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Pachter: Wii U a "mistake Nintendo may never recover from"

G

Gannd

Banned
My only problem with Nintendo is that they can sustain a Wii U not being a success and the 3DS being a modest success but I feel like they keep shooting for something "new" and I wish they'd just release a traditional console with the Pro Pad. I don't need a gimmick.

That, or they need to release an uber handheld that streams to the TV in away that the Wii U is a console that streams to a "portable". I'd rather have it go the other way.
 
J

JoeM86

Member
Correct me if I'm wrong, but isn't this statement erroneous?

To elaborate, if the Wii U is not generating profits, and if the 3DS is not generating profits, the only thing that will generate profits is software.
Click to expand...

It was my understanding that as of August last year, the 3DS was generating profits again after a year of it being at a loss.
 
A

anon_mastermind

Member
Drakeon said:
You're arguing semantics dude. Pachter doesn't actively wish for Nintendo to do badly, don't take it personally when he suggests that Nintendo is in a rough spot.
Click to expand...

I don't get your point, but yeah I am arguing semantics. I expect better from him. His analysis is alright otherwise.
 
M

michaelpachter

He speaks, and we freak
goomba said:
Sounds like your backtracking , you stated Nintendo would "probably never recover" , thats just sensationalist bullshit. You talk of profit and losses whilst failing to address the currency conversion issues Japan has faced nor hold Sony nor Microsoft to the same profit expectations.
Click to expand...

Operating profit is without regard to currency translation. They list that as a special item. Everything I talked about was apples-apples, and the yen was pretty strong during those big profit years.
 
AHA-Lambda

AHA-Lambda

Member
michaelpachter said:
First, I must apologize for calling two thirds of you assholes. It's probably more like 5%, so I was overly sensitive in my generalization.

Second, and to the point, there is actually some reasoning behind my comments that the Wii U is a mistake from which Nintendo may not recover, and I threw the 3DS' cannibalization from smart phones and tablets in there to make a point.

Nintendo has historically made money, and a lot of money, on each hardware unit sold. The DS at $99 US is more profitable for them than the 3DS at $169 (see many quotes from Nintendo in Kyoto about losing money, or being barely profitable). The DS sold 23.5 million units in FY:07 (ended March 31), 30.3 million in FY:08, 31.1 million in FY:09, and 27.1 million in FY:10. Nintendo made money, and a lot of money, in each of those years.

I think it is instructive to use operating income in Yen as a guide, since Iwata said he would consider resigning if Nintendo did not earn ¥100 billion in FY:14. Nintendo made ¥90 billion in FY:06, ¥226 billion in FY:07, ¥487 billion in FY:08, ¥555 billion in FY:09, and ¥356 billion in FY:10. In FY:11, DS sales dropped to 17.5 million units, and operating income fell to ¥171 billion; in FY:12, combined DS and 3DS sales were 18.6 million units, but operating income disappeared, and Nintendo generated a LOSS of ¥37 billion. Obviously, the loss was impacted by lower Wii sales and lower software sales, but the point here is that the 3DS doesn't generate much of a profit per unit, if any, and the DS did.

Over the same period, Wii hardware sales were 0, 5.8 million, 18.6 million, 25.9 million, 20.5 million, 15.0 million, and 9.8 million. We have been repeatedly assured by Nintendo that the company makes a profit on every Wii sold, but as sales leveled off at 10 million, the company printed its first loss ever.

In FY:13 (the current year, ending next month), Nintendo is projected to sell 17.3 million DS and 3DS units combined, and to sell 8 million Wii and Wii U units combined, and is projected to generate an operating loss of ¥20 billion. That means that current levels of sales keep the company at roughly breakeven.

My comment about the Wii U being a "mistake" from which the company "may not recover" was intended to say that if Wii U sales don't materially improve, Nintendo is unlikely to be profitable. They have around ¥1 trillion (around $11 billion) in cash, so they aren't in danger of going out of business for decades. However, if they aren't profitable, they aren't doing a good job for shareholders.

To elaborate, if the Wii U is not generating profits, and if the 3DS is not generating profits, the only thing that will generate profits is software. Nintendo is ensured high sales of its proprietary software, but it makes the most money on its royalty business, collecting fees from third parties for the privilege of letting them put out games on Nintendo platforms. Publishing (software) revenues peaked at ¥675 billion in FY:09, and are on track to come in around ¥235 billion this year; my call is that if hardware sales don't materially improve above current combined levels, software sales are unlikely to materially grow. If software sales don't materially improve, losses or break even will become the norm. Nintendo will not "recover" to its formal highly profitable glory.

The poor sales of the Wii U in January are likely to impact third party publisher plans to support the console. Notice that GTAV is not on the Wii U; that wasn't a typo, they don't see enough promise in sales to cause them to spend extra development dollars on a Wii U version. I have spoken to several publishers who are skeptical, and I think that the Wii U will see a lower level of third party support than the Wii did, unless sales materially improve. If I'm wrong, I'll admit it, but without third party titles, Nintendo will not generate its customary levels of royalties, and losses or break even could become the norm.

Many of you point out that the 3DS is selling better than the DS at a similar point. That's true, but the DS was always profitable, and the 3DS is not. Also, the DS saw sales go from 8.8 million units in its first four quarters to 18.0 million its next four, to 20.2 million in its third full year; I'm pretty confident that the 3DS will not get to 20 million units, but even if it did, it would generate little profit from hardware. Keep in mind that the DS redesign to a lite version boosted sales, and there was little competition for 12 year-old and older from smart phones and tablets. Now, parents who can afford it are opting for Kindles, iPads, and smart phones for their teenagers, and the more casual of those are perfectly happy playing Angry Birds and putting their DS or 3DS into a drawer.

The important point is that if 3DS sales level off at 15 million and Wii U sales level off at 8 - 10 million, software sales will be much lower than they were in the past. If Nintendo doesn't make a profit on hardware, they can't afford to cut prices further. If they do cut price, it will likely occur as their manufacturing costs come down, but I don't expect big hardware profits in the foreseeable future. They are stuck with software profits, and at current sales levels, they are unlikely to make an overall profit from software.

That's it, not trolling, but that is my reasoning.

To the 5% of you who ARE assholes, bring it on ;-)
Click to expand...

Damn good post from Pachter. Honestly I still think the man gets too much shit on here.

but I still think the FUSE selling 5m thing was DUMB =/
 
S

Skyzard

Banned
Gannd said:
My only problem with Nintendo is that they can sustain a Wii U not being a success and the 3DS being a modest success but I feel like they keep shooting for something "new" and I wish they'd just release a traditional console with the Pro Pad. I don't need a gimmick.

That, or they need to release an uber handheld that streams to the TV in away that the Wii U is a console that streams to a "portable". I'd rather have it go the other way.
Click to expand...

'I don't need a gimmick' - unfortunately I think you are in the extreme minority these days in terms of Nintendos overall demographic, at least the target anyway.

It's a real shame since it always means sacrificing another aspect that could have been. In terms of the 3ds,a price cut would have been better.
 
B

Baconsammy

Banned
pawelranger said:
If you talk about profits I would be more worried for Sony and Microsoft, especially Sony. But people don't care because they have a false sense than Sony and Microsoft are resourcing from other areas, and Nintendo don't.
Click to expand...

Microsoft's profits off 360 have been great enough to mask the huge losses in the groups that are put in the same division as them. Sony, you're right, has a lot to worry about.
 
O

ozfunghi

Member
Baconsammy said:
He said that's where they make the most money. And it's where they're not making enough money, and the fact that the hardware isn't selling is exacerbating the problem.
Click to expand...

Again, software not making enough money on WiiU (which is what his entire point is about). Why? Because not enough hardware is being moved, again for WiiU. Even in the case of Wii and DS, the profits of hardware were not as important as 3rd party royalties (not even speaking of 1st party software sales).

The only reason he gives why it could still be a problem, is because a lot of people game on tablets and smartphones. As if this wouldn't be a problem for the competition? Or is just console gaming in general "doomed"?
 
P

Plinko

Wildcard berths that can't beat teams without a winning record should have homefield advantage
Natureboy99 said:
Yeah but how many of those 30 million bought a Wii BECAUSE of MKWii? MKWii sold well because the install base was already there. It also had the wheel and online play. MKWiiU wont have any of those distinctions or advantages, not to mention there is now some great alternatives on the market such as SASRT, Modnation, even LBP Karting. I might be wrong, but I don't think MKWiiU will do as well as the 2 MK games before it.
Click to expand...

This is insanity. Mario Kart Wii came out in April of 2008. Go take a look at Wii sales for the rest of that year and 2009.
 
P

PhilipDoesMatter

Member
The gameplay is not unique????

Man!!! When in your life did you turn of the TV and played the damn same game in the exact damn same point when your wife wanted to go for the novel?

When did you played something so original and innovative as Rayman Legends (and the demo is only a portion of it)?

Do me a favor and shut up. It will be a huge success with Mario Kart, Mario 3D, Zelda and many other things.

BTW, Black Ops II is definitive with these controllers.
 
A

Amir0x

Banned
That post where pachter finally elaborates on some of his thought process, whether I agree with him or not in his assessment, completely restores my respect for him, even if not particularly for his predictive skills.

It was reasoned, articulated his position well and even made attempts to amend some of the bad blood. I really enjoyed it reading it. Good shit, Michael.
 
S

Sandfox

Member
Gannd said:
My only problem with Nintendo is that they can sustain a Wii U not being a success and the 3DS being a modest success but I feel like they keep shooting for something "new" and I wish they'd just release a traditional console with the Pro Pad. I don't need a gimmick.

That, or they need to release an uber handheld that streams to the TV in away that the Wii U is a console that streams to a "portable". I'd rather have it go the other way.
Click to expand...

Gimmicks drive sales with any product and Nintendo went with a long shot in both the DS(to counter the PSP) and the Wii(attract new gamers after the Gamecube). The Wii U just doesn't seem to be catching on and it probably has a lot to do with the tablet boom that they didn't see coming when developing the controller.
 
J

JazzmanZ

Member
Amir0x said:
That post where pachter finally elaborates on some of his thought process, whether I agree with him or not in his assessment, completely restores my respect for him, even if not particularly for his predictive skills.

It was reasoned, articulated his position well and even made attempts to amend some of the bad blood. I really enjoyed it reading it. Good shit, Michael.
Click to expand...

Now if he only ever did this for the rest of his quotes I see flung around here..
 
B

Bsigg12

Member
pawelranger said:
If you talk about profits I would be more worried for Sony and Microsoft, especially Sony. But people don't care because they have a false sense than Sony and Microsoft are resourcing from other areas, and Nintendo don't.
Click to expand...

What else does Nintendo do to make money? Microsoft out of the 3 is the most financially stable. Sony is beginning to recover after firing a large amount of employees from other areas of the company. Besides the grip of money Nintendo has in the bank, where else is Nintendo getting money from?
 
V

volpone

Banned
Mad props to Pachter.

And actually he's right. Some of the posts in here are truly the works of assholes. (or 'arseholes' in my case.)
 
D

DJMicLuv

Member
Back when the DS was announced it seemed obvious to me and my gaming pals that they were doomed.

When Wii was announced it was clear as day to me and my gaming pals that they were doomed.

3DS seems to be picking up speed and this years releases look great. I somewhat regret buying one at launch but by the end of 2013 I'll be glad to have one.

I don't own a WiiU yet but I know at some point in the future Nintendo will release a title on the system which I can't resist and will end up buying one.

Nintendo (hardware) has the trump card that is Nintendo (software).

Never bet against Nintendo. If they could recover from Gamecube they can recover from WiiU.

DS wasn't a huge hit out of the gate, it took a year or so to hit it's stride like any console release does, and I expect that by mid-2014 WiiU will have a decent, though clearly not Wii sized, install base with a reasonable, though not expansive, number of AAA titles to justify purchasing the console.

Pachter is always hyperbolic, that's what keeps him in the press.


Edit: I've read through the thread now rather than just the OP and I think my post is a bit kneejerky and doesn't really add much to the discussion. Nintendo will probably never reach the heady heights of the DS/Wii era again, though it could happen, but they'll always be around. If 'recover' means getting back to their highest point then I doubt they will, in terms of 'recovering' from WiiU then I'm not sure they need to. The WiiU won't kill Nintendo but it won't be another Wii. DS/Wii was a phenomenon and only analysts and shareholders would or could expect that to happen again.
 
B

Baconsammy

Banned
JazzmanZ said:
Now if he only ever did this for the rest of his quotes I see flung around here..
Click to expand...

You act as if it's his fault that you only read quotes taken out of context. As Ami pointed out, Michael's predictive skills are questionable at best, but his analysis of current situations is usually spot-on. If I had a question for him it would be: Where did the prediction of Wii U selling out worldwide for months come from? Extrapolation from the Wii's success or blind acceptance of Nintendo's own predictions?
 
UberTag

UberTag

Member
Vane_MagicCity said:
How is this shit not bannable?
Click to expand...
It should be. Personal attacks are personal attacks. GAF's code of conduct has a specific clause written into it for just that scenario.

sd28821 said:
I honestly believe he does it on purpose .
Click to expand...
You guys shouldn't be laying into Pachter so much for employing hyperbole to get his point across. Saying "a mistake Nintendo may never recover from" makes for a much tastier sound byte and generates a lot more interest than that big lengthy diatribe he provided us with in the last page where he breaks his logic down. We appreciate that level of detail but that's not what the media is looking for. We're completely different audiences.

Employing hyperbole is a common tactic to grab someone's interest and generate a reaction to what you have to say. I do it here myself... if I'm speaking in extremes on GAF, chances are I don't believe 90% of what I'm saying. But I'm taking an extreme stance to make a point.
 
S

Synth_floyd

Banned
But what I don't get is that let's say that Nintendo operates at a breakeven level for the entire next generation of consoles (~5 years). They still have $11 billion in the bank. Even if it goes down to $7 or 8 billion they could still come up with a hit product and become profitable again. I mean the Gamecube was a relative bomb and then they came up with the Wii. Same thing could happen again.

I assume Pachter is talking about this from a shareholder perspective. If the company is treading water or losing a little money each year the stock is not going to go up and the shareholders won't make any money. But the company itself could still recover.
 
C

ChimpanzeeThat

Member
When he says "not recover from", he obviously doesn't mean go out of business, more that Nintendo will lose the faith of a certain amount of consumers that it has built up from the success of the Wii and of course the publishers and developers who thought the console would do better than it currently has.

Sony arguably started this generation badly, high price, came into the gen late and took them forever to go full sprinting against the competition. They probably lost the faith of a few people, i know i didn't have much "faith" in the PlayStation brand and didn't buy it until a few years after its release. But they recovered, they released a lot of great games for the system and supported it very well with third party titles. It's hard to debate that they've finished this console generation in a sprint.

Now how this reflects on Nintendo is as thus: can they pull out the stops to make the new console successful? Wii U has started off relatively poorly, can they turn it around? I want to say yes, but part of me agrees with Pachter and i have to say no. The tablet controller idea was great, but the hardware powering the whole thing is a massive disappointment for me.
 
G

Gannd

Banned
Sandfox said:
Gimmicks drive sales with any product and Nintendo went with a long shot in both the DS(to counter the PSP) and the Wii(attract new gamers after the Gamecube). The Wii U just doesn't seem to be catching on and it probably has a lot to do with the tablet boom that they didn't see coming when developing the controller.
Click to expand...

Not any Nintendo product. I think Nintendo is cursed by being the largest game publisher in the world and it is hard to compete with them. I do not want Nintendo going 3rd party. I'd much rather have Nintendo get on a 4 year release cycle that has them lagging the other two but making up for it later and have it be reasonably priced.
 
S

sd28821

Member
UberTag said:
It should be. Personal attacks are personal attacks. GAF's code of conduct has a specific clause written into it for just that scenario.


You guys shouldn't be laying into Pachter so much for employing hyperbole to get his point across. Saying "a mistake Nintendo may never recover from" makes for a much tastier sound byte and generates a lot more interest than that big lengthy diatribe he provided us with in the last page where he breaks his logic down. We appreciate that level of detail but that's not what the media is looking for. We're completely different audiences.

Employing hyperbole is a common tactic to grab someone's interest and generate a reaction to what you have to say. I do it here myself... if I'm speaking in extremes on GAF, chances are I don't believe 90% of what I'm saying. But I'm taking an extreme stance to make a point.
Click to expand...

oh no i under stand it but that doesn't mean I like it or respect those who do it
 
M

metalslimer

Member
Baconsammy said:
You act as if it's his fault that you only read quotes taken out of context. As Ami pointed out, Michael's predictive skills are questionable at best, but his analysis of current situations is usually spot-on. If I had a question for him it would be: Where did the prediction of Wii U selling out worldwide for months come from? Extrapolation from the Wii's success or blind acceptance of Nintendo's own predictions?
Click to expand...

or his analysis that the 3DS would sell out for months at 250 only to promptly switch analysis and say Nintendo was dumb for doing that.
 
I

Interceptor

Banned
Kudos to Pachter for coming here in the spotlight to explain himself. But like always, why choose such a hyperbole headline just to explain it later with a few more elaborate sentences?

You use a lot of numbers to explain your point of view but unfortunately some of them are not quite accurate. You point out that the 3DS is still not profitable. This was true in 2011, but Nintendo themself stated this has changed in 2012. And of course it will change in the future. Additionally we have some serious heavy hitters upon us with titles like Pokemon and Smash and many more. The 3DS has a really bright future.

The competition of mobile phones usually gets too much attention in my opinion. Sure, everyone and their dog has a smartphone nowadays. They use it for browsing, chatting, pictures and of course gaming. But the problem is right here and you mentioned it yourself. Angry Birds. Still the same game. What else is there? What other applications are upon us? I am quite happy with my S2 and frankly i don´t see a point to upgrade. The OS is fast enough, the processor capapble of handling all my apps and the only increase in a requirement of hardwarepower lies in 3D games, Which are mostly unplayable on a smartphone. You try them once, show them around and then never start them again. I am going to say that while everyone will have a smartphone, serious gaming will become a niche. Both in quality and controls. And thats why a dedicated handheld, and thats important, with dedicated games, will be able to healthy coexist with other mobile devices. As usual there is a lot of doom and gloom around Nintendo. But even in the 90s analysts were quick to learn one important lesson. Never underestimate Nintendo.
 
Q

Quadraphonic

Member
Synth_floyd said:
But what I don't get is that let's say that Nintendo operates at a breakeven level for the entire next generation of consoles (~5 years). They still have $11 billion in the bank. Even if it goes down to $7 or 8 billion they could still come up with a hit product and become profitable again. I mean the Gamecube was a relative bomb and then they came up with the Wii. Same thing could happen again.

I assume Pachter is talking about this from a shareholder perspective. If the company is treading water or losing a little money each year the stock is not going to go up and the shareholders won't make any money. But the company itself could still recover.
Click to expand...

How many times will 3rd-party publishers fall for the "We've fixed our 3rd-party sales this time, guys, really!" before they straight up give up?
 
B

Baconsammy

Banned
metalslimer said:
or his analysis that the 3DS would sell out for months at 250 only to promptly switch analysis and say Nintendo was dumb for doing that.
Click to expand...

Yep. I'd just like to know what he bases the long-range forecasts on. Gut or inside info.

Coolwhip said:
Nah, he just stated the obvious and people are acting like that makes his crazy one liners any less annoying.
Click to expand...

Stop with the victim complex. Pachter isn't in the business of releasing crazy one liners. He's an analyst. If you latch onto one sentence, that's on you, not him.
 
F

FLEABttn

Banned
Interceptor said:
Kudos to Pachter for coming here in the spotlight to explain himself. But like always, why choose such a hyperbole headline just to explain it later with a few more elaborate sentences?
Click to expand...

You think Pachter chooses the headlines that publications run with? Come on now.
 
I

Interceptor

Banned
FLEABttn said:
You think Pachter chooses the headlines that publications run with? Come on now.
Click to expand...

Of course. Journalists just write down what you give them. Especially in video games. He chose his words very carefully and of course he knew how the media would use them. Now he gave us an almost correct analysis of the past. That doesn´t change the fact that his last statement was way over the top. On purpose. Again.
 
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