, Piper Jaffray analyst Anthony Gikas said in a client note on Friday.

Best Buy, which has more than 870 stores in the United States and Canada, is experimenting with buying and selling pre-owned video game software, which is estimated to be an $800 million market in the United States this year -- about 10 percent of the total video game market, he said.

"The test is limited to relatively few stores. We think it is likely that (Best Buy) will test more broadly as the project takes hold," Gikas said.

He said the move was complementary to Best Buy's existing product line because it already is an established retailer of video games, with roughly 14 percent of the U.S. market.

Among other things, he said sales of used video games would enhance margins. New video game software sales have a gross margin of 20 percent compared with 45 percent for used software.

Video game publishers frown on used game sales because they do not get revenue from them.

The move from Best Buy also comes as GameStop Corp. prepares to close its acquisition of Electronics Boutique Holdings Corp. (Nasdaq:ELBO - news), which would be a marriage of two of the largest sellers of new and used video games in the United States.

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