Pachter: Without used games, industry will "disintegrate"

Industry analyst Michael Pachter has clarified what he meant by saying that blocking used games isn't in platform holders' best interests, suggesting it would be tantamount to suicide for any hardware manufacturer.

In the latest episode of Pach Attack, Pachter said it would be a huge mistake to block used games on next-generation hardware.

"I think the industry will disintegrate; I think there will be no more video games if next-gen consoles don't support used games. You hear that, Sony and Microsoft? You have to support used games," he said.

Pachter noted that Sony has no reason to block used games, because it makes its money from royalties.

"Why would the next-gen consoles not support used games? Sony doesn't sell that much software; maybe 10% of sales are Sony products. Everything else, the other 90%, is third-party. Sony isn't going to help its overall sales that much - let's go with 1%, 2%," he said.

This tiny increase would be demolished if users flocked to Microsoft's new hardware, Pachter said which they would almost certainly do if it supported used games and Sony's didn't. The two companies are not only too smart to give the other side the advantage, he reiterated, but also not "evil" enough to "collude" against the gamer.

The Wedbush Morgan analyst went on to say that publishers over-estimate the number of lost sales caused by the used game market, and under-estimate its importance in fostering future new sales, saying that in the long run the market balances out.

"What does it actually cost [publishers] if people trade in used games and some people buy used games instead of new games? My guess is 5% of software sales, probably," he said.

"Because most people don't finish new games in a week. Most people take thrtee weeks to a month to finish games. Not everybody buys a game the first day. You probably don't get that many games traded in; in reality about 40% of games get traded back in."

Pachter said that of that 40%, very few come back in soon enough to have a significant impact on a new release's sales, the majority of which occur in the first three months.

"So what's the cannibalisation? I'd say probably 5%. I'd say about 5% of the time somebody buys a used game instead of a new game, that costs the publisher a new sale."

See the full episode below.