Only hard drive size holding 360 back

New GOD service a worry for retailers.

Digital releases of Xbox 360 titles are only being held back due to the storage capacity of the console's hard drive, according to Wedbush Morgan analyst Michael Pachter.

He also said that retailers will have no choice but to accept a service offering digital releases day-and-date with the High Street, as Microsoft's publishing partners are likely to back such a service.

"I don't see the timing between new release and digital download being a function of anything other than hard drive sizes," offered Pachter, speaking exclusively to GamesIndustry.biz. "I think as soon as we have large hard drives - think the rumoured Project Natal 'new' Xbox 360 with a terabyte of storage in 2010 - we'll have day-and-date downloads."

Microsoft is due to launch its Games On Demand service in August, but will initially limit the series to best-selling older titles including Crackdown and Assassin's Creed rather than new releases.

"I don't think that the publishers care at all if downloads are day-and-date, and in fact, my guess is that many publishers favour such a model. It's true that retail partners wouldn't like it, but it is not necessarily true that they would have much to say about it," added Pachter.

Suggestions that retailers may be unhappy to sell the hardware without software are off the mark, said Pachter, who highlighted Apple's iPod business as evidence of such a market being lucrative for both.

"I don't see how they could scream too loudly about day-and-date downloads, unless the price for the download was lower than the packaged product price," he offered. "I don't see any retailers refusing to sell iPods, even though all the content on an iPod is distributed digitally.

"Much in the same way, while retailers may baulk at the possibility of day-and-date downloads, I don't see too many refusing to carry Microsoft product in retaliation. Should a retailer boycott Microsoft, I think that the full force of the publishers would be brought to bear on that retailer, and they would find themselves starved for product."

Microsoft has promised around 30 titles for the launch of Games on Demand with new games added every week.

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