Heading into damage control mode, Wedbush Morgan Securities managing director Michael Pachter decided to explain himself to the gaming community after attacking the Big 'N' with inflammatory remarks about their latest console being a mistake and that it's a decision that Nintendo may not ever recover from. To help him flesh out his comments, Michael decided to go to gaming's most established forum site to argue his point.

Neogaf, is where the Pach-Man went to clarify his position, and VG 24/7 caught wind of the Pach-Attack, posting the notable bits about his “clarification”...
“Nintendo has historically made money, and a lot of money, on each hardware unit sold.

My comment about the Wii U being a “mistake” from which the company “may not recover” was intended to say that if Wii U sales don’t materially improve, Nintendo is unlikely to be profitable,”

The comments caught the ire of gamers who felt that Pachter was taking a tornado of hate and sweeping it through the community of Big 'N' just to keep up with his torrent of doom-talk that has permeated all his discussions involving Nintendo.

Pachter, however, believes that Nintendo has taken a misstep twice over with both the 3DS and Wii U, because the 3DS isn't generating profits like the original DS and the Wii U isn't moving units like the Wii.

Pach-Man continued on his damage control rant that included a lot of statistical enumeration of Nintendo's financial history, saying...
To elaborate, if the Wii U is not generating profits, and if the 3DS is not generating profits, the only thing that will generate profits is software. Nintendo is ensured high sales of its proprietary software, but it makes the most money on its royalty business, collecting fees from third parties for the privilege of letting them put out games on Nintendo platforms.

The important point is that if 3DS sales level off at 15 million and Wii U sales level off at 8 - 10 million, software sales will be much lower than they were in the past. If Nintendo doesn't make a profit on hardware, they can't afford to cut prices further. If they do cut price, it will likely occur as their manufacturing costs come down, but I don't expect big hardware profits in the foreseeable future. They are stuck with software profits, and at current sales levels, they are unlikely to make an overall profit from software.

That's it, not trolling, but that is my reasoning.

Trying to explain the psychology of core gaming to a business analyst would be like trying to teach Donald Trump how to use a comb. It's just two completely different worlds colliding.

As mentioned in the original article detailing Pach's attack on Nintendo, if the Big 'N' can knock out a killer app or two sometime throughout 2013 it'll be enough to put them back in the game. That's it. Already, Lego City Undercover could be the Grand Theft Auto that Nintendo desperately needs, and if they can follow up on that game with a few more titles that focus on both innovation and knock-'em-dead gameplay, then moving hardware won't be a problem because people will buy the Wii U for the software. Presumably, the same as the PS4 or Xbox 720 will undoubtedly move big units once established brands or IP are announced for the consoles.

Main image courtesy of Gamesblog.it

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