Used Video Game Sales Soar: So Who Wins?

The number of people playing video games has continued to increase as the economy has struggled, but revenue at video game publishers have dwindled. What gives?

While sales of new video games lag, used game sales are at an all time high.

It looks like thrifty consumers are to blame. Sales of new video game software are down 7 percent compared to 2008, according to the NPD Group. But a new study by Nielsen finds that used game sales are at an all time high.

For the most part, that’s not helping the industry’s bottom line. Publishers don’t make any revenue from used games. Instead, those sales help retailers, such as GameStop , which reported record sales and earnings in the first quarter, driven primarily by used game sales.

“Used game purchases have picked up in 2009, and this has increasingly come at the expense of new games when looked at as a share of the total,” reads the Nielsen report. “Sales of used games increased by 31.9 percent compared to last year.”

While used games can hurt profits at game publishers, they increase engagement among players, something that could ultimately help the industry. Gamers in 2009 are playing longer than they have for the past four years—with weekly sessions lasting anywhere from 16.5 to 19 hours.

It’s social games that are occupying people’s time, says Nielsen. Titles such as “Wii Fit,” “Guitar Hero” and “Rock Band” are the ones significantly increasing the hours of gameplay. Used games play a factor in this, but in some cases, it’s more a case of players continuing to play titles they have purchased previously.

"Overall, the uncertain economy has not hurt gameplay and may have accelerated it as gamers look to get more value out of the games they own," says the report.

Over the past year, shares of Activision , THQ and Take Two Interactive Software are all down more than 60 percent. Electronic Arts is off more than 50 percent.

A good part of those declines is market related, of course, but underwhelming game options in late 2008 and early 2009 haven’t helped things. That’s expected to turn around in the coming months, though, as publishers begin to roll out their big titles for the year.

Once again, a lot of hopes are riding on Nintendo . A new peripheral for the Wii, called the MotionPlus, will make the system’s controller more precise. EA is betting big on it, including the MotionPlus in copies of this year’s “Tiger Woods PGA Tour 10” and “Grand Slam Tennis”. (Sales figures for the games, which hit stores in mid-June, are not yet available.)

But publishers also have some seemingly sure hits for the Xbox 360 and PlayStation 3 as well, including Activision’s “Modern Warfare 2” and Ubisoft’s “Splinter Cell: Conviction."

While used copies of these and other new games will quickly turn up at retail, the price difference won’t be great, which likely won’t affect initial sales dramatically. The Nielsen report, though, notes that in addition to the climb in used game sales, people are beginning to subscribe to Netflix-like game rental services (such as GameFly) more frequently. For now, though, those services have a minimal impact on the industry’s profitability.

The rise in interest in lower priced games is likely part of the reason so many big box retailers are exploring used game sales these days. Wal-Mart , Best Buy , Amazon and Toys R Us have all launched pilot programs in the past few months, though it’s too early to determine if they will expand the programs.

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