After a brief hiatus due to E3, we're back with yet another edition in our ongoing Q&A series with Wedbush Morgan Securities analyst Michael Pachter. This month, Pachter talks with us about the impact of Apple's gaming business, whether we'll see 3G in portables like PSP, the disappointing sales of Alan Wake, and more.
IndustryGamers: There seems to be more talk lately about the iPad taking away the need for gaming portables like DS or PSP. Do you see the iPad as a growing threat to those platforms or even consoles?
Michael Pachter: I think that the iPad is less of a threat than the iPod Touch, only because of price. There are a lot of iPod Touches out there, and around 250,000 different apps/games, so it's a pretty compelling device. Obviously, the iPad will supplement usage, and most of the apps will be available on both devices. However, the all-in cost of an iPod Touch with a bunch of free games is lower than the DSi plus even one game, so ultimately, I see parents buying iPod Touches instead of DSis for their kids. The 3DS will dominate because it's so cool and different, but at the margin, I think DS is in trouble. The PSP has very cool games, but isn't really a factor right now, we'll see if Sony improves it to compete with the 3DS.
IG: Square Enix's Yoichi Wada said the future of consoles is in the digital distribution spaces like WiiWare, Xbox Live, and PlayStation Network. But Xbox Live already seems quite far ahead from a sales perspective with that recent report by Bloomberg. Has Microsoft already won that battle? How do you see the online/digital future shaping up?
Pachter: I have immense respect for Mr. Wada, and of course think that he is right. The biggest impediment to the future of downloads is storage, and this will be addressed either through bigger hard drives or through storage in the cloud. We have just seen the introduction of a 250Gb Xbox 360, with a rumored 320Gb PS3, and the Wii is quite far behind on the storage front. Services like Steam allow games to be archived in the cloud (much like iTunes or Kindle), so it's probably reasonable to expect this feature to be promoted by Microsoft and Sony in the near future. However, most gamers really like things at their fingertips, and like games to be portable, so I really see the future of downloads working only if the game can be downloaded to the user's console, and somehow made available at his friend's house as well. This is a problem for the publishers, as they will fear being ripped off by file sharing. Thus, there will always be a place for physical media, as portability is desired by many gamers.
The other impediment to downloads is the inability to re-sell the game to GameStop or GAME. I think that a large plurality of gamers (perhaps as many as half) value the ability to trade-in games, and these people will accept downloads of full games reluctantly. Thus, I think that we'll see games offered both for download and on physical discs for quite some time.
As for winners and losers, Microsoft has a three-year head start on Sony in online gaming, but as we see more PS3s, we'll see Sony gain some ground. Nintendo has no hard drive on the Wii, so they will remain pretty far behind until they improve the console.
IG: NPD reports that Alan Wake sold around 145k in its launch month. Was the game underpromoted by Microsoft? Or do you think it suffered from a crowded month?
Pachter: I'm sad to see Alan Wake's sales so low. It is a great game, and had the misfortune of coming out the same day as Red Dead Redemption. Part of the reason for my erroneous lack of confidence in RDR is that I thought Alan Wake would be a blockbuster. I really liked the game, and think that it was truly innovative and fun, and am hopeful that it sells a steady number of units over the next several months. Yes, the month was crowded, but to be honest, RDR sucked all the wind out of everything. The game was phenomenal, and it really captured the lion's share of May sales.
IG: After E3, has your opinion shifted on the fortunes of Kinect and Move?
Pachter: Although not yet official, it seems like Kinect is going to be priced at $150. Pricing at this level is going to impede adoption, as it is too expensive for most to take a flyer. I think that the core gamer features (voice commands, array microphone, dashboard control) are really nice to have, and certainly worth $50 to most, but asking the core to spend $150 for those features is not likely to drive 20% of the installed base to buy the device. At $150, I expect 2 - 3 million units sold by year-end. At $100, I think the number would be 4 - 6 million, and at $50, it would be 6 - 9 million.
As for Move, the price point is also higher than Sony led us to believe. The fighting game requires two Move controllers, Archery requires a Move controller and a subcontroller, and all games require an Eye. By my calculation, it will take $179.95 to buy one Move controller, a subcontroller and the Move bundle (an Eye, a second Move controller and a game) in order to enjoy the experience. Again, this is too much for most core gamers, and I'd guess that the sales levels will be similar to Kinect (around 2 - 3 million sold). Sony's one advantage is that a lot of PS3 owners already own an Eye (especially in Europe), so the cost to them is "only" $150.
IG: There's a WSJ report stating that Sony and Nintendo have both talked with wireless carriers in Japan. With the 3DS, do you think Nintendo will finally move in a more progressive direction with online and game downloads?
Pachter: I don't understand the connection between talking to wireless carriers and online/game downloads. I don't see the PSP becoming a phone, and doubt that the 3DS will have a phone built in. Perhaps we'll see Sony or Nintendo content on cell phones, but this would be a departure from past Nintendo practice (their games only appear on their hardware), so I would really be surprised. The same is true of Sony.
As for more progress with online and game downloads, Sony is clearly trying with PSN and with the PSPgo to drive more downloads. Nintendo CAN'T go backwards, so of course I expect progress. They need to get a hard drive in the Wii, and can offer some storage (perhaps removable) with the 3DS to jump start downloads.
5 Comments
July 14, 2010
Alan Wake might have had better sales had they followed through on bringing it to the PC...
July 14, 2010
^ lol, I was gonna say the same thing. I didn't buy it but finished it on 360, would have easily bought it if they did release it on PC, visual wise the game looks great but it would have been awesome maxed out on PC. Hopefully one day it will come out, sucks developers overlook us hardcore PC gamers. PC should be the standard, thank you Bioware for recognizing that.
July 14, 2010
It's too bad Alan Wake didn't come to PC - it seemed pretty well suited to the platform. I'm not sure it would have made the game into a hit, but its too late now, and a PC port (or sequel, or anything else with the franchise) doesn't seem terribly likely.
July 15, 2010
@Malice - It wasn't Remedy's choice to make put out on only the Xbox 360. Microsoft is the publisher of Alan Wake and they want to promote their game platform as much as possible. Remedy, in fact, wanted to publish it on PC, but they've stated that its simply out of their control.
July 19, 2010
The X-Box 360 is dominated by FPS and multiplayer options neither of which was Alan Wake. Alan Wake on the PC would have increased sales even on if it was forgive me on the PS3 the sales would have been better. On the PS3 Wake may have brought in Heavy Rain like numbers. I hope Remedy and Microsoft come up with a few more ways to promote the game... viral videos etc and DLC to increase sales could lead into an Alan Wake sequel...