Microsoft showed off the new Xbox Game Pass on Tuesday. It's a Netflix-like service that will bring Xbox One gamers unlimited access to a selection of over 100 games, including hits like "Halo 5: Guardians," for $9.99 per month, when it launches in the Spring.
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GameStop shares sank 8 percent on Tuesday after Microsoft unveiled a new attack on the used game business (GME, MSFT)
Microsoft's new Xbox Game Pass service stands to take a big bite out of GameStop's business.
Used game sales account for 47% of GameStop's gross profits.
Following the announcement on Tuesday, shares in nationwide video game retail chain GameStop sunk roughly 8% to $24.44 per share.
The sale of pre-owned and "value" (cheaper, older games) titles has long been a cornerstone of GameStop's business, accounting for about 25% of the chain's revenue and about 47% of its gross profit in 2015. With Xbox Game Pass, Microsoft stands to take a hefty chunk of that budget-conscious market for itself.
The video game industry has long been critical of GameStop in particular and the pre-owned games market in particular. When a brand new game is sold, the title's publisher takes a hefty cut of the proceeds, but once it gets sold back to GameStop, Amazon, or Walmart and becomes a pre-owned title, the original creators never see another dime. Publishers say that the practice keeps video game retail prices high.
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Microsoft itself has tried to take a bite out of the used game market before, with an aborted plan that would have tied a game to the Xbox One console on which it's played forever — effectively destroying the market for used games on the Xbox One forever. Amid a massive backlash, Microsoft scuttled that plan ahead of the Xbox One's 2013 launch.
Now, it seems that Microsoft is trying again. But instead of limiting the Xbox One hardware, Microsoft is trying to entice gamers away with a better deal. And while $9.99 a month is fairly cheap for the number of games involved, it's better than the zero dollars the publishers would get from the sale of used games.
GameStop did not immediately respond to a request for comment.
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