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Best Buy Takes on GameStop

GameStop is tanking following Best Buy's entrance into the used-video game market.

NEW YORK (

TheStreet

) --

GameStop

(GME) - Get Report

is tanking in Monday trading following

Best Buy's

(BBY) - Get Report

announcement that it will begin selling used video games.

Best Buy said, in what was a disappointing first-quarter earnings report

, that it will allow video game trade-ins this summer, offering gift cards for used video games.

The move, of course, is a direct blow to GameStop, which holds a massive chunk of the used-gaming market. The company previously said used sales have had an annual growth rate of 22% over the last four years, but this will surely slow as Best Buy enters the playing field. As a result, shares of the stock are tumbling 8% to $20.16 in afternoon trading.

GameStop has also faced increasing pressure from discounters like

Wal-Mart

(WMT) - Get Report

,

Amazon

(AMZN) - Get Report

and

Target

TheStreet Recommends

(TGT) - Get Report

, which continue to steal market share.

Not even promising developments coming out of this week's

Electronic Entertainment Expo

, or E3, seems to be saving GameStop.

Thus far at the conference,

Microsoft

(MSFT) - Get Report

has shown off Kinect, a motion-gaming device that will allow gamers to control on-screen action with body movements. The device will launch just in time for Christmas on Nov. 4.

There will also be a slew of video games coming out of

Electronic Arts

(ERTS)

and

Take-Two Interactive

(TTWO) - Get Report

.

-- Reported by Jeanine Poggi in New York.

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