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Best Buy Tests Kiosks With Used Games and New Movie Rentals

23 Jun, 2009 By: Erik Gruenwedel

Best Buy Co. has quietly begun testing standalone kiosks that allow users to return used video games in exchange for an instant gift card that can be used for anything in the store.

The kiosks also offer used game rentals as well as rentals on new DVDs and Blu-ray Discs.

The Minneapolis-based No. 1 consumer electronics retailer entered and exited the used-game market in the United States several years ago before rekindling efforts in select Canadian stores earlier this year.

The kiosks are co-branded by e-Play LLC, the Columbus, Ohio-based distributor of movie DVD rental kiosks that offer functionality to accept used product. The company last month launched a similar test program (including used games) at 77 Wal-Mart stores and will have about 460 total kiosks in operation by the end of the month.

“We have more choices than any of our [kiosk] competitors because we offer the buy-sell-trade business model,” said Kristen Fox, VP of marketing and business development with e-Play.

Barry Judge, chief marketing officer of Minneapolis-based Best Buy, said on a blog the kiosks, which scan the used discs for scratches and chips, are being tested in select Texas stores in Dallas and Austin.

“It’s a pretty slick system and one of the few trade-in programs to provide instant gratification,” he said.

Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles, said margins on used games (similar to DVD movies and Blu-ray) are significantly higher (50%) than with new product (20%) and hardware (5%).

Coincidentally, Texas is corporate headquarters to GameStop Corp., the nation’s largest video game retailer of new and used product at more than 6,000 stores. It controls about 90% of the used game market, according to Woo.

“I see Best Buy being more proactive selling used games than Wal-Mart,” he said.

Redbox last week said it would begin offering video game rentals in a limited number of markets in August. Blockbuster previously announced that beginning June 30 it would start testing online video game rentals in the Cleveland area, via its Blockbuster Total Access subscription program.

GameStop spokesperson Chris Olivera declined to comment specifically on the Best Buy tests.

"Trading in used games and consoles is a highly-assisted activity," Olivera told The Wall Street Journal. "We are very confident in our model that allows for our expert associates to help consumers trade in product, a fact not addressed with a self-serve process."

Independent analyst Rob Enderle said used game kiosks would help Best Buy generate significant foot traffic from an upwardly mobile demographic that covets product turnover.

“If this moves out of trial, which given the Canadian results is likely, it probably will put additional pressure on Blockbuster, who is already reeling from pressure by Netflix,” Enderle said.

Blockbuster is rolling out 3,000 movie DVD (and Blu-ray) rental kiosks by the end of the year via a partnership with NCR Corp.

Finally, Amazon last month began accepting used game trade-ins. Gamers select from a list of titles Amazon is accepting, print out a pre-paid shipping label and return it with the game for credit.

Colin Sebastian, analyst with Lazard Capital Markets in San Francisco, in a research note, said Amazon represented a significant threat to GameStop with initial trade-in traffic and used pricing for popular titles Left 4 Dead and Fallout 3 already surpassing GameStop.

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