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Pachter predicts Wii price cut, Wii U bundle/price cut, future support, 3rd parties, sales and struggles

by rawmeatcowboy
03 June 2013
GN Version 4.0
The following comes from Wedbush analyst Michael Pachter...

On price cuts, bundles

We also expect the hardware manufacturers to announce price cuts. We expect the prices for the PS3 and Xbox 360 to drop by at least $50 as we approach the holidays, with the Wii dropping to $99. In addition, Nintendo may look to spur Wii U sales through either a hardware price drop of $50 or a bundle that includes some of its more popular software. Sony will likely cut price for its PS Vita handheld, which has struggled since release due in part to its high starting price point of $249.

On Wii U staying power and third party support...

We believe the Wii U release slate on display will be a key determinant of the console’s long-term staying power. With the more powerful PS4 and Xbox One launching later this year, Nintendo risks losing additional share to its console competitors if the quality and volume of content available for Wii U does not pick up markedly in the near-term. In addition, if the Wii U’s popularity does not improve by the end of the year, many third-party publishers may pass on producing games for the console. We note that EA recently announced that it had no Wii U games in development, and it remains a possibility that the publisher will abandon the platform entirely. Should other third parties follow EA’s lead, the Wii U could be relegated to a first party only platform. We expect the Wii U release slate on display at E3 to be very first-party-centric (as outlined below), with limited third-party support coming from Activision Blizzard, Warner Bros., and Ubisoft, among others.

More on price cuts...

Fortunately, we think that price cuts will come no later than E3 for the two current generation consoles, with a cut for the Wii and a bundle for the Wii U likely before holiday. That should mitigate some of the declines in monthly software sales we have seen so far this year.

On Wii U install base, future revenue...

With that said, we continue to believe that Nintendo misfired with the Wii U, and believe that the next-generation of consoles will see a market share shift from Nintendo platforms to Microsoft and Sony platforms. In the aggregate, we think that the installed base of next-generation of home consoles at a similar point in the cycle will be smaller than the current generation, likely by 10-20%. However, the composition will be much different, with Sony and Microsoft each selling 85- 100 million home consoles (compared to approximately 75 million each in the current cycle) and Nintendo selling 50 million or fewer (compared to approximately 100 million in the current cycle). The 50 million decline in our forecast for Nintendo’s home console installed base reflects defections of more non-traditional gamers to social and mobile games. Should third parties follow EA’s lead and abandon the Wii U, it is likely that many Wii U households will purchase a next-generation console from Microsoft or Sony in addition to their Nintendo consoles, driving the installed base for “hard core” consoles to 220 million or higher.

On 3DS, third parties, smartphone, social and tablet games...

We continue to expect handheld hardware sales to decline over the next few years, as many non-traditional gamers consider smartphone and tablet games a perfect substitute for casual games played on dedicated handheld hardware. While we believe this news is bad for third-party game publishers focused on the Nintendo 3DS, there are few publishers remaining who are focused in any meaningful way on the 3DS. At least one publisher formerly focused on the Nintendo handhelds is bankrupt (THQ), and another
(Ubisoft) appears to have successfully shifted its focus from handheld games to a broader hard core offering. With the exception of Ubisoft, our OUTPERFORM-rated publishers have little exposure to Nintendo’s handheld platforms.

Pinball FX on Nintendo Switch