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Retail

Pachter: Nintendo weakness contributes to 11% decline in December

Pachter: Nintendo weakness contributes to 11% decline in December

Mon 07 Jan 2013 3:19pm GMT / 10:19am EST / 7:19am PST
Retail

The analyst's forecast also puts the blame on "gamer fatigue", noting a 20% decline in Call of Duty sales

The NPD Group will release its December sales report this Thursday, and according to Wedbush Securities analyst Michael Pachter, the results will be quite disappointing yet again, rounding out a tough year for retail in 2012. Pachter's NPD preview note forecasts a decline of 11 percent in console software sales "due to continuing gamer fatigue and sustained Nintendo weakness."

Pachter said evidence of fatigue was demonstrated by Call of Duty: Black Ops II's nearly 20 percent year-over-year sales dip and Halo 4 failing to meet "lofty expectations." He also handed out a good deal of blame to Nintendo for its "underwhelming launch" for Wii U and "continued weakness" in general for the company. Pachter is predicting that 675,000 Wii U units were sold at US retail in its second month (up 59 percent month-over-month) with a "very low" software attach rate (close to one title per hardware unit).

2013 should bring better results, Pachter believes, as top titles like Dead Space 3, BioShock Infinite and GTA V drive sales. The real rebound, however, is expected in 2014, coinciding with the launch of next-gen consoles from Microsoft and Sony, as "publishers will likely plan an unprecedented number of new IP launches in the first two years of the cycle, providing relief from gamer fatigue."

Interestingly, while there's been a clear expansion of the market with social and mobile, the traditional gaming sector has been more resistant to heavy declines, Pachter stated. Companies that have strong core properties should thrive in the next generation.

"It is clear to us that those companies who primarily focused on traditional gamers were largely unscathed by the declines over the last few years, and those same companies will disproportionately benefit once traditional gamers drive industry sales into positive territory in 2014 and beyond," he said.

10 Comments

Christopher Bowen Editor in Chief, Gaming Bus

447 692 1.5
Popular Comment
With all due respect to someone who makes a lot of money, I tend to discredit analysis by someone who is on record as saying he's not paid to be right. Michael could tell me the sky is blue, and I'd at least Google it to confirm.

Posted:A year ago

#1

Justin Biddle Software Developer

159 484 3.0
Apparently archaeologists have been studying the original Mayan calendar that predicted the end of the world in 2012. Sophisticated analysis has uncovered a copyright symbol with the name Pachter written next to it at the bottom.

Posted:A year ago

#2

Daniel Hughes Studying PhD Literary Modernism, Bangor University

436 496 1.1
If Pachter's right, Wii U had a better launch December (hardware wise) than the Wii did, by about 70,000 units... In a more competitive environment, at a far higher price, Nintendo actually achieving similar sales to their wildly successful last system is pretty good. 600,000 units in one month also beats the 360's November + December 2005 total... Is that really a weak launch?? To be fair, both those systems were supply constrained, but I fail to see bad news for Wii U hardware sales if Pachter's 600k figure is accurate.

Posted:A year ago

#3

Michael Vandendriessche Studying Computer Science, K.U. Leuven

85 12 0.1
The Wii U (like the 3DS) isn't supposed to have a booming launch. Instead they count on word of mouth to drive their sales.
Nintendo's main market (I believe mostly families with kids) aren't the early adopters and tech freaks but mostly people who just want a fun, family-friendly time in the living room. They're trying to replicate the Wii's success, not replace the Ps3/Xbox360. (that's why it's called Wii U and not Nintendobox)

Posted:A year ago

#4
Just curious if its the poor sales, or the incompetence of certain core management decisions that impacted the analysis?

Posted:A year ago

#5

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,270 2,439 1.1
Popular Comment
Kevin, I'll tell you what impacted the analysis and the stock pricing.

The Wii U didn't outsell the Wii. Investors, and most of these analysts, look at an increase of revenue, more specifically profits, over time. And will often just read headlines without knowing the fundamental aspects of the market segment and the products they are investing in. Even if a product is successful (and the Wii U very much is), it can fail to drive investors because revenue/profits and/or sales could be stagnant or down. Just look at Nintendo stock against Sony on the Japanese stock exchanges (8,740JPY against 954JPY respectively) or even the NYSE (12.76 versus 10.97). Yet Sony is huge compared to Nintendo. 162,000 employees with $73 billion (45 billion GBP) compared to 5,000 employees with $7.4 billion (4.6 billion BGP).

But massive losses over the past few years have crushed Sony's stock to the point that a much smaller company has a higher stock price and even a higher market cap.

This is why we really need to stop looking at the actions of investors as if they truly represent the circumstances of the market. Look how badly they ballooned Nintendo's stock price in 2007/2008. Valued higher than Toyota.

Posted:A year ago

#6
@Jim - thank you for the level presentation of the situation.

Fundamentally, it sounds like the keys (investment) to the car (consumer game industry) have been handed to people without any interest in driving or going anywhere. A crash is inevitable!

Its late, I have spent too long reading CES posts, enough of my poor analogy.

Posted:A year ago

#7

David Radd Senior Editor, IndustryGamers

359 78 0.2
This isn't just compared to past launches - it's also based upon successful holiday quarters past, where Nintendo has tended to do extremely well. If the Wii U didn't launch at at that level, it's not lifting Nintendo sales back up to its peak. You have to consider that the Wii was practically selling out the second it was available in stores for nearly its first 3 years of life - unless something changes, it looks like the situation with Wii U will be different.

Posted:A year ago

#8

Daniel Hughes Studying PhD Literary Modernism, Bangor University

436 496 1.1
Thanks David, that's a very good point. In the longer term view, Nintendo haven't recaptured the kind of sales they posted during the Wii/DS heydey and it's certain that by NPD reporting, they won't. Even Nintendo are moving further towards digital, so assuming they can build more momentum for 3DS and Wii U, they won't post retail numbers equivalent to their former highs.

Posted:A year ago

#9

Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.

2,270 2,439 1.1
David, that's true but that's also the norm for console launches. They rarely ever launch to typical holiday high numbers. Number for number, the Wii U launch was only surpassed by the PS2 and Wii. Hardly something to be worried about yet most investors, and sadly some analysts, don't understand this.

Posted:A year ago

#10

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