Pachter: Publishers won't block Xbox One used games

Wedbush Securities analyst Michael Pachter believes any publisher that disables used gaming runs risk of significant backlash or boycotts.


Microsoft yesterday clarified the Xbox One's stance on used games, saying decisions will be left up to publishers concerning whether such games will be allowed and if a fee is to be required.

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In a note to investors today, Wedbush Securities analyst Michael Pachter said the majority of publishers will not block used games, at least in the system's first few yeas.

"In our view, any publisher that disables used gaming risks a backlash or boycott of its titles by gamers, negatively impacting sales," he said.

Pachter told GameSpot that activation fees are similarly unlikely.

"They would face a huge backlash. They wanted manufacturers to do the dirty work, and both refused," he said.

GameSpot has contacted major publishers including Activision Blizzard, Electronic Arts, Capcom, Bethesda, Warner Bros., Take-Two, Ubisoft, and Konami about their stance on Xbox One used games. Thus far, only Bethesda has responded.

"We haven't had time to fully understand and evaluate their policy," a company representative said.

Pachter also commented on how Microsoft's Xbox One secondhand policy may affect leading industry retailer GameStop. He said publishers understand that currency generated from game trade-ins is beneficial to them and the secondhand market will remain viable overall.

However, Pachter also said that publishers may block the trade-in of games for a certain period of time following a game's launch to avoid the cannibalization of new game sales.

"However, many believe that used games sold in proximity to a new game’s release cannibalizes sales of the new title (we believe this is probably true), so we think that some publishers may limit used game trade-ins for a specified period of time following the game’s launch," he said.

Grand Theft Auto parent publisher Take-Two Interactive CEO Strauss Zelnick said last month that publishers are only concerned about used games for eight weeks after launch.

"If you can keep the game in consumer's hands for 8 weeks, you almost don't care anymore about used game sales because it's the first 8 weeks that really nail you," he said at the time.

According to Pachter, GameStop stands to be hurt the most from Microsoft's recent announcement that all Xbox One games will be available digitally and physically on day-one.

"We believe that this disclosure has the greatest potential to negatively impact GameStop’s business, as GameStop is unlikely to participate directly in these digital sales," he said.

At the same time, though, Pachter said it is in the best interests of Microsoft and publishers to integrate GameStop's PowerUp Rewards currency into digital transactions in some manner. How such a setup would work, according to Pachter, is laid out below.

"We think it is possible that either gamers will be allowed to purchase digital content key codes from GameStop’s DLC kiosks, or that Microsoft will somehow allow the company to integrate its PowerUp Rewards program directly through Xbox Live," Pachter said.

"In the first scenario, GameStop’s DLC kiosks could be used by Microsoft and the publishers to garner significant interest in upcoming and already available titles, maximizing pre-orders and in-store sales," he added. "In the second scenario, the amount of currency available to make purchases on Xbox Live would increase dramatically, and all parties would benefit from increased online spending."

The Xbox One launches later this year. GameSpot will have more on the platform next week during the 2013 Electronic Entertainment Expo.

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