He's right that it happens, but it's actually a good thing.
If a game is so boring and forgettable that watching a Youtube video is an effective replacement, a player who purchases it will not be satisfied with the game. This directly harms the industry, because it disincentiveses people from purchasing more games in the future.
Ideally, you want to match up games with people that want to play them. Crappy games should sell zero units, and people shouldn't feel burned having spent their hard earned cash. Let's play videos aren't perfect, but they're a damn better solution than text reviews or advertisements.
Disclaimer: I'm an indie game developer that's just released the first alpha of my game [1], which has gotten most of its attention so far via let's play videos (made by myself, and others). So I'm biased in that direction, but I would have said the same thing a year ago when I was making Flash games.
[1]: http://www.underthegarden.com (shameless plug)