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Akvod on 23 March 2013
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Final-Fan said:
Akvod said:
I thought Michael Pachter had a pretty simple and compelling argument. You mainly make money off of consoles by:
1) Royalties/Licensing fees from third party games.
2) Selling your consoles at a profit
[...]
So you basically have Nintendo not generating profit from method 1 and 2, and also limiting their ability to maximize revenue from software due to releasing on only 1 platform.
From an opportunity cost perspective, Nintendo is wasting its shareholder's money.

HAHAHA wow

If you ignore profits from first party software it's a lot easier to argue that Nintendo is not doing well...

I don't think you understood my post.

Point 1) I said "You mainly make money off of CONSOLES". You need to seperate out the revenue streams from the console and the software. Why?

Point 2) Pachter's point is that since Nintendo isn't gaining profit from the console business (due to low margins and lack of 3'rd party support), the software business is propping up a dead business. Pachter's arguing that Nintendo could make more money, by not selling Nintendo software on only one platform, but on three (and more with the next gens).

Is Pachter's argument completely full proof? No. You could take a very, very long horizon and say that Nintendo should stay in because they could do a better job with their next console. I would personally play the devil's advocate by saying that Nintendo's family friendly image and segment is valuable, and gives something Sony and Microsoft lack (although that could change with Microsoft ramping up Kinect).

But anyways, you didn't really understand the post and you didn't address Pachter's points.

 

1) Do you agree or disagree that the profits from the CONSOLES are high or low?

2) Do you believe that Nintendo's software business benefits more from only being exclusive to Nintendo's hardware (or by the hardware platform existing), or do you believe that Nintendo could make more money with its software business by selling on more platforms?

3) How long is your horizon, and how much future benefit do you think Nintendo will have by continuing it's current strategy now?

 

Watch the video again: