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Why Is Walmart Selling Used Video Games?

Stocks in this article: WMT GME

PORTLAND, Ore. (TheStreet) -- Just about every major developer has been getting away from physical game sales for years and this is when Walmart decides to buy and sell used games? Well, that last horse-buggy dealer probably made a killing, too.

Last week, Walmart announced that it planned to "shake up the marketplace" by letting customers exchange old Nintendo Wii, Sony PlayStation 3 and Microsoft XBox 360 games for store credit. Basically, consumers could sell off their games to buy paper towels and formula while Walmart sells them back to the general public at a tidy profit. Granted, Walmart is having a tough time moving the inventory currently sitting in its back room, but at least it's trying to generate money with a proven formula, right?

Well, kind of right. Temporarily correct at best. The gaming store chain that Walmart is targeting with this new scheme, GameStop, made $2.4 billion buying and selling used games last year. The bad news is that is that this isn't the Funcoland era anymore and used games aren't the currency they once were. In the mid-'90s, enterprising young gamers walked through the doors of their nearest mall's Funcoland and sold their old games and consoles for a chance of walking out with newer, glossier games and gadgets. The value of gamers' turned-in treasures was dictated by sprawling, demand-driven Funcoland pricing sheets that is still questioned by graying, irate gamers today.

Though a series of mergers and acquisitions that engulfed game shops including Funcoland, Software Etc., Electronics Boutique, Texas-based Babbage's eventually grew into the nearly 7,000-location behemoth now known as GameStop. That chain has been targeted by both console producers and developers for making a living off of their used titles, but has survived despite the emergence of downloadable content and one-time features such as access codes for online play.

But it realizes its game-selling days are numbered. During the Consumer Electronics Show, Sony unveiled plays for the Playstation Now that would allow gamers to play games from the PS1, 2 and 3 without relying on a console or discs. Gamers, ideally, would be able to use the service on Playstation Vita handheld consoles, Sony Bravia televisions and tablets and smartphones -- think Sony's Xperia smartphone, for example. Sony has also hinted that it may try to give those games a little bit of extra life by introducing them to a new generation of online players with new retrofitted tasks and trophies for each game. GameStop's share price fell by more than 8.5% after Sony's announcement before recovering slightly.

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