Pachter's Podium: Wii U "Not Quite 'Next' Generation", Xbox Live TV "Only The Tip Of The Iceberg"Each month brings new industry issues to analyze, and Wedbush Securities analyst Michael Pachter takes them on. This time Pachter's Podium covers the Sony-Microsoft kerfuffle, the Wii U's challenges, how 2K Sports is dealing with the NBA situation, Xbox Live TV and Amazon's new tablet.
IndustryGamers: Sony's been bashing Microsoft for its developer relations, saying they don't demand a "pound of flesh" to get games onto PSN, and 2D Boy recently wrote about how XBLA is losing developers. Is Sony pulling developers to its side and hurting MS, or what's your take on the whole situation?
Pachter: My take is that XBL and PSN are important selling points late in the cycle, when the late purchaser is far more focused on value titles or more casual titles, so both Microsoft and Sony are keenly interested in attracting as many developers to their respective platforms as possible. I don't know what Microsoft requires to get onto XBLA, but given that there are around 500 titles and this is the first we've heard about how difficult they are to work with, I tend to discount any complaints. It may be true that they are losing developers, and that could be attributable to a variety of factors, including revenue sharing and up-front cash to developers. It's something we won't be able to easily discern, since most PSN and XBLA developers are private, so we're forced to look at anecdotal evidence from sources like 2D Boy. I can't imagine that either Sony or Microsoft is actually "winning", as I don't think that the "war" for content on XBLA or PSN is that important; suffice to say that if Microsoft feels it is losing a competitive advantage, it will either pay more or make its process easier, in order to attract more developers. However, I don't really think Sony is "hurting" Microsoft, as your question stated.
IG: Since E3, Nintendo's been fairly quiet on Wii U, and reports are that it's in "development hell" with Nintendo still struggling to get the hardware right and developers feeling impeded by a lack of visibility into the final Wii U. Did Nintendo drop the ball with Wii U? What do they need to do to ensure a hugely successful launch next year?
Pachter: The Wii U is a pretty ambitious undertaking. It's a new console, with new controls and architecture, but it's not quite "next" generation. Developers have to contend with differences between the Wii U and current generation consoles, then have to figure out what to do with the controls. The timing is still up in the air, and as far as I know, there are no significant third party "exclusives"; instead, we'll see iterations of third party games already on the market, which is unlikely to drive significant hardware sales. In order for the launch to be "hugely successful" (as your question phrased it), the console will need three things: a competitive price, compelling first party launch titles, and compelling third party launch titles. We don't know if the Wii U will have any of these, so it's quite difficult to predict a hugely successful launch.
IG: Do you think doubling down on classic teams in NBA 2K12 was a smart move for 2K Sports, considering the labor state of the league? Will they be able to keep their sales up?
Pachter: I think that 2K Sports is making the best out of a bad situation. It was tough to gauge the extent of NBA player greed (you can see which side I'm on), and they had to go forward with a game without knowing if there would be a season. 2K had to make the best game that they could, and they decided that adding classic teams would make the game experience much better. Should the season be canceled, which is looking increasingly likely, it is an unfortunate fact that fan interest in an NBA simulation game will be lower than it is when the season is in progress. Thus, 2K will likely see sales decline by 20 - 35%. It's too bad, as their NBA game has been phenomenal the last several years, and the game is no less enjoyable with Kobe playing in Italy. My guess is that this year's game will be even better than last year's, due to the inclusion of the classic team mode.
IG: Will Xbox Live TV have any impact on hardware sales this holiday season? Does Sony need to react to make PS3 a better set top box for the living room?
Pachter: I think that Xbox Live TV will have an impact on Kinect sales, but not necessarily on Xbox 360 sales this holiday. The product lineup announced this week is only the tip of the iceberg; in my view, once Microsoft can demonstrate to content owners that people are actually using Kinect with Bing search to find and watch programming, they will see a lot more interest in providing content, and it's only a matter of time before they have a product offering that compares with Amazon's or Apple's. Should they get a competitive product offering, Kinect's voice control, Bing's search functionality and the Xbox 360's processing power create a formidable competitive advantage; I don't think Sony's PS3 is positioned to compete without voice control and search functionality.
IG: Do you see Amazon becoming a major player in games eventually? Will they challenge Apple?
Pachter: No, I don't see Amazon becoming a major player in games, and don't think they'll challenge Apple. The Kindle Fire is a cool device, but it's not going to overtake iPod, iPhone and iPad sales any time soon.
