Pachter's Podium: PS3 Price Cut, iPhone 3G S, and a Sincere Apology

Today on IndustryGamers we're happy to introduce a new monthly column with everyone's favorite video game industry analyst:  Wedbush Morgan's Michael Pachter.  Each month we will send him five questions to answer regarding top industry news and events – we will gladly listen to your suggestions for questions as well (send them to james@industrygamers.com) but we can't promise all will make the final cut.  

In this first ever edition of “Pachter's Podium,” the analyst discusses big E3 games, PS3 pricing, Nintendo and the hardcore audience, and he makes a sincere apology regarding previous statements he made on GameTrailers' Bonus Round show. 

IG: Based on what you saw at E3, which game will have the biggest impact this year?  How many copies do you estimate it will sell?

MP:  I think Modern Warfare 2 will be the biggest selling game, and Wii Motion Plus the best selling overall item that we saw at E3. Other games will do well, but likely not as well as MW2. I thought that Assassin's Creed 2 and Avatar both looked great, but they will be hard pressed to sell as many copies as the 10 million that MW2 will likely sell (6 million U.S., 4 million rest of world).

IG: Rumors are flying that Sony will cut the PS3's price this August before Madden ships. Can they do this without seriously hurting SCE's profitability?

MP: Sony signaled a price cut when they upped their PS3 shipment forecast to 13 million this year, compared to around 10 million each of the last two years. They are not likely to sell 30% more units without a price cut. The question is not whether, but when, and by how much. They can cut by $100 and perhaps see a spike of 30%, or can cut by a lower amount with bundles. I think that their decision will be based upon profits, so I think that they favor a smaller cut (likely $50) with a bundle of Sony first party games (which cost only $1 - 2 each). Look for $349 and a Killzone bundle in October, instead of a Madden cut in August. Their profits will suffer by the amount of the cut multiplied by the number of units sold, so probably 6 - 7 million units at $50, or around $300 - 350 million. They will not make this decision lightly.

IG: Do you feel Nintendo did enough at E3 to finally appease the hardcore crowd?  Does it even matter? Do they really need the hardcore?

MP:  I think that Nintendo did a great job with all of their constituents. They announced three hardcore games for the Wii (two Mario and a Metroid), and a handful of hardcore games for the DS. They also announced a lot of casual content. Overall, it was a great lineup, but the hardcore fans never seem to get enough from Nintendo. I don't think that it matters if they "need" the hardcore; what matters is that they want to be the console of choice for "everybody", and that includes the hardcore. Nintendo is all-inclusive, and they understand their base customer is hardcore.

IG: What potential do you see in the new iPhone 3G S, which features faster processing for applications, including games? How will this impact the industry?

MP: I see little, if any, impact from the iPhone 3GS. Games are pretty simple, and do nothing to cannibalize DS game sales. If anything, the iPhone expands the market for games by introducing new consumers to the experience.

IG:  Are retailers going to pullback on PSP since it's going all digital with PSP Go? How much will this hurt them?

MP:  I doubt that retailers will pull back on PSP. The PSP Go HELPS retailers at the outset, as the price point is higher ($249) and there will be a lot of replacement business. Over the long run, it will hurt them because of the elimination of packaged products, but you've never seen retailers refuse to carry iPods (all digital) or TVs (all digital), so why does the gaming press think retailers will revolt against the PSP Go?

Pachter also supplied us with this exclusive apology:

As long as you're giving me a forum, may I please beg your indulgence for a statement? I sincerely regret the choice of words in my response to Geoff Keighley's question in last week's Bonus Round, where I said that Sony is "ripping off" the consumer by pricing the PSP Go at $249.99. I made a poor choice of words, and I do NOT think that Sony is doing anything nefarious in choosing their pricing strategy. The company has the right to price its products at a point that they think is competitive, and has no obligation to sell products at lower than a competitive price. They have been subsidizing purchases of the PS3 since launch, to the tune of 22 million sold at a loss of $100 or more apiece (on average), so if they are able to make a profit on the PSP Go, more power to them. They are pricing at a point that positions the PSP Go competitively with the iPod Touch, and the PSP Go arguably has much more value than the Apple product. Notwithstanding my view that the price point is too high to generate more than a few million units sold, I really think my comment was unfair, and would appreciate your allowing me to clear the air on IndustryGamers.com.