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Best Buy's Pre-pwned Program

Best Buy tests used video game sales on CNN Money describes a new program being tested in four Best Buy stores in Illinois and California, quoting an industry analyst as saying: "We think there is a reasonable chance that Best Buy will expand used video game product sales to most of its 700+ stores during the next two years." The article does not seem to distinguish between PC and console games, though Gamestop, the major competitor mentioned in this field, does not actually sell used PC games. The article discusses implications of such a program, like the possibility that this would spur higher prices due to increased tech support falling on publishers or accelerate the push toward more widespread digital distribution. They also hear from Epic's Mark Rein on the topic:

Mark Rein, vice president of Epic Games, creators of the "Unreal" franchise as well as the upcoming Xbox 360 game "Gears of War," has vociferously argued against retail sales of used games in the past. The expansion of a major retailer into the field, he said, is disheartening.

"We pay to be in Best Buy's flyers," he said. "We pay market development funds. Publishers drive gaming traffic to these stores. To have them resell the games, with developers having no participation, that's just wrong. That's just fleecing us."
...
"Are they going to sell used copies of Microsoft Office -- and if not, why not?," asked Rein. "Why is that Microsoft (Research) has no objections to you reselling a copy of 'Halo,' but if you try it with Office, they'll come down on you like a ton on bricks?"

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90. hehe best buy butt Oct 2, 2005, 22:04 BoringHotPants
 



This comment was edited on Oct 2, 22:05.
 
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89. Re: Marc Rein = Music Industry Oct 2, 2005, 17:32 Ray Marden
 
Aye, I noticed that, too, but was hoping it was just some weird ordering thing (only recently moved to Modesto, three Lamestops are much closer than the one EB in the area.)

For my last two purchases, two of the stores never ever ordered the game and only one bothered to order any.

I am not fan of Lamestop, but the PC market needs to really understand how little Lamestop actually cares about PC games...

Go check out the website right now. Using 95356 as your zip code, do a search for that budget adventure game Voyage. Only the Lamestop in the mall has it - the other two stores never had it, never will have it. Alright, that was pure budget, but go look up Indigo Prphecy. The store in the mall is out (had it earlier and sold out,) but it states on the website more are on order. The other two Lamestops? They never had it, they never will have it.

Now, just for fun, look up the PS2 and Xbox versions of Indigo Prophecy. All three stores made sure to stock for the PS2 and Xbox.

Hell, go look up Guild Wars - one store does not even have it nor does it plan to order anymore (if it ever had it to begin with.) Same thing with Barbarian Invasion - a brand new PC game and a current best seller for the week - one of the stores cannot even be bothered to cary one of them. Note the PC quantities, too; those are all "1-3" while the console games can be listed as "4+."

Lamestop does not give a f*ck about PC gaming. I wish the PC games realized this. Lamestop will, obviously, close down some EB stores, but if it makes the EB stores mirror copies of the Lamestop stores, PC gaming just lost a good chunk of its retail footprint...
I am sorry, but Lamestop is just a really sh*tty company.
:(,
Ray


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88. Re: Marc Rein = Music Industry Oct 2, 2005, 17:08 The Half Elf
 
Also recently my local Lamestops (Thanks Ray I love that name) have quit ordering PC Games to have in store on release days UNLESS people have pre-ordered it. And IF they have pre-orders they only order 1 to 3 extra copies for the shelf.

And I really hope that EBGames remains intact store wise after the merger is completed, cause my local Lamestop has about 10 feet of wall space in the far back corner for PC Games, the entire rest of the store is Console or DVD's. Hell the Used DVD section is 4 times larger then the PC Section. While my EB Games still has it's entire back wall devoted to PC Games. Plus the Manager for my local EB has been around for 10 years, I move she gets moved to the nearest store. I told her if she's gonna keep stalking me she's gonna have to get me a 360. (she's a MMO junkie EA/WoW), and said the day a dwarf walks into her store is the day she'll give me a 360, and low and behold a midget/dwarf/short person came in 10 mins later asking for Madden. We shall see

 
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87. Re: Marc Rein = Music Industry Oct 2, 2005, 15:33 Smellfinger
 
"Think how easy it would be to require entry of a registration code to lock the game to that account."

Think of how easy it would be for me not to buy your video game if you decide to implement that stupid fucking shit. I wiped my ass with Half-Life 2 and I'll wipe my ass with any other game that wants me to go through hoops after I've paid my $50.

 
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86. Re: Marc Rein = Music Industry Oct 2, 2005, 13:39 JediPunisher
 
While most agree that individuals should be able to sell their used games, retailers can make more money selling used games than new, and they are not willing to split the profits with the developers.

There is a simple solution to this, and one that is bad for gamers... Publishers will require registration and an online validity check when the game starts up. This will lock the game to an individual and prevent you from selling it. This will affect both PC and Video games; For example, every XBox360 owner will have a free limited Live! account... Think how easy it would be to require entry of a registration code to lock the game to that account.

 
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85. Re: Marc Rein = Music Industry Oct 2, 2005, 13:27 Bhruic
 
Now, as it is a used copy of the game that the retailer now owns, the retailer of course cannot sell it for $50 again, but must reduce the price because the game is used. This time, however, the retailer has $50 invested in the copy of the game--the $25 he originally paid the game publisher when he bought it for retail and the $25 he paid out to his customer to buy the game back! So at this point our "greedy" retailer has a total of $50 invested in a game which he cannot sell for $50, so right away he's losing money, isn't he?

Uh, your math is off.

Costs to retailier:
$25 - original cost
$25 - buyback

Profits for retailer:
$50 - original sale

Net profit/loss:
$0

So at this point, whatever the retailer sells it for is pure profit. If they manage to sell it for $40, then they made $15 more off of it than they did the first time.

 
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84. Re: sell online, less overhead Oct 2, 2005, 13:12 Ray Marden
 
Well, it certainly does keep cost down. As previously noted, both Lamestop and EB have take really "every last dollar" approached to things.

I do think the cases of $1 profit in a sale are nuts, an obvious flaw with the retail chain, but Lamestop and EB are doing quite well. Checked their stocks lately? Watched them make significant impacts on their net profit due to warranties and used games? Can you show me developers that are consistently, across the board doing the same thing?

But that is the cause of some of the resentment and control of power. The retailer does not just sell the game; these companies have to pay the retailers to be retailers. It really is all about money, power, and how those two can be abused.

People hate the power Walmart has, right? How it - the retailer - can set prices for a company? In an abstract way, this payola crap is the same thing. Let's say we want/need $25 for this item (whatever it may be.) I got to pissed off that Walmart wants me to sell it at only a $.10 proft at $20 each. So I took it to EB/Lamestop and they said they will sell it for $25, but requested (demanded) I pay them this huge "stocking" cost which effectively dropped my overall sell price to $20.

Yeah, yeah, all exaggerated, but you get the idea. There are inherent issues when you have to pay a retailer to do its job or the retailer becomes more than a retailer. The retailer does not give a damn, it is all about the money, but it does cause issues for the other people in the market, hence drastic or retaliatory changes.

If we want to gripe solely about shelf space, notice how hard it is for EB/Lamestop/whatever to come up with shelf space, especially for the PC, but how easily they manage to give used games upwards of fifty percent of their (wall) shelf space? Imagine that...
Payola = suck.
Not even getting into exclusives,
Ray

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83. Re: Marc Rein = Music Industry Oct 2, 2005, 13:00 Ray Marden
 
Well, your numbers are way off, for starters. In general, across the board, developers are getting squeezed. As I have already commented, the gaming retail market is seriously screwed up.

The other thing, the thing Marc even states in his comments, is the obvious resentment of the payola-run retail side. It is not just a case of making a game, offering it to retailers at a price and just seeing what happens. You basically have to give a retailer money - slyly generalized as marketing cost - for many retailers to even carry your game. In addition, it is not even used purely for marketing; it really is a matter of "So, just how much money are you willing to pay me to stock this? Properly? How much is it worth to you?"

So, from a developer's perspective, they are paying the retailer to be a retailer, the "bonus" money can be paying for the employees to actually work, the developer is paying for marketing that brings customers and increases business for the store, the developer can be paying to make people want to visit this store.....and now the developer is, also, getting screwed over by the used game purchase.

Mr. Anti-Capitalist here does think greed can go too far. When one segment of the market figured out a trick to grab a lot more money for itself and does not share it with the other parties involved, it does build resentment and will cause issues over time. Again, I do think there should be some standard or middle ground for this, but it is becoming a case of developer's threatening to go digital delivery only and retailers flipping developers opting to make a few bucks at the developer's expense.

On the whole, I do not think most developers mind used games in the long run. I do think many of them can take a serious look at how they price old games, especially at that one year or more mark (I do occasionally get a whim to play old games, but not when they are listed at the developer's/publisher's website for $35+.) However, as previously stated, I do think there has to be some type of agreement - over game types, time since release, shared profits between companies, etc.

You talk about the MSRP, but on the PC side of things (that new, $60 console price tag - especially for ports or as a de facto price - is fleecing customers) prices have become quite lower, there is a much larger range of price from $20 to $50. And deflation (relative to games) means they are cheaper, too...
I don't know things today, but do studios still share rental money?
Not forgetting the scourge of pirates,
Ray

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82. Re: No subject Oct 2, 2005, 11:59 HorrorScope
 
My answer to the PC side of distribution is make all top-end games available for download at $30, while retail brick and mortar sells the boxed for $50. I mean if the stores want to change their policies like this, then the dev's should to, in which their download charge doesn't have to equal the boxed retail charge. It's simply the dev's touche’ing the retailers choices.

In this case everyone wins, everyone gets what they want. Retail can sell used, Devs get to sell quantity and make more with direct downloads and the customer has three choices, High-End Box, Discount Download or bargain bin used prices. I'd end-up being a Discount Downloader.

Downloader is a double win for the dev's, they get a bigger cut and we can't sell it used!
This comment was edited on Oct 2, 12:01.
 
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81. Re: Marc Rein = Music Industry Oct 2, 2005, 11:30 WaltC
 
Businesses soley exist to make profit. If Best Buy didn't think they would make lots of money doing this, they wouldn't do it. The publisher DOES lose out, because the person that comes in to buy a used copy instead of new doesn't give them any money.

OK--that's just dandy--but tell me, is Epic and/or Atari any less of a for-profit "business" than Best Buy? I don't see any difference at all, frankly. As I said, if I buy a game for $50 from Best Buy's and I give it to my son when I'm done with it--the game publisher doesn't make any money then, does he? Or, if I go to the library and check out a book instead of buying it then the book publisher loses potential profit, too, doesn't he?

Your analysis, like the RIAA analysis, is missing a key component fact, and that is that my son might never have had the game if he had to buy it because he didn't care that much about it in the first place, and although I might check out a certain book from the library I might only do so because it's free as the book didn't interest me enough to go out and buy it. And, despite the fact that public libraries abound nationally and millions of people swap and trade computer games daily, many book publishers and game publishers are thriving, are they not?

The fact is that if someone obtains a copy of a work via fair use that does not mean he'd have bought it given no other opportunity to obtain it. People find they can live quite well without all kinds of things--especially things they don't want enough to buy in the first place, right?

Likewise with Best Buy, if you think about it. Obviously there are many people who won't run out and buy a game at $50, but who might very well buy the game at $25-$30. Why should Best Buy miss out on these sales opportunities just because the game publishers choose to forego them?

The remedy for Epic and its publishers is right in front of them: if Epic and its publishers cut the prices they charge their resellers in half, for instance, then they'll sell many more games and strike a vicious blow against both piracy and the used-game market at the same time.

I really think it's funny to hear Mark passively "threaten" to go to a Steam-like sales approach...;) The fact is that whether a game is sold online or whether it is sold in a box in a store it will only bring what the market will bear and no more. All this talk about $40-$50 MSRPs being the "lifeblood" of the games industry is garbage and self-defeating. It is thinking that stems from 15 years ago at a time when the game market was at least 100x smaller than it is today. Today, what is keeping the game publishers afloat is *customers* and it's a sure thing that the higher you keep your MSRP's the fewer customers you will have.


 
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80. Re: sell online, less overhead Oct 2, 2005, 10:53 Hump
 
Retailers like EBX get more from game companies than just what they get for the actual sale. Premium shelf space and store advertisements are sources of revenue as well

Stop me if I'm talking out of my ass but EB and Gamestop seem to use this false "lack of shelf space" to shakedown publishers who, in turn, charge a premium price to the consumer to cover their overhead. For instance, I find it curious that the EB at our local mega-mall has remained the same size for the past 7 years even though game sales have multiplied almost exponentially. They've refurbished the store several times but never ever have they chosen to switch physical locations or knocked down a wall and expanded. Theres literally stacks of used games falling over in the middle of the aisles, display shelves near the ceiling being used for storage, etc. WTF?

Am I crazy in thinking this is done purposely?

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79. Re: Marc Rein = Music Industry Oct 2, 2005, 10:47 Lost One
 
Businesses soley exist to make profit. If Best Buy didn't think they would make lots of money doing this, they wouldn't do it. The publisher DOES lose out, because the person that comes in to buy a used copy instead of new doesn't give them any money.

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78. Re: Marc Rein = Music Industry Oct 2, 2005, 10:42 WaltC
 
I go out and buy Unreal Tourney 2007 for 50 bucks, I go home I install it, put all the crap back in the box and go back to the store to trade it in/sell it. The retailer, in this case EBGames, puts it right back on the shelf for 10 bucks less. Rinse and repeat as many times as you want. Eventually the game will loose value due to the brand new version's price being dropped.

There are so many blind spots in this idea that I don't know where to begin, but I'll take a shot...;)

The retailer first buys the games from the game publisher for a certain amount per copy--let's say $25 just as an example. If he sells the game for $50 his gross profit is $25. OK, so what happens if his customer comes back with the game later and the retailer buys it back for $25? Answer: the retailer just lost all of the profit he originally made when he sold the game the first time. The game publisher, otoh, has lost nothing, since he was already paid for the copy the retailer sold before the retailer sold it the first time. The game publisher gets paid before the game ever sits on the retailer's shelf.

Now, as it is a used copy of the game that the retailer now owns, the retailer of course cannot sell it for $50 again, but must reduce the price because the game is used. This time, however, the retailer has $50 invested in the copy of the game--the $25 he originally paid the game publisher when he bought it for retail and the $25 he paid out to his customer to buy the game back! So at this point our "greedy" retailer has a total of $50 invested in a game which he cannot sell for $50, so right away he's losing money, isn't he?

Of course, that means that our hypothetical retailer is not going to offer previous customers anything like 1/2 of the original purchase price in a buy-back. Instead, it's likely that our retailer will offer customers only pennies on the dollar for a buy-back of the original game, and that in itself greatly reduces the number of people who will be willing to part with their games in this manner. If he buys the copy of the game back for, say, $10, then he's reduced his original profit to $15 versus the $25 he made by selling it new for $50 the first time. But the customer is only going to recoup 20% of his original purchase price, and he may not wish to sell it back for that amount, especially if it is a good or classic game.

So, if the retailer then successfully sells the used game for $35 then his gross profit on the resale would be $25 and would be added to his original gross profit of $15 on the new sale, which would then drive his total *gross* profit on the sale of the same copy of the game to $40. This is apparently what you object to.

But right here allow me to point out that if instead of selling my copy back to the retailer I elect to give it to my son or daughter, or I swap it in trade or I sell it to a friend, then the game publisher is theoretically losing the same amount of "potential" profit, isn't he? Books, magazines, newspapers, computer games, movies and music CD's are all traded around by people in exactly this fashion on a routine basis, millions of times per day, and it is not deemed a copyright violation nor is it deemed to be "piracy" of any kind. Instead, it is deemed "fair use" of the copyrighted material which the original purchaser of the material is entitled to. If we were to adopt the RIAA way of looking at things then even public institutions as highly esteemed as public libraries would be shuttered and closed because the book publishers are being denied theoretical sales every time someone checks out a book. (Trust me, that isn't going to happen...;))

But this is only the first problem with Mark's stated objections that I see. What happens when a game is released that few people want to buy at any price because it isn't esteemed to be any good? Assuming that the retailer buys those games back, too, it is much less likely they will sell even at a used, reduced price, isn't it? And that will eat into the retailers gross profits, thus reducing the amount of reseller profit hypothesized above. Yet, even for poorly selling games, the publisher gets his cut before the retailer puts it on the shelf for the first time.

This brings us to the last major blind spot I see in Mark's analysis. Mark assumes that his retailers have no expenses such as physical storefronts to buy and maintain, employees to pay, inventory to stock, utilites and taxes to pay, etc. ad infinitum. Mark is speaking as if the retailer has but a single obligation which is to Epic and its publishers. That's what's really wrong with his opinion here. The situation is nowhere near as simple as Mark apparently wishes to see it, and imo it's this kind of wilfull myopia which has the potential for bringing down game developers--moreso than many other factors. Mark doesn't seem to understand that the companies which retail the games they buy from Epic and its publishers are struggling to survive so that Epic will have retail outlets such as Best Buy's in which to sell its games in the first place. The minute game developers see themselves as separate and apart from the retail structure that supports them is the minute they will start getting into real trouble.



 
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77. Re: GameStop & EB Oct 2, 2005, 09:31 WaltC
 
Different markets, methinks. They may achieve similar sales, but the movie market is significantly larger than the gaming market (gaming PR aside.)

Interesting, though, to hearken back to the days when movies were first released by the film companies on VHS tape. It wasn't unusual to see them priced at > $100 each--it was common, in fact.

Enter the video rental store. $100 per movie was far too much for the majority of people but renting the same movie from a video store for 3-5% of that amount hit a nerve with the movie-going market and the video rental stores took off like rockets. What created the video rental markets in the first place was the price gouging the film studios attempted when the market was young. Had the film companies come out of the chute charging $5-$15 a movie I think there's a real possibility that all of these rental stores would've begun as retail outlets for movies, instead.

By contrast, even though today the quality of DVD movies far exceeds the old VHS copies by about 100%, I can buy brand new movies on DVD for $5-$15 dollars each, and often on the day they are released into the DVD markets.

With this blind allegiance to a $40+ MSRP for computer games, game developers and publishers are setting themselves up for all sorts of things that will happen in the market as it searches for ways to meet the demand for those products at lower price points (and I'm not even talking about software piracy, of course. IMO, game devs and publishers have enshrined the $40+ MSRP to the extent that they are far more concerned with preserving it than they are by piracy. It's obvious that given a choice between greatly reducing piracy and preserving $40+ MSRPs the game companies will take the MSRP every time.)

On the sticker price front, I do think that (PC) games are much more heavily discounted than they have ever been in the past...

Yes...because their markets are so much larger than they were in the past--the game devs are hitting the same MSRP wall that the movie companies hit when the VHS market was young. The larger your market becomes the more downward pressure is placed on the MSRP. If game companies do not themselves respond then the market will find ways around propped-up MSRPs every time. It's just the economic facts of life. Rather than stubbornly cling to the MSRP strategies of the past the game companies need to develop new strategies based on their current and future markets. If they don't then their resellers will.

This comment was edited on Oct 2, 09:38.
 
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76. Re: GameStop & EB Oct 2, 2005, 08:03 aldo_14
 
ou just can't resist, can you Riley? Tell me, how often have you noticed the system down?

It went down when the game (HL2) was first released, didn't it? What happens when other games are being regularly released along those lines on the system?

I'm surprised no-one seems to have pointed out that DD like Steam seems to be more expensive in the long run; there's no need to reduce prices to clear stock as with conventional retail, for example. All the games you can buy on Steam, can be found for far cheaper prices in the high street.

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75. Re: sell online, less overhead Oct 2, 2005, 07:04 Prez
 
Retailers like EBX get more from game companies than just what they get for the actual sale. Premium shelf space and store advertisements are sources of revenue as well. If not being able to sell used games would cause EBX to stop selling PC games altogether (which I think it might) I don't want it to happen.

Of course, with places like Gogamer.com and Chips and Bits out there, itwouldn't be a great loss if they did.

 
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74. sell online, less overhead Oct 2, 2005, 04:25 Charlie_Six
 
For the past couple of weeks, I thought about trying to open up a small online store and selling games. I was hoping to at least make minimum wage through the site, just get by. But a retailer said you can't really make a living (he had a physical B&M store), and that retailers of all kinds are just hanging on by their fingernails. Small retailers have no chance because the big guys can buy so many games at a discounted price, that small retailers just die off.
The used games, action figures, strategy guides, controllers, and accessories are where the money comes from. Selling a new game makes them like $1-3 bucks. I've also talked to a friend who works for a company that actually prints these DVDs and CDs. She said that they make good money on movies, but that on games they made very little money. So they stopped.
It sounds like everyone is pissed with how games are made and sold. We gamers are pissed that the games lack innovation and that we get so many sequels and clones. The developers are pissed that they're pressured into clone games because new concepts can fail them and destroy their companies instantly. And the retailers.. well we know about their problem now, too.
I don't know what's up, but I have one suggestion: drop the B&M stores and just sell online. Video gamers are all people who know and trust online shopping. We're not like, say, your average Wal-mart shopper who probably hasn't bought a thing on the Internet yet. We're totally comfortable with online shopping. And unlike most products, you don't need to physically see the game, hold it in your hands, to judge it's quality. It's just a box with media inside it.
That being said, there should still be places for gamers to trade games. Most people don't like the hassle of selling their games over Ebay, packing them up, and shipping them out. People just want to say "How much can I get for this? OK. Here you go. Seeya." And walk out the door. So my idea is that people would primarily buy new games from the Internet, then trade them in a B&M store. Then that store proceeds to sell the game back online. This way, there's no reason to waste shelf space on games at all. THey're all bought online, and then merely traded in at a real store, to be stored for online sale.

This comment was edited on Oct 2, 04:26.
 
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73. Re: A Comment From Mark Rein Oct 2, 2005, 02:58 Jensen
 
Video games are very rentalable, and there are a few services for the PC like Yahoo's and the new Game Tap in addition to the prevalence of console game rentals at video stores.

Movies are much easier to finish in a one week rental period than games are.... I guess that is my point.

 
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72. Re: A Comment From Mark Rein Oct 2, 2005, 02:56 Jensen
 
Looking at Nintendo as a business, I doubt they will ever offer anything for free.
I got Zelda Orcarina of Time with my pre-order of Wind Waker. Not really free, just included with my purchase price. Nintendo also has other offers if you register games.

But in the case of the Revolution, the extra game would be non-resellable... it is locked inside the system's 512 mb of memory with DRM.

When I go into Gamestop, I can get Mario Revolution with a voucher for a "free" download of Mario 64 for $50, or I can buy a used copy of Mario Revolution alone for $40. Now I have more incintive to buy new.

 
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71. Re: A Comment From Mark Rein Oct 2, 2005, 01:17 Ray Marden
 
Jigga, jigga, WHAT?

<performs really stupid, lame dance moves>

You, sir, have been SERVED!

<"OMGFUG" "OHHHHHHHHH" from the background>
I hate those f3king shows. With a passion.
Thinking you better reKugNyze!,
Ray

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