DLC codes not denting pre-owned sales

US analyst Michael Pachter claims that US retailer GameStop has yet to experience any dent to its pre-owned sales in spite of a considerable increase in the number of publishers charging second hand buyers an additional fee to access certain content.

The company has not seen a negative impact on used software sales from first-use codes or new competitors in the space,” Pachter said in his post-financials report on the retailer. The company estimates that only 25 per cent of used game buyers play online.”

However, Pachter was less optimistic about GameStop’s plans to forge a space for itself in the growing digital market.

We remain sceptical about how GameStop will participate in digital distribution,” he added. After a successful trial run in 35 test markets in the spring and summer, the company will complete a full DLC kiosk rollout in Q3.

It has been working with Microsoft for over a year to develop effective point-of-sales technology for DLC, and with major publishers to offer exclusive in-store content (for example, GameStop will be the only company to offer Spartan armor for Halo: Reach when it is released next month).

In addition to its efforts with Microsoft, GameStop will also offer Sony DLC for the first time in Q3. GameStop believes that it has a distinct advantage over its competitors due to its store footprint and marketing ability.

While we agree that the DLC opportunity is large and growing, we are sceptical that it will be a sales growth driver. Rather, we think that DLC will at best forestall the inevitable cannibalization of physical disc sales and allow GameStop to capture a small percentage of this cannibalization, with relatively insignificant margin contribution.”

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