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Pachter explains Wii U “mistake” comment

Tuesday, 19th February 2013 05:04 GMT By Brenna Hillier

Industry analyst Michael Pachter has clarified comments from earlier in the week about the Wii U and 3DS, arguing that poor hardware sales will keep software sales low, leading to tough times for the big N.

Accused of trolling with his description of the Wii U as a “mistake” Nintendo can’t recover from, Pachter took to NeoGaf to provide a more complete explanation of his comments.

“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,” he clarified.

“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.”

Pachter said that neither the 3DS nor the Wii U are generating profits, citing various publicly available figures to back up his claims, leaving Nintendo to wring profits out of 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. My call is that if hardware sales don’t materially improve above current combined levels, software sales are unlikely to materially grow,” he said.

“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.”

Pachter said poor January sales of the Wii U are likely to scare off third-parties, pointing out that Grand Theft Auto 5 isn’t coming to the system.

“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,” he added.

Pachter gave a detailed break down of Nintendo’s financial performance to show that the 3DS is not anywhere near as profitable as the DS despite matching its sales records, noting that smartphone competition is partly to blame.

“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,” he said.

“They are stuck with software profits, and at current sales levels, they are unlikely to make an overall profit from software.”

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11 Comments

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  1. Dragon246

    It definitely makes sense if applied to profitability.

    #1 1 year ago
  2. Cobra951

    “They have around ¥1 trillion (around $11 billion) in cash, so they aren’t in danger of going out of business for decades . . .”

    Whew! When I said they were very conservative with cash in the original thread, I wasn’t thinking that big. Good for them.

    #2 1 year ago
  3. noamlol2

    well they have billions of $$$ so they will never go bankrupt

    plus who dafuq will buy a nintendo home console? it’s trash
    and always has been

    #3 1 year ago
  4. Rinslowe

    Pachter in damage control is quite interesting…

    That aside,
    ““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.”
    He makes a point regarding profitability, but I think it’s important to remember third party companies are skeptical to support Wii U purely because of economic reasons, time and money spent to dev or port, to parity requires more effort. In such a fickle environment from a business perspective who can blame the studios from thinking in this way. Nintendo can only really push sales forward on Wii U right now by releasing ASAP one of their own established IP’s… Over and above popular multiplats, even over and above fresh projects from third parties.
    Wii U specs have very little to do with third party support…

    #4 1 year ago
  5. DrDamn

    I think Sony and MS moving on to PS4/NextBox will actually help the WiiU. It doesn’t need variable PS3/360 ports, it needs more original content which takes advantage of the features. When third parties move on to that we will see some more interesting software. Nintendo do need to drive sales to get the installed userbase to support this though.

    #5 1 year ago
  6. Gnosis

    Apparently someone got shitstormed.

    #6 1 year ago
  7. ps3fanboy

    this is the first time i agree with michael pachter, the wii-u is a big mistake. there is no games for it and it don’t have the wii-mote attraction. when the nextgen consoles arrive it is game over for nintendo.

    #7 1 year ago
  8. DJKeens

    Publishers are to blame here. Low sales numbers are expected considering the lack of third party titles. Most of us know how well received first party titles from Nintendo are. But to garner the numbers of PS360, third party titles are a must. Both systems have no shortage of third party titles and makes them an easy decision in todays market.

    But the publishers have instituted a catch 22. We won’t make console selling games unless consoles sell. Wii U is a fine system but publishers have treated it like a child locked in the basement. The larger third party titles on Wii U are ports released months and even a year before. But what about games on the horizon? GTA5? Bioshock Infinite? Recently released titles even. FarCry3, Crysis 3, Metal Gear Rising? These are major releases this year and yet none are even mentioned for Wii U. I’d say that may have an impact on hardware sales. Will we see these titles on Wii U? Possibly, but it’s likely it will be released sometime into next year long after their original release date. You can probably guess how well these titles will sell in that case.

    To cut this short (sorry!), third party publishers are to blame when discussing the state of Wii U. Nintendo has done quite a bit to try and push sales of the system. They’re publishing titles themselves, reaching out to other companies, and rolling out these directs to keep people interested. I may sound like a fanboy and I may be, but it irks me consistently to hear this discussion time and again.

    #8 1 year ago
  9. deathm00n

    @8 No man, you don’t sound like a fanboy, you gave concrete arguments and I completly agree with you. This is a very good point, even people who are defending Nintendo should accept it. The mainstream people who wants “no child games, gimme da action and blood of GTA and crysis man!” don’t even think about Nintendo when choosing wich console to buy.

    #9 1 year ago
  10. manamana

    Tss, Pachter. Steps in the limelight talking nonsense. Limelight hog, that’s what he is.

    #10 1 year ago
  11. stealth

    This site also missed pachter saying he responded to the email at 9 at nite and didnt know what he was saying and basically it should be taken as his opinion, not fact.

    #11 1 year ago