In March of 2012, fully eight months before the launch of Wii U, Wedbush Securities analyst Michael Pachter predicted that Nintendo would “Dreamcast itself” with the then forthcoming hardware – referring, of course, to the final home console SEGA released before shedding its hardware division and transforming into a third-party developer. On the one-year anniversary of that prediction, Pachter has revisited the very same theme, stating that if Nintendo has any business sense, it will exit the hardware market and focus exclusively on games.
Pachter’s latest, and harshest, criticism of Nintendo comes from the March 9th episode of GameTrailer’s Pach-Attack! Calling Nintendo “a bad company that doesn’t make money,” and singling out President Satoru Iwata as “a pretty poor CEO,” Pachter claims that Nintendo’s hardware sales are so unprofitable that “it really doesn’t make sense for them to be in the hardware business.”
Pachter’s latest volley follows a pair of high profile criticisms leveled at Nintendo during first two months of 2013. Namely, that Wii U and eShop arrived “years too late,” and that Nintendo “misfired on the Wii U,” a mistake that the company “probably can’t recover from.” More recently, Pachter predicted that “Microsoft wins the next generation.”
Asked on Pach-Attack! whether he could ever “see Nintendo going the way of Sega and having to exit the console making business,” Pachter responded that, yes, Nintendo should do exactly that – though he doubts they will.
“I think Nintendo is no longer able to compete the way they did in the past and sell their consoles at a big profit.”
“The good news is, Nintendo has something around 8 or 9 billion dollars – billion – of cash on their balance sheet. When they lose money, they lose something like a billion dollars. And frankly, I think next year their losses will be smaller. I think if they lose money it’ll be $100m, $200m. They can run for 50 more years and keep losing money and they’re not going to go out of business. So they aren’t forced to do anything.”
“If Nintendo’s business is trying to make a profit, once they conclude they aren’t going to make any money on hardware, of course they should exit the hardware business. And if they were to put their software on multiplatform they would probably sell twice as much software. So I think Nintendo, if they were to follow the SEGA route, would be immensely more profitable, but it’s not in their DNA…”
It has to be said that Pachter’s entire argument is motivated solely by the bottom line: Nintendo isn’t making money for its shareholders, and that failure must be addressed.
“The only way anybody is going to make money going forward is if Nintendo suddenly starts making money, and they’re not going to make money on hardware, not at these prices.”
Pachter’s assessment brings to mind Ubisoft’s recently stated desire for a Wii U price cut, and Nintendo’s steadfast insistence to instead focus on innovation.
There is no arguing about the financial realities of Nintendo’s current situation. They are what they are. That said, and Pachter’s opinion aside, there is no guarantee that transitioning into a third-party developer would bolster Nintendo’s earnings. SEGA, held up by Pachter as an example for Nintendo to follow, is resolutely no such thing. Once an uncontested industry leader, SEGA is a shadow of its former self, having hemorrhaged key talent during the switch from console manufacturer to game developer. Who’s to say the same wouldn’t happen to Nintendo?
What do you think, Ranters? Should Nintendo exit the hardware business? It might be good for the company’s shareholders, but would it be good for the games industry as a whole? Leave your thoughts in the comments below.
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