IndustryGamers - Informing the Games Industry

Pachter's Podium: Nintendo Doesn't Have 'Resolve' to Cut Wii Price

Posted September 22, 2010 by James Brightman

In this month's Q&A column with Wedbush Morgan Securities' Michael Pachter, the analyst steps up to the podium to talk about Nintendo's pricing, its position in the market as executives depart, the battle between Sony and MS, Sony's confusing PSP strategy and more. Read on...

IndustryGamers: Last year, the Wii was saved during the holidays by the price cut and New Super Mario Bros Wii. Do you see anything giving the Wii a similar shot in the arm this holiday?

Pachter: I don't think that Nintendo has the resolve to cut the price of the Wii heading into the holidays.  Recent sales levels have been weak by Nintendo standards, with monthly Wii unit sales averaging just over 300,000 per month in the U.S.  However, that's still on par with Xbox 360 sales, and until Microsoft or Sony cuts price further, the Wii should be able to hold its own.  With all that said, I think we'll see Nintendo maintain price until early next year, and I think we'll see Walmart implement a similar promotion to last year's $50 gift card with the purchase of a Wii.  That suggests that sales will pick up dramatically, as the effective price for a console, two pieces of software and Wii Motion Plus will be $149.99. 

IG: Reports suggest that the PS3 might outsell the Xbox 360 worldwide by 2011. Did Microsoft squander their early lead? What went wrong?

Pachter: I haven't seen any reports that suggest that the PS3 is currently outselling the 360 by a meaningful margin, and the 360 has a lead of over 5 million units.  It appears that they are running pretty close to one another in annual sales, and if Sony begins to gain ground, I think Microsoft will cut price.  This holiday could be the catalyst, as Sony intends to market the heck out of Move, so if Sony keeps pace with Microsoft in the U.S. and gains ground in Europe and Japan, I expect a price cut for the 360 in early Spring.  To answer your question, I don't think Microsoft did much wrong, but the PS3 is a better value with built-in Blu-ray and Wi-Fi, and the 360 has kept pace with the new design and built-in Wi-Fi.

IG: There were lots of games released over the summer, but only Red Dead Redemption really made out like gangbusters. Is the “core” game industry such that a title has to be great (and not just very good) to stand out and do well?

Pachter: I know that I sound like a broken record, but I remain convinced that the "core" gamer is spending an incredible amount of time playing multiplayer online games, and the vacuum created by all of this time spent can only be filled by superior content.  If a gamer is playing Battlefield Bad Company 2 or Call of Duty Modern Warfare 2 online for 10 hours a week, it's hard to lure him away with Alan Wake (a great game, but a completely different experience).  Now that Halo Reach is out and with Medal of Honor and Call of Duty Black Ops around the corner, I expect the multiplayer dilemma to get even worse, and think that "so-so" games will languish on the shelves.  That's why I think that the publishers will start to charge for premium content--out of desperation from seeing games that are good but don't sell.

IG: Nintendo's Cammie Dunaway is leaving, following last year's departure of Denise Kaigler. It seems the NoA executive structure is in disarray. Do you think this is connected to the slowing Wii sales? What does it say about Nintendo's current position?

Pachter: I don't know where Cammie went, but she is a capable executive, and my guess is that she left for a better opportunity.  By the time this is published, we may know where she landed, but I believe the press release said that she left for a better opportunity.  Denise lives in Boston, and was commuting to the West Coast for the Nintendo job, and my understanding is that the burden was too great on her and her family.  She landed a great job with 38 Studios, and appears to be thriving.  I feel sorry for Reggie, who lost George Harrison and Perrin Kaplan in the relocation to San Francisco, and then lost Denise and Cammie over the next couple of years.  He's a really bright (and nice) guy, but I think that the strain of doing three jobs might get to him if he doesn't fill the positions pretty soon.  

Shockingly, my phone hasn't been ringing . . . As far as the Wii's current position, they're holding their own.  They had such a phenomenal start that nobody should have expected them to sustain it for more than four years.  They are definitely behind the technology curve, and with $500 flat screen 1080p TVs out there (I just bought a 40" Dynex for my play room for $479), I think that a greater number of households are ready for a full-HD experience.  Again, playing the broken record, that's why I thought we would have seen a Wii HD by now--consumers are ready for it, and slowing Wii sales reflects that.

IG: We recently broke the story about the PSP2 being in developers' hands. We're surprised Sony still hasn't announced it – TGS would have been a good venue given that PSP already does great in Japan. When do you think Sony will finally push the PSP business forward? What do you think their game plan is?

PSP: I'm completely baffled by Sony's PSP strategy.  They owned the portable entertainment market with the Walkman, and sat back and watched as Nintendo dominated games and Apple dominated music.  They never quite got it right with an MP3 player, and their initial effort in games was a bit too pricey and sophisticated for the majority of the portable gaming market (kids under 13).  They have a new ad campaign with a kid as spokesperson, so I suppose we should wait and see if it works.  I continue to think pricing is an issue, but if the 3DS comes out at $249, the $169 PSP might seem like a bargain.  If Sony were really smart, they'd emulate the 3DS and put a 3D screen on the PSP2.

James Brightman has been covering the games industry since 2003 and has been an avid gamer ever since the days of Atari and Intellivision. He was previously the EIC of GameDaily Biz.