Investors in GameStop Corp. may have panicked recently on the news that Amazon.com was entering into the used video game space, but a new study suggests that the slumping economy may help make room for plenty of competitors in the market.
Amazon has announced a new service through which customers could trade in used video games through its site, in exchange for store credit.
The news immediately caused a sharp sell-off on shares of GameStop, a Grapevine, Texas-based retail chain that specializes in video game sales and derives nearly half of its gross profit from the sale of used games. GameStop saw its stock drop more than 20 percent in the two days following the announcement.
However, according to a report from Electronic Entertainment Design and Research, a market research firm that focuses on the video game market, GameStop is unlikely to see much of its business threatened by the larger online retail giant.
“Based upon our research, we believe Amazon’s used program will be both successful and profitable,” the report read. “We also believe that most of Amazon’s new business will come from the expansion of the used video game software market rather than from stealing market share from competitors like GameStop, Game Rush, EBay, or Game Crazy.”
Amazon does not break out specifics of its video game business. Sales of media products — which include books, games, DVDs and music — totaled nearly $11.1 billion last year, more than half of the company’s total revenue base.
GameStop said it expects revenue for the year ended Jan. 30 to total about $8.8 billion, based on preliminary data announced last month.
According to the EEDAR report, GameStop is likely to retain its advantage in the used market with core gamers, who often use the company’s stores to trade in older titles to get credit on new releases when they come out.