So let me get this straight. The former head of a company that made big exclusive for Microsoft's consoles is speaking in support of Microsoft?
Colour me surprised.
He is right, though. The used games market won't be able to support the sky-high cost of AAA development.
He is wrong, however, about why that is and what should be done. The cost of AAA development is high due to poor management, shoehorning in more crap so the games have (insert Jim Sterling mockery voice) "broader appeal", and having unnecessarily famous people doing voice acting and motion capture.
The answer is not to get rid of a market that hugely benefits the consumer, it is to cut the cost of AAA development by refining the focus of the games, not shoehorning crap in, better project management, and not having famous people play parts in games. I'm sure there are more.
The fault is not on our end, Cliffy, it's on yours. Get your act together.