IndustryGamers - Informing the Games Industry

Pachter's Podium: Pach Backtracks on $50 Natal Estimate, Says DSi XL 'Won't Be a Success'

Posted February 25, 2010 by James Brightman

We're back once again with another edition in our monthly Q&A column featuring Wedbush Morgan Securities analyst Michael Pachter. This month, we tapped Pachter's brain on the impending motion control war, the chances of success for Nintendo's DSi XL, the third-party situation on Wii, the booming social games market, and EA's marketing spend for Dante's Inferno. 

 

IndustryGamers: So we understand you believe that Natal will crush Sony's motion controller in sales, but do you really think either motion platform will have much impact in expanding the video game audience, similar to the Wii? 

Pachter: I probably aimed too low with my $50 Natal comment, as I'm sure that consumers will come to believe that the product and software has a lot of value.  That means to me that Microsoft may try to price higher than I guessed on the Pach Attack segment.  Regardless, if consumers think that Microsoft is providing a lot of value with Natal, it could be priced higher.  The more they and Sony charge, the lower unit sales of the competing controllers will be, and the less they charge, the higher.  I don't see either expanding the GAMING audience, but do see them expanding the user base beyond the core gamer in the household.  I do not expect the multi-user household to buy a significantly higher number of games, but think that once these other household members are introduced to the PS3 and 360, they may begin to enjoy the many features of each, and are more likely to justify movie downloads, joining Netflix, or whatever is planned in the future, as the consoles are more approachable with motion controls.

 

IG: What is your take on the DSi XL?  How do you think it'll sell? Will people really want to pay $20 more just to get a larger handheld?

Pachter: I think that the price point of all DS products are too high, and think that a price increase for the DSi XL is not going to sit well with consumers.  The difference in price between the DS Lite and the XL is $60, and I'm not sure that bigger screens provide the value that Nintendo thinks.  The difference between the DSi and the XL makes sense, but all three models are due for a cut, the DS to around $99, the DSi to $129, and the XL would then make more sense at $149.  I don't think it will be a success at launch, since it costs only $10 less than a Wii.

 

IG: What will it take for more third parties to succeed on the Wii? Will it improve in 2010? Can Nintendo do anything to help or is this more due to publishers simply putting out crap games?

Pachter: I continue to believe that the Wii audience will buy good games, and think that third parties have done a poor job of making them for the Wii.  There are a handful of exceptions (my favorite is Zack and Wiki), but most third party Wii games just plain suck.  The third parties don't appear to be giving the Wii owner what he/she wants, which is an approachable, high quality game.  The bulk of titles are shovelware, and once a Wii owner has a bad experience with a poorly crafted title from a third party, they are even more likely to return to buying only Nintendo products.  This is most definitely NOT Nintendo's fault; they can hardly be blamed for making consistently good games.  It's the fault of studios that think it's ok to make a lousy game and put the word "party" in the title.

 

IG: Richard Garriott recently said that social gaming will be the "juggernaut of growth" for the next decade in the games business. Is the social games sector really as big as everyone seems to think, or will the bubble burst?

Pachter: Richard is right that the category has expanded the appeal of games to non-traditional audiences:  women, older people, and definitely people who are intimidated by a console or handheld experience.  The "bubble" you refer to relates to the valuations of the companies in the space, and not to the revenue growth we see from these companies.  More important, the number of users is growing exponentially, as business models are still developing, and the bulk of these games can be played for free.  In my view, it's a high class problem to have if there are more people than ever playing games for longer periods than ever before.

 

IG: What are your thoughts on EA's shelling out nearly $3 million to advertise Dante's Inferno during the Super Bowl? Given Dante's reviews and sales, do you think it was worth the investment? 

Pachter: EA has pretty smart people responsible for their marketing campaigns.  While I have four degrees and was a pretty good student, my worst grade after college was in marketing, so don't ask me if that advertising buy was worth it.  I'd estimate that Dante's Inferno will generate around $100 million in sales, suggesting that the marketing budget is around $15 million.  I don't think we should be concerned if EA spends that 5¢ at a time advertising on IndustryGamers.com or spends it in a large chunk during the Super Bowl (well, maybe YOU should be concerned about that. . . )

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.