Pachter On Nintendo: "I think they misfired on the Wii U"

He also reiterates that the 3DS will never reach the level of success as the original DS.

by on 19th Feb, 2013

The Wedbush Securities managing director who has a penchant for getting gamers in a tizzy is at it again. In a recent interview with Venture Beat, Michael Pachter states that what he's been saying about the Wii U for some time now is becoming fact. Which is the long-term future of Nintendo is not looking so hot.

"I think they misfired on the Wii U… It’s just not that different from the other two [existing] consoles, and the gameplay isn’t as unique as the Wii. They made a mistake, it’s something they probably can’t recover from."

This is in reaction to reports of Nintendo's performance in January, specifically hardware sales of the Wii U. After a respectably strong holiday showing, the numbers for the first month of the New Year are estimated around 55,000, which is quite the disappointment.

In the same month, Microsoft was able to sell another 281,000 Xbox 360s, which is not bad for a system that's essentially yesterday's news. It is also noted how Wii U sales are 38% lower than the original Wii during its first three months, which again is far from encouraging. There are certainly no shortages to speak of like last time.

Also, to add insult to injury, Patcher had this to say:

"I think they have made a costly mistake [with the Wii U]… And their handheld business can’t save them in the face of cannibalization from smartphones and tablets."

Patcher has a history of foreseeing the downfall of Nintendo, and many wondering why people in the press bothers to give Patcher so much attention in the first place, are quick to remind everyone that Patcher also said the 3DS was a bad idea, and it's doing better than ever,

But to answer the question as to why the man gets so much attention, Destructoid has the answer. For they highlighted his recent appearance on NeoGAF, to address his critics head on. Say what you will about the guy, but his opening salvo is fairly amusing:

"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."

From there, Patcher explains his reasoning by getting down and dirty with dollars and sense:

"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."

Patcher also notes that, while the 3DS is doing well, it's also not as profitable as its predecessor, the regular DS. He also reiterates that it will not be as successful either, mostly due to the fact that the DS didn't have to compete with iPhones, iPads, and the like.

Say what you will about Patcher; he backs up his arguments with fairly compelling facts and reasonable guesses. It would seem that the primary reason why he is so hates is that he always has bad news, and even worse, he's sometimes correct.

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