What's the difference between a shiny new video game disc and one that's been unwrapped and played a few times?
To the teenagers browsing the used racks at Game Crazy inside the Hollywood video store on University Avenue in East San Diego, nothing. To their pocketbooks, a lot.
DAVID BROOKS / Union-Tribune
Emily Jacobson paused between customers at Luna Video Games in Ocean Beach to adjust the high score on Bust-A-Move, a stand-up arcade game from 1994. Used video games make up 90 percent of the shop's sales.
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In a jolt to software game manufacturers, demand for used video games is accelerating like a hot speedster in "Grand Theft Auto: San Andreas."
The trend is one reason sales of new video game titles dipped in November to $700 million, down 18 percent from the same period in 2004, according to marketing researcher NDP Group.
Meanwhile, pre-owned video games are being snapped up by consumers who want to save up to 50 percent or more on discs, which can cost $50 or so new.
The used market "has become a thriving part of the business, said Sean Bersell, a spokesman for the Video Software Dealers Association.
Fueling the demand is the limited utilitarian nature of the games, which become useless to many players when they reach all the levels of competition and want to start anew with something else, Bersell said.
Instead of storing the disc, customers "can take the games back to stores and get credit to buy new ones," he said. Some trade-ins can bring up to $25 or more, depending on the game's popularity.
DAVID BROOKS / Union-Tribune
For the true gamer looking for used games, stacks of Atari 2600 titles at Luna Video Games should stir memories of past glory.
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Analysts estimate that the used video game market may be draining $800 million a year – or 10 percent of the video game software market – away from new game sales.
Analysts say gamers also might be holding back on spending for new discs in anticipation of the release of Sony's PlayStation 3 system and a new Nintendo machine sometime in 2006, as well as in reaction to a dearth of desirable games this year.
There are no hard figures for the pre-owned games because many small retailers across the country – from specialty video game shops to convenience stores – sell used games but don't report sales.
However, the rapid growth in the segment can be seen at electronics retail giant Best Buy, which is test-marketing used video game sections in some of its stores.
"The test is limited to relatively few stores," analyst Anthony Gikas of Piper Jaffray said in a recent note. "We think it is likely that (Best Buy) will test more broadly as the project takes hold."
Publicly held video game retailer GameStop said recently that itsthird-quarter sales soared 28 percent, to $534 million, largely driven by demand for used video games.
The company operates more than 4,000 stores around the world, including about 45 in San Diego County.
GameStop recently closed on its acquisition of Electronics Boutique Holdings Corp. in a merger of two of the largest sellers of new and used video games in the United States.
The company's margins in the quarter "were positively affected by used video game sales, as value-driven customers became a larger factor in the face of high gas prices and general economic uncertainty," chief executive Richard Fontaine said in a statement.
Fontaine said sales of new video games slowed in November partly because of customers gravitating to the used game bins.
Established retailers like Best Buy are considering the burgeoning used video game market because of high margins, which can reach 45 percent compared with about 25 percent for new titles.
However, software companies are distressed by the development, fearful that used video sales could ultimately cannibalize the industry.
At the GameStop outlet on University Avenue recently, several young men stood alongside a wall devoted solely to used games, seemingly unaware of the critical issues facing software manufacturers.
They were too busy checking out hot video game titles – some of them released within the past month or so – which had been deeply discounted from the new game price.
Used video game items, which the store buys from customers for $1 to $25 each, make up about 40 percent of the store's sales, assistant manager Daniel Campanelli said.
"We don't just get young people who don't have much money" buying used games, Campanelli said. "It's everybody."
Frank Green: (619) 293-1233; frank.green@uniontrib.com
