MichaelPachter
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The mind of a video game analyst
Analysts are the life-blood of investors. We need some kind of opinion of where a company may be going; if we don't get it, we feel uneasy about a company's future. Michael Pachter is one of those people. In an interview with N'Gai Croal, Pachter primarily discusses his bullish Xbox 360 predictions and how they've essentially fallen flat. He cites the bigger impact the lack of HD sets in homes had as well as miscalculated the price-insensitivity of the hardcore crowd. He thinks a simple price cut won't solve the matters (at least until his magical $150 mark is hit). Pachter further states he expects the PS3 to sell at the same rate as the 360 did since launch. Given Pachter's history, we're beginning to wonder if he is on a stretch of bad luck, or shouldn't be listened to at all. He did predict the PS3 would outsell the Wii (then called Revolution) by up-to 60% this year as well as predicted 2006 to be a slow year for gaming (deemed wrong by his future prediction to buy GameStop stock); neither prediction came out close. We guess it is true; analysts are people paid to have an opinion.
Analysts promise they're not just making it all up
Ever had the fleeting thought that maybe those video game analysts just don't quite know what they're about? Don't worry, it's not just you -- even they admit that the ever-changing market can be a challenge to ride.Next-Gen's Krist Graft sat down with Michael Pachter of Wedbush Morgan Securities to discuss the challenges of predicting the business of video games. How does he do it? The same as any 'armchair' analyst, Pachter keeps up with the news. Some firms (like WMS) change their predictions as often as there are new developments, and this tumultuous week has brought about some major updates. What else? Analysts look for comparisons in gauging what's hot in the console war. He pointed to the success of the DS, particularly games that employ the stylus, as evidence that Nintendo is on the cutting edge of the interactivity that consumers want. Trend-spotting like that forms the basis of so much analysis in video games. What's the final verdict for us? "The Wii's going to crush," Pachter says. Well, we don't understand all this fancy-schmancy business jargon he's using there, but we have to agree.
Analyst becomes less bullish for Sony
Wedbush Morgan is one of those places where people sit around in a dark room, pondering the future. They make up numbers that predict future sales, shoot lightning out their hands, and they have three heads. Michael Pachter is one of those men. While he was optimistic for Sony's handheld at the beginning of the year, he seems to be reconsidering his position: "We are lowering ... our forecast for PSP sales from 8.5 million to 7.4 million, and increasing our expectation for DS sales from 6.5 million to 8 million."This isn't really too bad: even if PSP isn't number one in sales, it still has done much better than any non-Nintendo gaming handheld in the past. Regardless, the analyst had tons of good things to say about Nintendo, and not so much about Sony: he decreased his 2006 PS3 hardware sales estimate by 1 million units (to 3 million) and increased his 2006 Wii hardware sales by 500,000 to (4 million). Of course, it's not just the analyst that sees good things for Nintendo: the shareholders do as well.[News via Gamespot][Sales chart for US. DS has a few weeks extra data due to an earlier launch. Via VG Charts]
Surprise, surprise, no price cut expected
Next Generation more or less shot down yesterday's rumored price cut for the 360. Basically all they did was reiterate everything we said, only more elaborately and eloquently (we're still flattered though). Michael Pachter of Morgan Securities breaks it down old-school analyst style:" ... The company plans to sell 10 million Xbox 360 hardware units over the next year, so a price cut in November would likely impact 8 million of these, costing the company $800 million. At a software royalty profit of around $10 per unit, the company would have to sell 80 million incremental software units in order to be in the same place as without a price cut." ... Our model has Microsoft selling only around 60 million total units of software this fiscal year, so in order to break even on a price cut, they would have to sell 140 million pieces of software. Remember, we're talking about profitability for FY:07, not over the life of the 360."That's a lot of software. Next Gen even mentions Peter Moore's comments to Joystiq during E3: "We had a price drop ... when Sony announced their price."So, don't expect a price drop before next year. Do expect a software bundle instead.[Thanks, Thomas Crymes]
GTA:LCS PS2 coming 6/6/06 for $20
Just as we reported, Grand Theft Auto: Liberty City Stories for the PS2 has been delayed. Apparently the game will debut on June 6th at a RRP of US$19.99/€29.99/£19.99. The game was originally scheduled to be released on April 24th at $29.99.On the surface the reduced price looks like an attempt to appease impatient gamers. Wedbush Morgan analyst Michael Pachter thinks that it goes deeper than that: "we believe that the lower than expected price point for GTA LCS implies that the game is a straight port from the PSP, with few (if any) enhancements to graphics or game play" and that "although we believe that the game will sell a greater number of units at a higher [sic] (we think he meant lower) price point, we think that overall sales may suffer if the game is not sufficiently different from the PSP version." As it is, Wedbush Morgan thinks that Take Two could sell "3 million units at $16 (for total revenues of $48 million) instead of 1.9 million at $28 in our model (total revenues of $53 million)", which mean the delay might cost Take Two $5 million. Ouch.Of course, there's still the possibility that Morgan is underestimating the game's sale figures: they predicted that T2 would sell 900,000 copies of Elder Scrolls in the time immediately after its release, when in fact Take Two recently announced that they've sold 1.7 million units.
