Wedbush Securities analyst Michael Pachter has been studying and commenting on the video games industry for decades, and is notable for not holding back on his observations of what is now a $138 billion business.
Speaking with VentureBeat at the recent Video Game Bar Association event in Los Angeles, the topic of loot boxes came up. The controversial revenue source has been the subject of many an opinion piece in recent years, and Pachter says that the fault lies in the consumer:
“There are three alternative outcomes for what’s going on with proposed regulation and legislation. Either the publishers comply and get rid of loot boxes, which I think is a low-probability outcome, or they fight, which I think is a high-probability outcome, or they withdraw from those countries and let the consumer bitch and moan, which I think is the most likely outcome.
Why are there loot boxes? Because consumers are stupid and they’ll spend thousands of dollars trying to get that hard-to-get thing. If you put it up for sale for $500 they won’t buy it. I mean, I actually think the Chinese solution – posting the odds of getting each item – is the right way to do it. This thing has a 1-in-250 chance in the loot box, or you can buy it for $250. Then people realize, I have to buy 250 loot boxes for $600 to get it? Then they’ll just buy it.
In the U.S., there’s very low probability anybody passes legislation to regulate loot boxes. The guys in Hawaii are just f–king morons… their solution was, loot boxes are gambling. Gambling is illegal under Hawaii law. Therefore you can’t buy a loot box until you’re 21. Does that mean you can gamble when you’re 21 in Hawaii as well? There’s no chance that law is upheld. They’re not going to get it passed, because somebody in that legislature actually went to law school. Somebody in their staff is going to look at that Hawaii law. They’re idiots. I don’t think any of that stuff happens.”
Asked about the biggest disruption coming in the next few years he says it’s going to be the lack of need of consoles as home devices, TVs, etc. become powerful enough that the addressable market for games expands exponentially: “I’d say it’s probably five to seven years of migration, but the game market becomes anybody with a PC or a laptop playing on their television like it’s a console with a controller. That just removes the console purchase as a barrier to entry. You want to be selling software into that.”
You can read the full interview here.