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Retail

Wii U attach rate outlook "highly unrealistic" says Pachter

Wii U attach rate outlook "highly unrealistic" says Pachter

Wed 24 Oct 2012 10:14pm GMT / 6:14pm EDT / 3:14pm PDT
Retail

The analyst doesn't believe Wii U can attach 4 games per console sold

Wii U launches in just a few more weeks, and while most believe Nintendo will have a sell out this holiday, there is some question about how much software will be sold with the new hardware. Reacting to Nintendo's disappointing fiscal results and Wii U sales outlook, Wedbush Securities analyst Michael Pachter noted that the Wii U software guidance is simply "unrealistic" and he said the hardware guidance is "disappointing."

"Nintendo has guided to Wii U hardware sales of only 5.5 million units in FY:13, below the 6 - 7 million that we had previously expected. In addition, guidance for 24 million Wii U software units in FY:13 implies an attach rate of over four games, which we view as highly unrealistic given pricing and release slate," Pachter stated. "Wii U will fight for holiday wallet share with the existing consoles (which have the bulk of their most compelling releases in the December quarter), Amazon's Kindle Fire HD, and Apple's iPad Mini, among a slew of other devices."

While Pachter has concerns about software attach rate, he acknowledges that Wii U's launch lineup is actually quite good.

"The launch schedule is better than we had initially expected, with notable launch day titles including Activision Blizzard's Call of Duty: Black Ops II, EA Sports' FIFA Soccer 13, Nintendo's New Super Mario Bros. U and Nintendo Land, and Ubisoft's Assassin's Creed III and ZombiU. However, demand will probably wane once Nintendo's core fan base has purchased the first 5 - 6 million units, negatively impacting long-term hardware and software sales as well," he continued.

For investors, Pachter recommends avoiding Nintendo stock until the company can prove that it's able to grow sales once again. How the Wii U fares this holiday and for the first half of 2013 will be telling.

26 Comments

Jim Webb
Executive Editor/Community Director

2,246 2,231 1.0
Popular Comment
I'm sorry Pachter but you negatively report on Nintendo at an unbelievable rate against any other device out there and you're consistently wrong in the process.

I rarely hear you say anything about the other consoles but once or twice every single week you rail against Nintendo for something and your accuracy rating makes the weatherman look good.

Posted:A year ago

#1

Keldon Alleyne
Handheld Developer

432 406 0.9
Hmm, sometimes it just sounds like any other guy with an opinion occasionally using technical terms in between random assertions with nothing to back up his claims.

If that's all it takes to be an analyst, I'm a friggin' analyst, because I know how to give opinions too. Now if I can just get enough twitter followers and make enough false predictions I just might get covered as well. Watch this space. Now I believe that the Wii U software guidance is simply "{negative adjective}" and the hardware guidance is "{negative adjective}". Wii-U will have an attach rate of 2 because of the iPad-Mini announcement will "{negative verb}" consoles sales in FY13 Q1. Ya heard it here first.

Edit: fix typos

Edited 1 times. Last edit by Keldon Alleyne on 25th October 2012 9:48am

Posted:A year ago

#2

Dirk van Wijk
Student - Computer Science (Master)

28 13 0.5
Shouldn't a good launch line up result in a good attach rate? Or is the launch line up still not enough to sell (at least) 4 games per console?
Pachter mostly admits that he doesn't understand Nintendo at all and that he has been wrong on their predictions most of the time, but it seems that still doesn't keep him from criticizing them.

Posted:A year ago

#3

Daniel Hughes
Studying PhD Literary Modernism

436 496 1.1
Given Nintendo are including sales of Nintendo Land in that software guidance, I wouldn't be too surprised if they hit it. Most of those 5.5 million will buy Mario Bros and Nintendo Land. There's also this:

"Wii U will fight for holiday wallet share with the existing consoles (which have the bulk of their most compelling releases in the December quarter), Amazon's Kindle Fire HD, and Apple's iPad Mini, among a slew of other devices."

Ignoring the three months after Christmas, an entire quarter, in which the Wii U can sell systems and software, seems a little misguided. Wii U adopters who get the machine for Christmas or in November will have the 'launch window' to stock up on software, while (theoretically) more adopters jump on board and buy a couple of games with their system. 4 games per console across a 4 month period of early adopters isn't unrealistic at all.

I do think, however, the software prices need to come down. Many UK retailers seem to be pricing the majority of Wii U games above 360/PS3 games. If there's anything that will stop Nintendo hitting their targets, it's their refusal to set SRPs across Europe, because retailers have become greedy and set high prices, which I don't think consumers will accept after Christmas.

Posted:A year ago

#4

Tom Keresztes
Programmer

644 257 0.4
Popular Comment
Pachters predictions look highly unrealistic says my hamster.

Posted:A year ago

#5

John Bye
Senior Game Designer

480 451 0.9
What's the attach rate on previous consoles been like in the first few months after release? Pachter's wrong more often than he's right, but in this case I have to say an average of more than 4 games per console does seem a tad optimistic, assuming Nintendo's financial year ends in March/April.

Edited 2 times. Last edit by John Bye on 25th October 2012 12:26pm

Posted:A year ago

#6
Now, surely Nintendo are talking about "shipped" units, given retailers are the ones ordering and paying... right?

Given its launch, and retailers will want to have lots of stock on the shelves - it seems quite possible to me that this many software units will be shipped. But - does this only cover titles Nintendo will publish/ship, or all published titles for the WiiU?

Really surprised they are selling the WiiU below cost - although there was a hint that *was * (past tense) the case, rather than it being the case now. And surely Pro packs are a solid way for them to improve the situation.

Posted:A year ago

#7

Jim Webb
Executive Editor/Community Director

2,246 2,231 1.0
Thank you, Michael. You touched on the magic word. Retail.

And I thought Pachter is a "retail analyst".

How could he completely ignore/forget this critical difference? Just because you ship that many doesn't mean you have to have sold that many to meet your expectations. Nintendo (and Sony and MS) do not sell to us, they sell to retailers. We are not their customers. A sale to them is a sale to GaemStop, Wal-mart, distributors, etc.... When they announce a sales projection or total sales, it means units shipped. Always has. Unless they cite a 3rd party tracking firm like NPD, GfK Chart Track, Media Create, Famitsu, etc...then they are referring to units shipped.

Consumers don't have to buy all 5.5 million Wii U's and 24 million Wii U games by the end of Q4 2013 for Nintendo to still meet their projected sales. As a retail analyst, Pachter should well know this.

Posted:A year ago

#8

Caleb Hale
Journalist

154 229 1.5
I don't think it's going to be hard for people to accumulate four Wii U games soon after they purchase the console. The launch window lineup has enough unique content and compelling versions of multi-platform releases for me to believe it's not only possible but probable. When I pick up the deluxe Wii U set w/ NintendoLand on day one, I'll also be picking up New Super Mario Bros. U, Assassin's Creed 3, and Call of Duty: Black Ops 2 (and a Pro Controller). That's four games right there. Add my son, who wants Skylanders Giants, Epic Mickey 2, Sonic All-Stars Racing Transformed, and Batman: Arkham City - Armored Edition all for Wii U for Christmas, we're up to eight. I fully expect to own between 10 and 15 Wii U games by the end of Nintendo's panoramic launch window. I'm also planning to upgrade to a 4th-gen iPad. So there, Mr. Pachter, Apple and Nintendo don't have to fight for my money this holiday season. They each get a cut.

Am I the typical consumer here? I don't know. My household finances definitely make me part of the 99 percent, as some like to say. My point is, I think Nintendo's outlook is realistic, not disappointing.

Posted:A year ago

#9

Tony Coles
Account Manager

9 2 0.2
Worth noting that the Wii had a 3:1 attach rate in 2008, two years after the 2006 launch:

http://www.gamasutra.com/php-bin/news_index.php?story=20988#.UIlPQGemWaI

So it's pretty sound for an analyst to look at a predicted 4:1 ratio within a few months of launch as being a touch optimistic, if you go purely by past performance and the raw numbers.

Posted:A year ago

#10

Keldon Alleyne
Handheld Developer

432 406 0.9
@Tony: that's just the third party attach rate, the actual attach ratio was 5.5.

It was revealed with the DS at least that consumers typically purchased four titles on their first year of owning a DS, and two per year thereafter. There was also a figure of how many games were purchased with the console (if I remember correctly).

The Wii attach rate is most likely skewed somewhat by the casual purchasers (who would have purchased little more than Wii Sports, Brain Training, Mario Kart and maybe Wii Fit), so perhaps it might be worth isolating the behaviour of the traditional gamer as I do suspect a likely split of buyers so looking it as a whole will not yield much useful conclusions.

Posted:A year ago

#11

James Wells
Gaming Contributor - digboston.com

72 31 0.4
Caleb, that sort of sounds like you'd be spending 99 percent of your paycheck on video games and gadgets... lucky kid! ;)
While I would say that volume of purchasing definitely is not representative of the average WiiU buyer, I do agree that 4 games per console isn't too unrealistic of a goal, especially with 20+ titles on day one.

Edited 1 times. Last edit by James Wells on 25th October 2012 5:21pm

Posted:A year ago

#12

Andrew Goodchild
Studying development

1,235 396 0.3

Also, are people who buy new consoles near launch not generally the type to buy more games?
And yes, a Kindle Fire or an iPad may be competing for money, but once I decide to buy a Wii U, then I probably would decide that's where a decent percentage of recreational budget will go.
Not saying they will hit the attach rate, not saying they won't. My magic Pachter-Nostrodamus-crystal-magic-8-ball is in for repairs, and I wouldn't want to look like a tit because I made predictions without it.

Posted:A year ago

#13

Jim Webb
Executive Editor/Community Director

2,246 2,231 1.0
Andrea, I don't think second hand, consignment or used sales will be high enough in that time period to really damage the hardware to new software sales ratio. At least no more so than during any other time period where projections are given...which is every quarter. It's not like consignment stores are showing up all of a sudden just for Wii U.

Besides, if it's in a consignment shop, that still means that someone bought it at some point at retail and that counts toward the sales.

But it's still irrelevant given that Nintendo (Sony and MS too) count sales to retailers, not sales to consumers. So it doesn't matter if a copy of NintendoLand goes through 6 different hands...that's all after the fact. That game was at one point sold to a retailer and that's where it counts with regards to their projection figures.

Keldon, not only was it 5.5 but it was higher than the PS3. I wonder if Pachter would raise objection to Sony if they projected the same software ratio for the PS4? Or would he then suddenly remember the retail/consumer sales aspect?

Posted:A year ago

#14
Jim, he's not talking about second hand sales, but about consignment sale or sale or return, which is increasingly common and means shipping is not the same as selling.

Edited 1 times. Last edit by Laurens Bruins on 25th October 2012 6:12pm

Posted:A year ago

#15

Reza Ghavami
Marketing Analyst

22 10 0.5
Why are there so many stories from here about Pachter?

Posted:A year ago

#16

Art C. Jones
Writer / Blogger

58 78 1.3
Nintendo's numbers also include digital, not just retail.

Pachter is so clearly biased against Nintendo it is hard to listen to him, even when he may be right. He's the analyst who cried 'wolf!'
I agree with the poster who noted he only does these bi-weekly fanboy flames for Nintendo, not MS or Sony, and his track record has been much less than stellar.

I do tend to think a 4 game attach rate is high, but Pachter's constant cry of "Wolf!" makes me discredit anything he says.

Posted:A year ago

#17

Jim Webb
Executive Editor/Community Director

2,246 2,231 1.0
Laurens, I kinda covered that too. If there is a trader or reseller, that still means a sale took place between Nintendo and a distributor or retailer before it ended up in the hands of the trader or reseller. If a retail outlet itself is using a consignment model, many still tend to get product from distributors and wholesalers, not directly from the game publishers. Especially in Europe where that model is far more common.

Posted:A year ago

#18

Greg Wilcox
Creator, Destroy All Fanboys!

2,156 1,076 0.5
Maybe if Patcher would actually play some of these Wii U (or any) games and spend less time speculating about them, he might see that he's wrong more often than he's right. As it is, it's like watching the ghost of Johnny Carson do his Great Karnak act, but on a really bad night with a dead audience. Or undead, it being Halloween coming up and all...

There are more than enough good games coming on the console that while I can't see EVERYONE who buys the system grabbing them all at once, they'll at least have a large enough choice that it's not just which Mario game they want to get for the kids when they do go back to a shop.

Posted:A year ago

#19
Personally I think the WiiU could be the coolest TV set top box on the market.

At the moment I use an iPad VNC-ed to a Mac Min (I have for years)i but I think Nintendo have a real opportunity to tie it all together under one standard piece of hardware with an interface dedicated to that and that alone. It would certainly be cheaper than a tablet and xBox or any other combination out there.

So far what they've demoed has looked promising however it would require a bit of a culture shift - and I don't see that happening.

Posted:A year ago

#20

Art C. Jones
Writer / Blogger

58 78 1.3
From Nintendo:

"In this fiscal year we are looking to ship 5.5 million units of Wii U hardware and 24 million units of Wii U software.
By the way, when we launched Wii six years ago, we shipped 5.84 million units of hardware and 28.84 million units of software in its first year."
(source: http://www.nintendo.co.jp/ir/en/library/events/121025/02.html)

So...surprise...Nintendo is forecasting based on previous numbers, and yes, they are talking about shipping, not sold (Pachter is talking about sold).

The fact is Pachter is an idiot.
He has twisted this number like a politician smearing his rival.
Except he's not supposed to be biased right? He's supposed to just provide facts right?

Unbelievable that people continue to listen to him.
Can GamesIndustry PLEASE never run another story mentioning his name.

Edited 1 times. Last edit by Art C. Jones on 25th October 2012 10:45pm

Posted:A year ago

#21

Andrew Goodchild
Studying development

1,235 396 0.3
Pachter swore blind Nintendo would release a Wii HD in 2010. They didn't, and he looked like a bit of an eejit. Since then, he has taken the tac that it's not him that was wrong, it was Nintendo.

Coincidentally, someone once linked a site measuring his prediction hits vs. misses. I think he got about 35%. So yes, you could in theory do better tossing a coin and betting on the outcome.

Posted:A year ago

#22

Stephan Schwabe
Multichannelmanagement

74 34 0.5
All i hear when Pachter speaks is noise.
At the end of the day it is like it allways is Nintendo shows him he is wrong.

Posted:A year ago

#23

James Berg
Games User Researcher

146 186 1.3
Please add another vote to the "Stop posting Pachter's garbage"

Posted:A year ago

#24

Peter Dwyer
Games Designer/Developer

481 290 0.6
Hmm reading these comments with interest.

First off surely if Nintendo sell 5.5 million units and the retailer only shifts 2.5 million, then the retailers don't order any more. If they order 24 million game units and the console has an attach rate of just 1 per console then retail will not buy any more units or far less when a new game comes out. Either way I'm not seeing how Nintendo's earnings projections would be met in that scenario. Games are usually on a sale or return basis with hardware being simply sale to point of retail.

Shops rarely sit on stock these days.

Posted:A year ago

#25

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