Speaking to GamesIndustry International, Wedbush Securities analyst Michael Pachter says that Nintendo's continued weakness contributed to 11 percent of the decline in U.S. video game sector in the month of December. Pachter also said that there was evidence that consumer fatigue has set in - even when it comes to popular games like Call of Duty: Black Ops II.
This is sure to put analyst Michael Pachter on someone's naughty list: Recently he said that Activision needs to start charging a fee for the multiplayer portion of its Call of Duty games. Wedbush Securities industry analyst Michael Pachter made his comments during the Digital Game Monetization Summit in San Francisco, California (as reported by GamesIndustry International). During his presentation he said that Activision made a serious mistake when it didn't implement a subscription-based model for Call of Duty multiplayer.
Wedbush Morgan analyst Michael Pachter says that Electronic Arts and Activision's mismanagement of big first-person shooter titles could end up contributing to another month of "terrible" software sales for the game industry in October. He is referring to Medal of Honor: Warfighter, a game that was supposed to be a major release for EA in October and Activision's 007 Legends, which fared worse than Medal of Honor.
Wedbush Morgan Securities analyst Michael Pachter has said in a note to investors (PDF) that it is unlikely that Vivendi would sell off Activision Blizzard.
Wedbush Morgan analyst Michael Pachter expects that Microsoft’s next-generation "Xbox 720" console will be released in the Spring of 2014, adding that he expects the new console to function much like a set top box. Anyone that has followed Microsoft in the last ten years knows that the company has been working on a set top box strategy for a very long time - even before it considered making a video game console.
Pachter adds that he does not believe the speculation on a late 2013 release.
Wedbush Morgan analyst Michael Pachter says that Nintendo has to price its new Wii U console at around $300 per unit to stand a chance of being successful at retail.
Pachter tells C&VG that he remained uncertain after Nintendo's E3 press event whether it has a "killer app" to help drive sales of the new console.
Wedbush Morgan analyst Michael Pachter believes that Microsoft and Sony may very well cut the price of their respective consoles at some point but are waiting to see what the retail price of the Wii U will be so they can respond accordingly.
"I think both Microsoft and Sony are waiting to see Wii U pricing. If it is over $300, they don't need to cut." Pachter tells C&VG.
According to Wedbush Morgan analyst Michael Pachter unlocking downloadable content that is already present on a retail game disc when you by it might not be illegal. On the latest edition of his GameTrailers TV show " Pach Attack," Pachter also says that it shows the greediness of developers and publishers in some ways.
If 38 Studios is forced to sell the IP related to Kingdoms of Amalur: Reckoning and the MMO Project Copernicus (set in the same universe), one wonders how much both properties would be worth. Joystiq decided to ask Wedbush Morgan analyst Michael Pachter for a valuation and he came to the conclusion that 38 Studios' IP is worth about $20 million.
THQ expected that bringing its popular Wii drawing peripheral, uDraw, to other platforms would be lucrative. Earlier this year they announced that the uDraw would be coming to the Xbox 360 and PS3. With the peripheral out and in stores, it looks like THQ isn't getting the kind of returns they expected. The company said yesterday that sales for the third quarter would be down around 25 percent and blames weak sales of the drawing peripheral for the Xbox 360 and the PlayStation 3.
According to Wedbush Morgan analyst Michael Pachter, Activision's Modern Warfare 3 will sell ten percent more copies than Call of Duty Black Ops. He estimates that the game will rake in $1.1 billion in its first six weeks on store shelves. Pachter also predicts that the Call of Duty Elite premium service could pull in up to 4 million subscribers by the end of the year. Of course, he probably didn't know at the time that it wouldn't be available for PC users. That may throw a wrench into the gears of his calculation machine.
Wedbush Securities analyst Michael Pachter loves to make predictions, and when he does, he goes big. Two of the biggest games this year - Modern Warfare 3 and Battlefield 3 - are set to launch in North America and Pachter has a big number that he believes both games will hit. Pachter believes that Modern Warfare 3 and Battlefield 3 will generate more than $1.4 billion combined by the end of the year.
In light of the accusations of horrible working conditions that L.A. Noire developer Team Bondi has garnered of late (excessive hours, no overtime pay, employees cut out of the game’s credits), do game developers need labor rights? Should they have a union?
While LA Noire has proven to be a decent tile for Take-Two, Wedbush analyst Michael Pachter says that the poor showing of Duke Nukem Forever has eaten away at those profits. In a note to investors today, Wedbush analyst Michael Pachter lowered his expectation for Take-Two's quarterly revenues, saying that bad performance from Gearbox Studios' Duke Nukem Forever have offset the stronger-than-expected sales of Rockstar's L.A. Noire.
"We had previously expected Duke to be one of the year's top sellers due to a high degree of hype and a dedicated fan base, and expected solid profit contribution as the bulk of development had been previously expensed," Pachter told investors. "However, the game's poor reviews (average Metacritic score of 49) likely had a negative impact on sales, causing us to lower our [first quarter] sell-in estimate to 1.5 million units from 3 million units."
In a Gamasutra feature article called "The Year In Review: Game Biz Analysts On The Worst Happenings Of 2010" analysts from various firms sound off about the worst moments in the game biz during 2010. Below is a small sampling of what analysts had to say.
According to Wedbush Securities analyst Michael Pachter, the worst thing to happen in the industry in the year is video games going before the Supreme Court:
Christian video game publisher Left Behind Games has increased guidance upwards by 30 percent for its fiscal year ending March 31, 2011. LBG expects $1.3 million in annual revenue as a result of significant interest in our products - according to CEO Troy Lyndon.
The company also gave credit to Wedbush Morgan analyst Michael Pachter for some of that newfound interest in its products:
"On February 24, 2010, Michael Pachter, Research Analyst at Wedbush Securities stated, 'I think that the Christian video game market is a significant market currently underserved by traditional publishers.' Since the time of Pachter’s quote, LB Games has grown in revenues by more than 1000 percent and gained national retail distribution through Synnex, a billion dollar funding, fulfillment and distribution partner introduced to LB Games by Walmart. LB Games products are also available online at Walmart.com and BestBuy.com."
Journalist Tracey John and analyst Michael Pachter guest star in The Escapist feature, The Crystal Ball of Michael Pachter. No matter what you think of the outspoken Wedbush Morgan video game analyst, this interview / feature from Tracey John sheds some light on what Pachter does on any given weekday and how he manipulates the media to promote himself.
Here is the part where he shows his humility and admits that he uses the press:
"Investors should [listen to me] because I'm really good, but look, I use the press," he admitted when I asked why we should listen to him. "It's a symbiotic relationship. I try to give you guys what you need, and I use the press to promote myself so that more investors want to talk to me. That helps me get paid more money."
Michael Pachter, gaming research analyst for Wedbush Morgan Securities, says that schemes to recoup cash from used game buyers doesn't seem to be having an impact on sales at GameStop. In a post-financials report on the retailer, Pachter said that the country's largest games retailer remained unscathed in its latest quarter and that aggressive code-based schemes for used games weren't hurting the retailer’s bottom line. This could be because most of these schemes from EA and THQ (in a small measure) are targeting multiplayer, which GameStop says only 25 percent of used game buyers are interested in.
"The company has not seen a negative impact on used software sales from first-use codes or new competitors in the space," Pachter said. "The company estimates that only 25 per cent of used game buyers play online.”
Naturally EA and THQ have just barely rolled out such schemes on a couple of titles. We'll see how it affects used games sales of titles like the latest Madden game in the next quarter. Pachter also shared his pessimism on GameStop’s plan to create a digital market space to sell DLC.
Wedbush analysts Michael Pachter and Edward Woo, who no longer think that the video game industry is "recession proof" (remember that?) are now saying that the new hardware introduced during E3 last week in Los Angeles has the potential to reinvigorate the sector. The major hurdle, they say, is pricing. The Wedbush duo were apparently most impressed with the Nintendo 3DS, which provides gamers (not under the age of 7, says Nintendo, because 3D is the devil to your eyes at that tender age) with 3D gaming and entertainment without the need for goofy 3D glasses. The 3DS is rumored to have a price point of $250 or more, but the pair do not believe it will matter, saying that Nintendo will sell millions of units.
Microsoft's Kinect, on the other hand, will have to be priced reasonably to sell, they believe:
Brand-new games at used game prices?
A pilot program that does just that is being tested at a Best Buy location in Utah. While it sounds like a good deal for consumers, Wedbush-Morgan analyst Michael Pachter doesn't expect to see the Best Buy experiment gain traction on a large scale.
Of the program, under which Best Buy will match used game prices in effect at either GameStop or Game Crazy, Pachter said:
I don’t think it will do well. The price match means that Best Buy either cuts their profit per game in half, or wipes it out altogether. I don’t think that they can afford to sell $60 games for $50, and don’t think that it will be effective in the long run. If it does well, then GameStop will cut used game prices to the point where Best Buy can’t match without losing money.
Yesterday's GamePolitics report detailing a University of Michigan economist's estimate that EA's exclusive NFL deal cost Madden buyers as much as $926 million raised a number of eyebrows, including those attached to the forehead of Michael Pachter (left).
In an e-mail exchange with GamePolitics, the Wedbush-Morgan analyst scoffed at the monopoly theory offered by Dr. Jeffrey MacKie-Mason in a filing last week with the U.S. District Court in San Francisco. MacKie-Mason was hired as an expert witness for the plaintiffs in a class-action suit filed in 2008 by a pair of gamers who allege that EA exploited its exclusive NFL deal to jack up the price of its popular Madden series.
Here's what Pachter had to say:
What kind of fool is this U of Michigan economics professor? ...Madden (according to NPD) sold 23 million units in 2006 - 2009, not the 30 million that Dr. MacKie-Mason claims... The total retail sales were $1.034 billion, meaning that EA's cut was around $800 million (retail margin is 20%). How in the world does [MacKie-Mason] conclude that EA overcharged by more than they generated?
For the four year period, EA's average retail price was $44. For the period 1995 - 2005 (when either Sega or Take-Two provided [NFL 2K series] competition), EA generated $1.548 billion of sales on 36 million units, for an average price of $43. In other words, WITH competition, the price was $43, and WITHOUT competition, the price was $44.18...
I rarely read anything that gets me so incensed... They may have some odd estimates I'm not aware of, but based on what you printed, they should be embarrassed. You can quote me.
Here's more: Take-Two discounted [NFL 2K5] to $19.99 to gain market share, and lost their butts in the process. It's the same as a dollar menu at McDonald's that is a loss leader in order to gain share, and McDonald's hopes people buy the high-margin soft drink. There is no "right" among consumers to receive a perpetual discount just because one retailer decides to discount below cost...
It strikes me as irresponsible that the professor would focus on the NFL exclusive as if there is some god-given right for consumers to have all intellectual property available for exploitation by any business that chooses to do so in the name of competition...
The ONLY I/P that has ever been licensed to multiple video game parties is team sports. The NFL, Major League Baseball, FIFA, and NCAA Basketball have all chosen to go the exclusive route for games, similar to the contracts for all movie-based games.
GP: As GamePolitics reported yesterday, MacKie-Mason acknowledges that his analysis is based on incomplete data. In a response filing, attorneys for EA (who were similarly contemptuous of MacKie-Mason's theory) agreed to furnish available documentation dating back to 2001.
A new report by Wedbush-Morgan analyst Michael Pachter should put paid to game industry whining about used game trades. Although, somehow, we doubt that will happen.
According to gamesindustry.biz, Pachter found that up to 100 million (!) used video games are traded each year in the United States. That figures accounts for a remarkable third of all game sales.
But Pachter also reports that the used game trade has a positive impact on new game sales, not the negative impact so often claimed by a variety of game industry types. The outspoken Pachter comments:
The vast majority of used games are not traded in until the original new game purchaser has finished playing - more than two months after a new game is released - typically well beyond the window for a full retail priced new game sale.
If trade-ins occur at GameStop, they should position the trade-in customer to buy more new games than he/she would otherwise normally purchase. Because the average used game value is around 20 per cent of the new game price, we think that used game trade-ins fuel incremental sales of over six per cent of total new game sales, suggesting that the cannibalisation from the used game 'push' is more than offset by the benefit from used game currency.
Wedbush-Morgan analyst Michael Pachter has publicly apologized for saying that Sony was "ripping off the consumer" by setting a $249 price point on the PSP Go. The eminently quotable Pachter made the damning comment about the new handheld last week during an E3 segment of Bonus Round.
Apparently thinking better of his words in the interim, Pachter penned an apology yesterday as he debuted a new monthly column for IndustryGamers:
I sincerely regret the choice of words... 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...
GP: Pachter is a straight shooter and, apology notwithstanding, I believe he was speaking from the heart when he made his original comment. It's not too much of a stretch to imagine that there were a few angry phone calls from Sony HQ to Pachter between the airing of the "rip off" remark and yesterday's mea culpa.
But the fact is, Pachter got it right. Why does the PSP Go, which does away with the UMD drive assembly, cost $80 more than the current PSP-3000? There's no good reason, and gamers knew that even before Pachter spoke out. From the moment it was announced at E3, the PSP Go's $249 price point went over like the proverbial lead balloon.
Nor do I think much of the PS3 justification floated by Pachter in his retraction. Sony is losing money on the PS3, certainly, but that's no excuse to try to make a few million back by skinning consumers with the PSP Go. Personally, I love my PS3. But if Sony overdid the hardware, over-estimated their market and totally screwed up the worldwide launch, that's on them.
For an industry that's supposed to be all about fun, the video game biz is tightly managed from a P.R. standpoint. Not too many people speak their mind publicly or wander too far off message.
That's why we enjoy Mike Pachter, who tracks the industry for Wedbush-Morgan. The guy may not always be right, but he always says what he thinks.
And when Pachter says the $249 PSP Go announced at E3 is "ripping off the consumer," we must agree. The analyst, who was otherwise complimentary toward Sony's E3 presentation, slammed PSP Go pricing to host Geoff Keighley on an E3 edition of Bonus Round:
$249 is too much. Period... The [current] $169 PSP-3000 is a profitable device - the disc assembly, for a UMD, costs more than 16 gigs of flash does. So this new device doesn't cost them as much to make as the PSP-3000 and they jack the price up $80...
I'm sorry to say it. I don't want to get bad fan mail from the Sony fanboys, but... They're ripping off the consumer until they sell a couple million and if consumers don't buy it then the price is going to come down... they're making a lot more money on the PSP Go than the PSP-3000. And the PSP Go helps them because there's no piracy...
Maybe I like Pachter because his take on the PSP Go echoes my own. Here's what I tweeted about the system during Sony's E3 press conference last week:
Kaz [Hirai] is holding up PSP Go, but sez PSP 3000 won't go away...
Kaz PSP Go $249... Too much. Sense Me feature will match ur PSP music to ur mood. Um, thank you, no...
[Jack] Tretton: Resident Evil Portable. Let's hope that's a working title. LBP for PSP looks sweet. Crowd not really into PSP news, tho.
GameStop CEO Dan DeMatteo can't be happy with the news that his firm, which has owned the used game space for years, suddenly has not one, but three major competitors.
Indeed, financial website The Motley Fool reports that the entry of Toys R Us into the used market will hurt GameStop and likely force the retailer to give consumers a better deal - and we're all for that.
On the publishing side, used game sales hater Ben Feder, President of Take-Two Interactive, must be absolutely frothy now that four major retailers - not just one - will be pushing pre-owned copies of GTA IV.
While the news that Toys R Us, Best Buy and Amazon are all - rather suddenly - entering the used game market is terrific for consumers, the timing seems a bit... odd. How do all three happen to get into used games in the same week?
GamePolitics put the question to Entertainment Consumers Association President Hal Halpin, who, in a past life, founded a trade group for game retailers. In other words, he knows the retail side of the business quite well. Here's what Hal told us:
Toys R Us and Best Buy getting into the used games business makes sense because they really serve very different markets than GameStop, demographically speaking. Amazon getting in is especially bright because of their model - they're positioned really well to cut the market wide open.
For Toys R Us and Best Buy, it's likely just coincidence [that news of both came this week]. They're victims of the same economic turmoil as everyone else and looking for growth areas. They have examined the used business before, but [then] it was likely too far astray from their core. Now, it's a matter of exploiting high-margin business extensions, of which Used clearly is one.
For Amazon, my guess is that it's much more organic a move. I'm excited to see them invest so heavily in games and with gamers. Overall, it'll be really interesting to see how the landscape is changed by the news. And the bottom line is that it's great news for consumers.
Meanwhile, analyst Michael Pachter of Wedbush-Morgan offered his take on the developing situation and agreed that used games are a smart move for Amazon.
It's obviously a great business.
Amazon is the only one that matters. The sweet spot of consumers who trade in games are 13 - 18 year-old boys, and they don't typically shop at Toys R Us or Best Buy, but they most definitely frequent Amazon.
It seems to me that the Amazon offer is pretty compelling, insofar as there is no cost to ship games to Amazon, and there is an opportunity for gamers to trade in games and purchase other stuff on Amazon.
With that said, Amazon's market share of NEW games is only 2 - 3% (around $200 - 300 million annually), and GameStop's USED game business is over $2 billion. That means it will take a LONG time for Amazon to make a dent in GameStop's business
GP: Going forward, the developer/publisher response will be something to watch. Will a quartet of major retailers selling used games cause the industry to stop rattling their sabers (as they have been doing toward GameStop of late)? Or will it motivate them to fight harder?
FULL DISCLOSURE DEPT: The ECA is the parent company of GamePolitics.
Do you get the feeling that Midway's ongoing bankruptcy drama isn't going to end well?
Reports yesterday indicated that executives planned to either structure a reorganization or sell off the company's only major IP asset - Mortal Kombat. Guess which one of those will be easier to do.
But a filing by Midway's new owner seems just as alarming.
GamePolitics readers may recall our February 15th exclusive report on allegations of sleazy insider dealing in the Midway affair. At the time, some Midway creditors wondered who new owner Mark Thomas was and how he was able to purchase Midway from media mogul Sumner Redstone for a mere $100,000 in November.
Thomas, through his shell corporation, Acquisitions Holding Subsidiary, fired back in U.S. Bankruptcy Court on Friday. Midway, says AHS, is hemorrhaging cash and Thomas wants his investment collateral protected:
[Midway has] an immediate need to access and use AHS's Cash Collateral. Nor can it be disputed that, based upon the Debtors' 13 week forecasted Budget, [Midway is] hemorrhaging cash at an alarming rate. Indeed, the [Midway] Budget indicates that between February 9, 2009 and May 4, 2009, [Midway] will burn through approximately $12,392,598 in cash representing an approximately 75% depletion of its cash reserves...
The Objecting Noteholders have made several unsubstantiated and unsupportable accusations - none of which are true - regarding the relationship and transactions between Sumner Redstone and AHS' s principal Mark Thomas... each of those allegations is without merit...
The Limited Objection is replete with unsupported and, frankly, irrelevant factual allegations regarding the relationship between Mark Thomas and Sumner Redstone...
We asked Wedbush-Morgan analyst Michael Pachter to comment on Midway's situation:
Unfortunately, their low cash position, high debt load, and unforgiving creditors place them in the position of having to generate cash at a bad time, and it's always easiest to sell the assets with the most value.
I think it's premature to say that they are dead, but fair to say that a [potential] sale of Mortal Kombat will weaken them.
DOCUMENT DUMP: The AHS/Mark Thomas objection...
Yesterday, GamePolitics broke the news that Madden publisher Electronic Arts paid the National Football League Players Association more than $35 million in licensing fees during 2007.
We asked a couple of financial gurus to comment on the eye-popping figure, which is buried within a massive document filed by the NFLPA with the U.S. Department of Labor.
Wedbush-Morgan financial analyst Michael Pachter told GP:
The [Madden licensing] deal is likely a guarantee of around $50 million total, and $35 million [going] to the players makes sense. The old deal was around $15 million per year, and I know that it went up substantially when renewed in 2005.
[EA sells] around 5.5 million copies a year, so they're burdened with [about] $9/unit in licensing. That's reasonable, on par with the royalty paid to the console manufacturers.
So, Mike, yesterday GP speculated that the league would get at least as much as the NFLPA from EA. Are you saying we were wrong and that the NFLPA actually gets more than the NFL?
The product is the players, and the league used to get most of the money. The reason the royalty went up was the players, not the league. The league looks at the game as a marketing tool, but the players want to be paid for their likenesses.
Meanwhile, analyst Doug Creutz of Cowen and Company termed the $35 million paid by EA to the NFLPA "a gigantic number," adding:
I’d estimate Madden generates $350-400 million in revenue for EA annually.
In an interview with Reuters, Wedbush-Morgan financial analyst Michael Pachter has characterized MMO players as "addicts."
In the article, Reuters examines the effect of the current economic climate on the online game business. Pachter suggested that MMOs would see little impact due to the nature of their players' relationship with the games:
I don't think (online multiplayer games) get impacted at all, because people who play them are addicts, Losing their jobs makes them more likely to play because they have more time to play.
As GamePolitics readers know, Electronic Arts pursued the acquisition of Grand Theft Auto publisher Take-Two Interactive for the better part of 2008.
Timing, as they say, is everything.
The deal ultimately fell through when EA walked away from the table in mid-September. Since then the global economy has gone into the toilet and the supposedly recession-proof video game industry has shown that it really isn't.
But when EA made its offer to acquire T2 at $25.74 per share, the economy had not yet tanked. No one even dreamed of a Wall Street bailout, much less a potential bailout of the U.S. auto industry.
What if the deal had gone through, obligating EA to lay out huge piles of cash? Would it be like burning your savings on a new car and finding out the next day that your hours were being cut back at your job? Since the merger fell apart, EA has definitely hit a rough patch, laying off a thousand workers and shuttering some of its game development studios.
As for Take-Two, their stock will open south of $9 this morning. Since EA bailed on the merger, TTWO has plummeted, losing about 2/3 of its equity value in 90 days.
From here it seems like T2 would have been better off if the deal had gone through, but EA would have been in worse shape. But we're not experts, so we put the question to Wedbush-Morgan analyst Michael Pachter. Here's what Pachter told us:
[My answer is] totally speculative. Had EA completed the deal, the TTWO shareholders at the time would have benefited, but other than Oppenheimer (who has been listed as a large shareholder the entire time), it's hard to say that there are many of those other shareholders still around. I think that many of the shareholders who bought to take advantage of EA's offer were sellers when the offer was withdrawn, so only a small number of current shareholders, including Oppenheimer, were actually involved in the stock back then.
EA would be a mess had it completed the deal. In addition to its own restructuring (which is just getting underway), the company would have been faced with re-signing the Housers and with cutting significant costs out of Take-Two in order to fully achieve synergies from the deal.
I don't think a low cash balance [due to the T2 purchase] would be particularly relevant, since EA has a line of credit and is not burning significant cash, but it would have forced decisive action.
Notwithstanding, this is purely speculative. I think EA would be a stronger company if combined with Take-Two, as the latter company has several valuable franchises and a combination would have given EA a near monopoly in sports. Had they signed the Housers, EA would have been well-positioned to develop incremental new IP, and would have had one of the strongest franchises around in GTA.
But it didn't happen, and doesn't look like it will over the near term