Pachter believes PSP will be "dead on arrival"

Handheld market "in trouble" says analyst as Apple set to dominate

Wedbush Morgan analyst Michael Pachter has said that he thinks the PSP2 will be "dead on arrival", and that the only handhelds with a bright future are Apple's iOS devices.

Speaking during his Pach Attack! show on, Pachter answered a question about the future of the handheld market with a grim prognosis for Sony's PSP2.

"We're way approaching saturation on the handheld market," Pachter told viewers.

"We're starting to see DS hardware sales crack, I think the ubiquity of the iPod Touch is cutting into the handheld market. I think the PSP is dead on arrival and I think the PSP2 is going to be dead on arrival.

"It looks to me like young kids are just as happy playing with an iPod Touch or a Nano. The Touch is cool, it plays games, plays music, they're going to put a camera in it and you're going to get all kinds of cool stuff."

Pachter also has a dim view of the 3DS's future, although he gives it a little more credence than its Sony rival.

"The 3DS will prolong the handheld market for the game manufacturers, but ultimately, I think handhelds are in trouble. I really think as the iPod Touch gets more and more powerful, you're going to see a lot of free games over there.

"What's the difference if you play Tetris on an iPod Touch or on a DS? Well, you pay a buck on the iPod Touch, you pay $20 on the DS. Parents prefer $1 or free software, I think the iPod Touch is going to sell really, really well. So, after the 3DS has had its little rush I think the handhelds will continue to decline."

Pachter also foresees a further round of price cuts for the PS3 and 360, expecting their prices to drop to the $200 range in the US by next Christmas, a move which he believes will see a lot of consumers "upgrading their Wiis" as a result.

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Latest comments (25)

Vlad Zotta Operations Director / COO, Netzah Game10 years ago
PSP2 dead on arrival? Tell that to the 62 mil. client-base. The handheld market is not in trouble because of the poor DS sales. Poor DS sales are the result of the imminent 3DS release. Pachter is actually ignoring the software behind the hardware and bases his assumptions on hardware only. We all know that software sells the hardware. It seems that Pachter doesn't. 3DS, the PSP Phone and PSP2 will sell very well if they will back them with good software offerings/bundles. Oh, the Wii owners can upgrade to cheap X360s and PS3s, but current NDS/PSP owners can't? What kind of logic is that?

What Pachter does is what every analyst faced with lots of info does. He plays a cat and mouse game and picks a winner. He has to, or his credibility is going down.

Oh, and btw Mr. Pachter, you've predicted the Wii 2 so many times that no one will believe you any more. Well, you might just wish to rethink that because Nintendo HAS TO announce Wii 2 next year, or else they're in real danger of losing a BIG slice of the pie (market).
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Christopher Bowen Owner, Gaming Bus 10 years ago
All any device needs is one or two killer apps that will move units. Sony has first party IPs (God of War, Ratchet and Clank, hell even Resistance if they can shovel it onto the PSP2) that can be just that. The moment they announce a new God of War, preorders will skyrocket.

The question is, will casual completely dominate the iOS market or will there be a split? How much of the industry is being taken up by $1 causal games? That's the question that needs to be answered before we can determine if a system that hasn't even been CONFIRMED yet is "dead on arrival". Of course, Mr. Pachter has made a very good living on ignoring reason, so who's to stop him now.
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Antony Cain Lecturer, Teesside University10 years ago
He constantly predicts doom and gloom for Nintendo, he's ultimately wrong and people still put value on his predictions.

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Julio Gorgé Managing Director, Lemon Team10 years ago
I mostly agree with Pachter on this one.

Even if the initial lineup of PSP2 and 3DS games were great, most people I know, including myself, do not want to go back to paying $29-$39 for handheld games.

It just doesn't make sense when you have this huge collection of cheap, (relatively) high quality games on iOS. ¿Prefer playing with a d-pad or mouse+keyboard? You've got loads of cheap AAA titles on Steam. Most 360 and PS3 games also fall to $29.99-$39.99 a couple months after release.

Sony and Nintendo's online stores on the PSP, PS3, DSi and Wii are also awfully implemented compared to the competition (XBLA, iOS). They need to provide a much more polished user experience in this department in the future 3DS and PSP2, otherwise they just don't stand a chance IMHO.

Finally, as a developer, I'm not really excited about 3DS or PSP2. Development costs for DSi and PSP are already too high and turning a profit on retail or downloadable games is proving extremely challenging (just ask around).

Edited 1 times. Last edit by Julio Gorgé on 6th December 2010 9:38am

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PSP2 / DSi still are very good and valid gaming platforms, designed for gamers, not casual phone users. Personally I find the gaming experience more enjoyable on the DS and PSP, much better than on the iPhone. The only real danger is the cheap pricing of games in the iPhone and Android app stores which all too often boast with quantity over quality.
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Lawrence Makin Audio 10 years ago
Hmmm let's see. Play a cheap and pointless game on a touch-screen with no tangible sense of touch (other than rubbing one's fingers on cheap plexiglass), or using controls for a much richer, accurate, more in-depth gaming experience. We're not seeing big games drop out of the sky for the fad that is app gaming, and I highly doubt this'll change now either.

Hardcore gamers (who are still at the core of gaming during the social boom, always have been since gaming took off) will very much unlikely make an expensive switch for an inferior product.

All you'll see is that the casual/social market either won't buy into the PSP2/3DS market and stick with their crummy phones, or they'll have their phones to pass the time and get the better hardware to play the big games when they're released.

It's like saying gamers don't buy PS3s when they have Wiis or 360s. They do, all the time. So people with iPhones or Droid phones or the newly-revived Symbian phones won't buy other consoles?

Pachter, you sir, are wrong.
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Kingman Cheng Illustrator and Animator 10 years ago
Assuming it will be crap, they have a massive fanbase anyway!

One way or another his predictions are always very questionable at best anyway.
Never has a clue what's going on..
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Terence Gage Freelance writer 10 years ago
@ Anthony: "He constantly predicts doom and gloom for Nintendo, he's ultimately wrong and people still put value on his predictions.



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Franck Sauer Creative / Tech Art Director, Fresh3d10 years ago
If the future of handheld entertainment is playing cheapo games at 12 fps with greasy fingers on 500 euro hardware then count me out, along with millions of 'hard core' gamers. Not gonna happen mr Pachter.
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Antony Cain Lecturer, Teesside University10 years ago
Shame you can't kick him down a giant pit Terence :)
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Wesley Williams Quality Assurance 10 years ago
I think Pachter is half right. iOS and other mobile devices (Android and WP7) will definitely eat into 3DS and PSP2 sales and the generation of kids that come after those using the DS at the moment may well see no need for a dedicated gaming device. Until then, as others have mentioned, there are still many people prepared to pay a premium for the best software. However, Sony and Nintendo really need to look at their pricing models and costs for software developers to try and ensure they retain and attract talent.
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Klaus Preisinger Freelance Writing 10 years ago
But Pachter is right in one way. Today, kids do not get their first gaming handheld as a present from parants who do not know anything about games, instead kids have been using daddy's iPhone as a pacifier since they were four years old. That is strong competition even for Nintendo.

Sony is also constantly under close scrutiny by its customers. Before the PSP2 can really succeed, it will need a console that can be used in bright sunlight, good controls, a viable online store with products, a wide price-range of games from $1-$50, applications reflecting the Web 2.0 lifestyle, and, last but not least, good games which are compatible to short mobile gaming fits and not just trans-atlantic flights.

But let us be honest. If Sony came out tomorrow telling us that all the great PSN titles were now on a mobile console (all those Castle Crashers, Pixel Junk, Stardust, Braid, etc.), we would be mad not to be exited and could crucify Pachter easily. In contrast, if all we get is Ridge Racer and the promise of some GT5-Mobile sometime in the far future, then the hardware will not matter. Today it is all about the games and other things you do with your mobile device.

Edited 1 times. Last edit by Klaus Preisinger on 6th December 2010 1:48pm

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Matthew Eakins Technical Lead, HB-Studios10 years ago
Crap, after the PSP Go fiasco I was expecting (hoping) the PSP2 to bomb as well but if Michael Pachter believes the same thing then history tells me I should re-evaluate my position.

Seriously though, as most people here have pointed out software will drive the sales. Like Paper Mario for the 3DS (*drool*). And in terms of software you get what you pay for. While mildly amusing you can only take so much of tetris and bejeweled clones which is all you are going to get for a dollar.

Plus, most of the iDouches I know are cheap, not even willing to shell out a dollar in most cases. Even if you did create triple A titles for the iPhone without some incredible buzz no one is going to buy it, and relying on buzz is not a sound business model.
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Francis Cermak Website Administrator, HeavenGames LLC10 years ago
Is Pachter a parent? He is severely understimating a parent's willingness to give an iPod Touch to a child. Parents know what kind of content they can get (porn) on the wi-fi connection and they are terrified of it. A mother of a 9 year old boy asked me about this just two weeks ago as her son is begging her for an ipod touch because "all his friends have one" and she wanted to know from me the kind of parental controls are available for the Touch. The DS or 3DS is a "safe" enviornment. The shell case is more durable to being dropped on the sidewalk and parents just feel "safe" with Nintendo games for their kids. Nintendo is a known quantity to parents at this point and they are more willing to give their 9 year old a $250 DS than a $225 iPod Touch.
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Jim Webb Executive Editor/Community Director, E-mpire Ltd. Co.10 years ago
"What's the difference if you play Tetris on an iPod Touch or on a DS? Well, you pay a buck on the iPod Touch, you pay $20 on the DS. Parents prefer $1 or free software."

This is where you fail, Pachter. You are comparing 2 different gaming experiences. When the iPhone starts getting Dragon Quest IX and Mario Kart DS type software, then you may be on to something. But last I checked, the iPhone doesn't do well with non-casual titles and Nintendo doesn't make iPhone games.
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Vlad Zotta Operations Director / COO, Netzah Game10 years ago
Well, maybe Nintendo SHOULD start making iPhone games. ya, ya, I know, I'm day dreaming.
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Dave Knudson Sr. Technology Manager, Electronic Arts10 years ago
I always read any analyst comments like this with many, many, grains of salt. Typically they are paid based on their ability to predict whether or not a company makes their numbers for a given qtr/year. Some of this type of stuff is either PR self-promotion or it comes from someone that is doing a piece/article and they ask an analyst for a quote.

I don't have an opinion one way or the other on PSP2, but would like to see more ubiquity coming out of any of the handhelds. Not sure that's something the platform holders want, but it's the most intriguing thing to me.
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Private Industry 10 years ago
As nice as some of the Unreal Engine 3 and Rage engine stuff looks on mobile phones, I really like to have actual buttons instead of everything just touchpads, there is just that difference of precision when comparing an "analog stick" on the iPhone to a real one. If I want to play something like God of War or Metal Gear Solid on the go I need precision and the dedicated handhelds from Nintendo and Sony give that extra amount of precision when playing and there is the smaller problem of space requirement.

And no kidding the DS sales are going down after many many years with god knows how many different version and a new one just around the corner. Who wants to buy now a DS when you can get soon a 3DS that plays all the DS games? It`s expecting many people to buy a Xbox 1 2 month before the Xbox 360 launch.

Plus with all respect to Nintendo the DS numbers where always a bit inflated in regards to sold units and who many different people have a DS with all the different upgrades. Nobody with a few braincells left who wanted to keep playing on the DS didn`t trade in the first horrible made DS for good DS lite.

Edited 1 times. Last edit by Private on 6th December 2010 8:10pm

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Haven Tso Web-based Game Reviewer 10 years ago
The so called prediction basically ignored the most important part of the handheld or even gaming market - the software.

iPod Touch surely has a few good games on it that captures the market but Pachter actually haven't thought about whether games will execute well on certain platform. Resident Evil Degeneration on iPod Touch completely bombed because it was just not suitable for that platform. iPod Touch is great for casual games, which is a challenge to DS because they are milking the same market. But at the same time DS is more suitable for more durable casual games. Games like Elite Beat Agent just won't work on iPod Touch because of the interface requirements. Even Cooking Mama might not work on an iPod Touch. So essentially, they will be different games for different markets.

As for PSP2, yes PSP cannot be said as a huge success with what it originally intended to be but it is not a failure either. Also there are lots of IPs on the PS brand that will totally ship the console - God of War, Resistence etc. These IPs just won't go on to iPod Touch at all.

DS and PSP don't just built on hardware and interface but also IPs. That's what iPod Touch lacks. So by making such a generic statement on the gaming market like that simply because one company is doing well is quite absurd.
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Adam Campbell Studying Games Technology, City University London10 years ago
I disagree.

You know, I actually think the PSP is in trouble and has been for a while. Even with a massive installed base, there are serious issues selling games on the platform. I ended up selling mine because I couldn't bring myself to buy endless spin-offs and downgrades of existing PS2 games, which the library is predominantly made of and it's hard to argue against.

That said, people doubted the original PSP could be a success with Nintendo in the mix, and it smashed all expectations. People should never underestimate the Playstation brand, and to be quite frank as a Playstation it will always offer something(s) that the latest Apple i or Nintendo machine won't - whether that's button control and powerful brands or certain media features absent from Nintendo's end.

If they are going down the phone route with Sony Ericsson's Zeus and they get it right (with high end PSP2 software and a robust download channel) then I think they step into the modern day of gaming and distribution. I actually think a phone form factor could take on rivalry from all corners and help change Sony'-Ericsson fortunes in the process, where they're currently being trounced by Nokia, Samsung and LG.

I might add, if they embrace the indie gaming scene, and of course offer a more flexible approach than Apple with the Android/Playstation integration, it will really help differentiate them from Nintendo or Apple.

Edited 1 times. Last edit by Adam Campbell on 6th December 2010 11:16pm

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Rohin Whitford writer 10 years ago
"We're way approaching saturation on the handheld market," Pachter told viewers.

As new hardware is released with greater capabilities, new markets open up as software titles exploit the capabilities of this hardware. Consumers often want the latest and greatest even if it is something old dressed up as something new. The games market is always going to be evolving and as new devices are released - a previously DS/PSP/whatever saturated market will give way to a new market with a thirst for the latest Nintendo/Sony/etc have on offer.

The market is massive and even if these new devices have a moderate success rate - the profits the companies stand to make are worth their effort. I agree very much with some posters who have emphasized the fact that success is tied to SOFTWARE rather than HARDWARE. If creative, new, innovative and fun titles are released on each new platform - odds are in favor of decent if not disgusting returns.

Pachter also seems to ignore that gamers some, if not many, gamers consume multi-platform.

Who really wants to play strategy titles on portable?? Not me - if other do awesome, but personally I like a PC for strategy titles, DS for Mario & Bomberman and PS3 for almost all else. XBox and PS3 each have their own exclusive titles that will never see the light of day on each other's platform - let alone an iPhone.
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Greg Wilcox Creator, Destroy All Fanboys! 10 years ago
As someone who owns around 120+ UMD's (down from 200+, as I'm streamlining) and knows quite a few hard-headed gamers who haven't moved to all-digital downloads (thanks to a HUGE chunk of older PSP games NOT being available). I can safely say the PSP 2 will fail to capture the attention of this smaller core consumer unless it has a UMD slot or some means of allowing us to get our games onto the system in as painless a manner as possible.

As I've said elsewhere, the PSPgo didn't flop only because it cost too much - Sony really missed the great opportunity to get us aboard the bandwagon by dropping the ability to play "older" games in the format we prefer. I still think a "core" no-frills UMD-based system at $99 with the ability to upgrade (at cost per application) would be a great idea for those who own UMD games and are hesitant to spend a premium on a device that shuts out the dozens (or hundreds in a few cases) of games we currently own and have no intention of getting rid of.

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Sergio Santos Freelance 3D Artist 10 years ago
Patcher is wrong again, as usual.

Sometimes I think this guy don't even have a clue on how the video game market works.
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Panagiotis Karanikolis Developer Account Manager, Intel10 years ago
"It looks to me like young kids are just as happy playing with an iPod Touch or a Nano. The Touch is cool, it plays games, plays music, they're going to put a camera in it and you're going to get all kinds of cool stuff."

Pure ignorance I guess. It's obvious he doesn't understand the market segments or target audience.
What's next? We don't need game consoles either since internet TVs can connect to the internet and there are alot of facebook games there?
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I wonder who pays these analyst to come up with inaccurate predictions...
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