Vernor v. Autodesk: New Verdict Could Block GameStop Used Games Sales

Last Updated Oct 19, 2010 3:46 PM EDT

GameStop is already fighting against virtual gaming, social network gaming, mobile gaming and other competition, but a new law could make selling used games much more difficult. The store will have to push its digital gaming strategy even harder.

In that case, Vernor v. Autodesk, the 9th U.S. Circuit Court of Appeals prohibited customers from reselling certain software to other customers. Victor Godinez of The Dallas Morning News, who broke the story, says that it could effect any garage sale or consignment store, but the real focus here is on software since the defendant, Autodesk, makes the 3D design software AutoCAD. (BNET contributor Erik Sherman had a post on the case when it was first brought to court.) Video games would no doubt fall under the realm of software, and, if the ruling does stand, it will affect Target (TGT), Best Buy (BBY) and other companies recently getting into the used software business.

The biggest impact, however, would be on GameStop, which has become dangerously dependent on used games. The company gives customers credit for their used games that can be used to buy other previously owned or, more importantly, new games. Several sources say the markup between the used game credit given and a used game sold is significant -- like 100% markup significant -- which has helped GameStop make serious profit. (There is also at least one lawsuit regarding GameStop selling used games as new.)

GameStop perhaps saw the writing on the wall, purchasing the digital game hub Kongregate and revising stores to better support virtual as well as physical software purchases, but it may be too late to turn around the ship. First, as BNET Retail Reality Check contributor Carol Tice noted, new GameStop CEO Paul Raines recently said "the world won't be all digital tomorrow", essentially minimizing GameStop's own digital plan while underestimating any threats to its used game business.

Second, as I said previously, GameStop's plan to get customers into their physical stores to buy digital goods is silly when gamers can just buy them from the comfort of their own homes. Third, as The Dallas Morning News wisely points out, the reselling issue will soon be a moot point since video games, like movies and music, are becoming increasingly digital -- within a couple years, GameStop's not going to have much of an actual physical software business at all. Startups like the gaming-anywhere outfit OnLive are the future.

The Vernon v. Autodesk verdict may get overturned by a higher court -- a reasonable move considering it could technically make selling, say, used Atari 2600 Donkey Kong cartridges at a garage sale illegal. However, it does highlight GameStop's precarious dependence on physical used games and the spottiness of its new digital vision, which makes it unclear if it will avoid Blockbuster's (BBI) recent fate.

Photo courtesy of Johnthan Speed // CC 2.0
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