Outspoken analyst Michael Pachter thinks that free online multiplayer is hurting new game sales – and publishers need to start charging subscriptions to make up the difference.

While the NPD figures released yesterday for June 2010 showed an increase from May – and especially from the disastrous April numbers – it was still a 6% year-over-year decline for the industry. The Xbox 360 had a solid month thanks to the release of the new “slim” (or rather “short”), but handheld sales were down, and sales of software fell 15%.

In an interview with IndustryGamers, ubiquitous analyst Michael Pachter said that he largely attributed cool sales to the prevalence of free online multiplayer in games like Modern Warfare 2 and June’s top seller, Red Dead Redemption.

“[We] think that the overall decline was due to a very large number of people playing multiplayer online games for free on PlayStation Network, and for an annual fee with unlimited game play on Xbox Live,” said Pachter.

We estimate that a total of 12 million consumers are playing Call of Duty Modern Warfare 2 for an average of 10 hours per week on the two platforms’ respective networks, and the continued enjoyment of this game (along with an estimated 6 million Halo online players, 3 million EA Sports players, and 5 million players playing other games, such as Battlefield, Red Dead Redemption, Left 4 Dead and Grand Theft Auto) has sucked the available time away from what otherwise would be spent playing newly purchased games.

Pachter noted that the prevalence of free online multiplayer was a great thing for consumers, but said that it was “devastating” to the people putting money into the development of new games. “[Unless] and until the publishers come up with a business model that appropriately captures the value created by the multiplayer experience, we are destined to see a migration of game playing away from packaged goods purchases and toward multiplayer online.”

So what can publishers do? Well, in a statement guaranteed to make him Bobby Kotick’s new best friend, Pachter said that game-makers with especially compelling and popular multiplayer should look into monetization – like subscriptions.

“We think that it is incumbent upon Activision, with the most popular multiplayer game, to take the first step to address monetization of multiplayer,” Pachter noted. “It is too early to tell whether that will be a monthly subscription, tournament entry fees, microtransaction fees, or a combination of all three, but we expect to see the company take some action by year-end, when Call of Duty Black Ops launches.”

Though Pachter said he expected Activision to soften the blow by allowing some form of free-to-play multiplayer, he noted that gamers on PSN and XBL had racked up close to 4 billion combined hours of playtime since MW2‘s launch last November. Assuming that the average game has a playtime of under 30 hours, said Pachter, this means that “a staggering 133 million units of equivalent game play have been spent (so far) playing Call of Duty online.”

Pachter is right that game developers and publishers, as businesses, are beholden to their employees and investors to make money. If they don’t make money, they don’t make games – it’s pretty simple. On the other hand, Kotick’s plans to monetize Call of Duty‘s multiplayer have been met with vicious push-back from hardcore gamers. Will the majority of Call of Duty players shell out the bucks to shoot people in the face online? Judging by the sales of the game’s map packs, it’s not out of the question.


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