Wii U attach rate outlook "highly unrealistic" says Pachter
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.
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.
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
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.
"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.
Even if the vast majority of hardware sales come before Christmas, are people really likely to buy more than one game a month for it at £40+ a pop? And given that a lot of the launch line-up is cross-platform games that many people will already own or could buy (sometimes much) cheaper on other consoles, is there enough must have exclusive software to drive those sales?
Edited 2 times. Last edit by John Bye on 25th October 2012 12:26pm
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.
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.
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.
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.
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.
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
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.
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?
Edited 1 times. Last edit by Laurens Bruins on 25th October 2012 6:12pm
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.
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.
"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
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.
At the end of the day it is like it allways is Nintendo shows him he is wrong.
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.