Fair enough, I didn't watch the video and thought the argument that Nintendo is doing bad, not that "Nintendo is doing fine but could do better by abandoning the console hardware market".
1. I don't know the data on how profitable Nintendo is on their consoles. However, I do have a couple things to say on that subject. Firstly, I had to stop the video when Pachter said that the WiiU is barely making a profit now per console, as opposed to "$100+" for the Wii at launch. I think that is a hilarious criticism, not only because I find it hard to believe the Wii was that profitable at launch (though again I have no data) but because the fact that it is profitable at all is a much better situation than the two competitors' consoles were last gen, and I'd be very surprised if they did better than Nintendo is now with their upcoming consoles, and not at all surprised if they did worse (with respect to profit/loss per unit). Secondly, I would point out that Nintendo also makes money on controllers and other peripherals which they would not, or to greatly lesser extent, were they to cease manufacturing consoles.
2. (a) I think Nintendo benefits strategically from being in the position of dictating their own hardware abilities, like motion sensing on the Wii, or dual screens or a touchscreen on the DS, which would be basically impossible for a software developer to do. The most they could possibly hope to achieve in that case would be via peripherals like the Wii Balance Board that Wii Fit uses, which was successful but nothing like the same scale. They probably wouldn't be able to require players to get one for all their games and there would also probably be hardware limitations on the console end of what functionality would even be possible in a peripheral.
(b) Antoher aspect is that Nintendo obviously doesn't have to pay royalties to other companies while putting software on its own console, which they would have to do if they "pulled a Sega". So I think that Nintendo may derive tangible advantage, and definitely derives intangible advantage, by maintaining itself as a console maker.
The counterargument would be that being a console maker means they are effectively prevented from releasing major multiplatform games, because doing so would undermine their own console's software advantage (losing exclusives), and that this restriction loses them SO much market opportunity that it overwhelms any advantage they obtain by the ability to define their own hardware, get royalites, etc. But I would argue that as the generation goes on, the amount of flagship Nintendo games becomes so great on the Nintendo console that a lot of the audience for their games might pick up the Nintendo console anyway. But I may here be greatly overestimating the amount of multiplatform ownership. Even if that reason isn't borne up by the evidence, I still think the benefits for Nintendo outweigh the drawbacks.
3. As I described in point 2, I think Nintendo draws great strategic benefit from being able to dictate the hardware on which they make games in order to be able to follow its vision on what kind of games it wants to be able to make (which depends to an extent on the hardware it is able to use to play those games on), which is an advantage it can obviously only maintain by continuing to make their own consoles.
Nintendo's NES had the D-pad, which was univerally accepted; Nintendo's SNES included shoulder pads which were univerally accepted; Nintendo's N64 pioneered analog sticks and "rumble", both of which Sony quickly copied, etc. You can argue that the advantage gained was fleeting because the competition was able to copy these developments, but the fact remains that if Nintendo hadn't done it first it might just not have been done, which would limit the games Nintendo could make. At the risk of repeating myself, by remaining in a position to dictate hardware Nintendo will retain the ability to innovate in its games by innovating in player interaction.
1. Well, Pachter is the stock analyst that has 4 degrees (went to business school), and analyzes stocks and businesses for a living. So given that you have no data to say otherwise, I'm going to give Pachter the benefit of the doubt.
As for the other competitors selling at a loss, that's because their business model is more weighted towards royalty payments from 3'rd party developers, in contrast to Nintendo, who has been alienating 3'rd party developers.
Very, very good point with the peripherals. Although, I don't really see as much potential for peripherals with the WiiU, in contrast to the Wii.
2. (a) I think you're putting too much weight on the hardware abilities. If you're arguing from a creative freedom perspective, that's a bit more compelling, but I don't see that really translating much in terms of business/sales. I'm not really sure if Mario or Zelda games are known for, or that people buy games from these two series due to "innovative" controls. And again, let's just assume sales will go down and/or the quality of the games will go down due to less freedom over hardware.
Will those be so large as to offset the expansion in customer base by selling on another platform?
(b) Again, you need to look at it from a cost benefit perspective. Do you honestly believe that the royalties are so large that it'll offset the expansion in customer base?
The point is that there's no point in propping up the console with exclusives though. The console itself isn't making a large profit, and Nintendo's third party support doesn't seem strong. In addition to that, even if they did get developer support, will they get consumer support (again, Activision (?) executive saying that Nintendo fans are all talk).
3. And again, you need to analyze things seperately. Your claim is that: Dictating hardware->Better quality of software.
Before I go on, let me point out that this is a pretty big claim in and of itself. I'm not sure a majority of people will argue that the Wii controls were the main drivers of the quality of Mario or Zelda games (some people may say they hurt some of those games).
Now, what are the implications of your claim on the hardware and software business of Nintendo?
1) Hardware - Irrelevant. The point is that even if Nintendo's first party games are high quality, there's no point in having those games attract buyers, because of the lower profit of the consoles, and low revenue from royalties. Your best possible argument is alternative sources of revenue such as peripherals, or maybe whatever revenue Nintendo can get by having the WiiU become a living room "media center".
2) Software - Irrelvant. Unless you show that the decrease in the quality of games will result in such a decrease of sales for Nintendo that it'll result in a net decrease in sales, after Nintendo gains access to the other 2 consoles. You'll also have to show that the royalties are so onerous, that it'll lower the total profit below what Nintendo would have gotten by selling on one console, as opposed to 2 or 3.
4. Again, I like Pachter's argument due to it's simple logic. You have a much more uphill battle to climb, and need to do some number crunching to prove your point IMO.
I hate that reply format with a passion. DO NOT EVER do it with me please.
1. (a) I don't care about Pachter's degrees, no appeal to authority fallacies from you please, especially when his ACTUAL area of expertise is stock analysis. And even there his degree of expertise is pretty debatable from what I've heard. But let me ask it this way: Pachter is saying that Nintendo was selling a $150-costing console for $250. That might have been understandable while there were shortages. They'd just be throwing away money by charging less when they can't sell more units. But what about later on? Surely they'd have been able to drop the price more than they exhibited to keep Wii sales high? Even now the Wii is selling for $130 -- a mere $20 less than its production cost was SEVEN YEARS AGO according to Pachter. Surely, what with the universal falling cost of manufacture that consoles experience, Nintendo could afford to cut the price farther to prop up flagging sales if Pachter's estimate was true, don't you think? Or is the Wii unique among consoles in having a rock hard cost of manufacturing that has barely decreased through an entire console generation?
Perhaps more importantly -- if they really were making $100 per Wii from launch, where the hell do you and Pachter get off saying that Nintendo hardware is unprofitable? I mean that's an INSANE amount of profit they must have been making! Shit, they must be refusing to lower the price just because of the scads of money they're raking in just on the boxes themselves!
(b) What are you basing that opinion about peripherals on? Regardless, they will still sell many tens of millions of controllers.
2. (a) It's hard to say how much Nintendo franchises benefit from the hardware control I spoke of. But I would argue that in the long run, it is more beneficial to keep the franchise strong than to pursue the short term gains of going multiplatform, only to see your franchise suffer and see declining sales because of declining quality, rather than continuing strongly into the future. In this scenario, in exchange for a smaller market they gain reliable customer support. Look at Sonic.
(b) If I were to speculate, I would say that the difference between having to support a console, but not having to pay royalties and also receiving royalties from third parties (which believe it or not do exist on Nintendo consoles), may or may not be equal to not having to support a console, but having to pay royalties, but having access to a greater market; but that when you take into account not only the hardware factor I refer to elsewhere (and possible franchise degradation if hardware control is lost) but also brand unity/recognition, it is at least equal.
Au contraire, the point of "propping up" a console is discussed in great detail. You can argue whether it is fully justified given the alternatives, but to claim there's "no point" is just false.
3. Aside from the effect it had on existing franchises (and I'd remind you of Super Mario 64 and the analog stick, which acknowledging that there are people like RolStoppable who would argue that that was also detrimental to the franchise), it gives Nintendo opportunities to do NEW things like Wii Sports, WSR, and the Trauma Center series which (as a non-player, I understand) relies on touchscreen or Wii Remote drawing for its gameplay. Making new franchises as well as continuing old ones is, I'm sure you will agree, essential to the health of a software company.
1) You haven't even proven that the Nintendo hardware and hardware-based business is unprofitable. Aside from that, I will concede that if you are only analyzing the hardware for the hardware's sake, then it isn't relevant to that analysis how much the hardware helps the software.
2) On the other hand, I think it's quite a remarkable claim to say that "Dictating hardware-->better software" has no relevance to Nintendo's software business. I mean frankly that's a completely ridiculous statement. What I suppose you mean is that the quality argument is trumped by the quantity argument of being able to release across two platforms (not three, unless you forsee a new entrant into the market). But IMO that is a shortsighted outlook because over time series of inferior quality dwindle and fade away, if not disappear entirely.
4. In conclusion, simple logic isn't necessarily correct logic. And I have better things to do than to do 100% of the factfinding while you don't have the same burden, especially when you (and Pachter) are the ones making the claim in the first place that Nintendo would be smarter to abandon their hardware business. The burden of proof is on you IMO.
"1. (a) I don't care about Pachter's degrees, no appeal to authority fallacies from you please, especially when his ACTUAL area of expertise is stock analysis. "
Stock analysis requires you to understand the company's business you know? What exactly do you think stock analysis entails?
Also, lol "appeal to authority fallacies". Did you just read Wikipedia's article on logical fallacies or something?
Point is, is that Pachter actually reads 10-k's and other, exclusive, sources of information and talks to management as well as journalists. He's a fucking expert, and I find it hard to believe that he's just pulling numbers out of his ass.
On the other hand you just make claims while even admitting yourself that you have "no data".
Knowledge isn't a perfect or surefire thing. Given the limitations, I'm going to believe Pachter over you.
"Or is the Wii unique among consoles in having a rock hard cost of manufacturing that has barely decreased through an entire console generation?".
Could be, dunno. Can't really say anything about the costs at this point in the generation, since I have no knowledge about that.
But as for not cutting the prices: 1) A few years ago, when the Wii was still selling a lot, it would have been stupid to cut prices and lower MARGIN. 2) The price they have now could be based on a number of stuff. They might have an idea of what the current demand of Wii is, and determined that the current cost maximizes profit (which is a function of volume and margin). It might be that costs can't be lowered anymore.
I'm not really sure where exactly you're going with this though.
"(b) What are you basing that opinion about peripherals on? Regardless, they will still sell many tens of millions of controllers."
From what I've seen, Nintendo has mainly been marketing the WiiU as 1 GamePad+a bunch of Wii motes. Going off of what seems to be Nintendo's marketing (and therefore, business strategy), I just don't see Wii motes being sold as much, given that current Wii owners should already have some.
Maybe they'll sell the GamePads? I don't own a WiiU so I'm not sure if there's support for multiple GamePads (are they even being sold individually)? But it just doesn't seem like something that'll have a lot of volume in terms of sales (or appeal).
"2. (a) It's hard to say how much Nintendo franchises benefit from the hardware control I spoke of. But I would argue that in the long run, it is more beneficial to keep the franchise strong than to pursue the short term gains of going multiplatform, only to see your franchise suffer and see declining sales because of declining quality, rather than continuing strongly into the future. In this scenario, in exchange for a smaller market they gain reliable customer support. Look at Sonic. "
I think the Sonic brand really didn't fail as a result of a lack of exclusive hardware, but just poor quality software.
"(b) If I were to speculate, I would say that the difference between having to support a console, but not having to pay royalties and also receiving royalties from third parties (which believe it or not do exist on Nintendo consoles), may or may not be equal to not having to support a console, but having to pay royalties, but having access to a greater market; but that when you take into account not only the hardware factor I refer to elsewhere (and possible franchise degradation if hardware control is lost) but also brand unity/recognition, it is at least equal. "
Christ that's a long sentence (also a lot of "buts"). Sorry, I didn't really follow what you wrote there.
"3. Aside from the effect it had on existing franchises (and I'd remind you of Super Mario 64 and the analog stick, which acknowledging that there are people like RolStoppable who would argue that that was also detrimental to the franchise), it gives Nintendo opportunities to do NEW things like Wii Sports, WSR, and the Trauma Center series which (as a non-player, I understand) relies on touchscreen or Wii Remote drawing for its gameplay. Making new franchises as well as continuing old ones is, I'm sure you will agree, essential to the health of a software company."
Sure, but does that really get people to pay a premium for the console? WiiU seems to show that people aren't. Is it worth having those controls if that means that you can only sell to one platform? It just doesn't really make sense for a hardware or software point of view.
"1) You haven't even proven that the Nintendo hardware and hardware-based business is unprofitable. Aside from that, I will concede that if you are only analyzing the hardware for the hardware's sake, then it isn't relevant to that analysis how much the hardware helps the software.
2) On the other hand, I think it's quite a remarkable claim to say that "Dictating hardware-->better software" has no relevance to Nintendo's software business. I mean frankly that's a completely ridiculous statement. What I suppose you mean is that the quality argument is trumped by the quantity argument of being able to release across two platforms (not three, unless you forsee a new entrant into the market). But IMO that is a shortsighted outlook because over time series of inferior quality dwindle and fade away, if not disappear entirely.
4. In conclusion, simple logic isn't necessarily correct logic. And I have better things to do than to do 100% of the factfinding while you don't have the same burden, especially when you (and Pachter) are the ones making the claim in the first place that Nintendo would be smarter to abandon their hardware business. The burden of proof is on you IMO. "
Watch the video again. Don't stop inbetween it. Just take a deep breath, and understand that he's just about business. You could say that Nintendo's more focused on "quality" or "artistic integrity" or something like that. But Pachter's points are simple.
Nintendo's not making enough money on hardware, Nintendo could make more money on software.
Player1x3 said: ...also, if I might add, I've never seen such an enormous amount of irrational defense for Wii U anywhere on the internet. Some people here just have big problems with facts and accepting reality of a situation their beloved console is in
I cannot believe it either. The fact is the Wii U is doing terribly and now that pricecuts are not even helping it is looking like the Wii U truly is in dire straights. Saying it isn't so, or changing the subject to completely different consoles with their own unique circumstances just makes you look desperate.
Also I will say that I got a Vita on launch and recently thought it was in big trouble too. In fact I was worried it was just gonna die off in a year. But then SONY dropped the price in 1 country and sales exploded. The Wii U's has not...
You're the one who wanted sensible discussion.
Nintendo has NOT DROPPED PRICE. Individual retailers have dropped price. Guess what; they did with with Vita in Japan too, before an official price drop.
The only people who look desperate here are the ones rushing to make the Wii U's defeat a closed subject or something.
Well it's a story that has been seen before - a Nintendo console with little 3rd party support relying on Nintendo franchises to carry it through. The GC and N64 sold in the region of 20 - 30 million when that approach was taken, and that's when those systems were released close to consoles with similar power.
However this time around the consoles which are closer in terms of power to the Wii U are not the other 8th gen consoles but the 360 and PS3. The reality of the situation is that the Wii U's sales are very, very low and distributors are clearly concerned about the low volume of sales. Mix this with the console losing 3rd party support & exclusives it is very, very hard to imagine a way in which it could make a come-back.
Let's also not forget that the Wii U will have a worldwide price cut and a much better library when each system releases.
This isn't necessarily true. If the PS4 has Gaikai running and 720 has backwards compatibilty then they might be able to leverage that.
Your forgetting that Nintendo will have it's Virtual Console fully up and running with significant back catalog of games by that time (indie games should be quite more substantial by that time as well), Not to mention whatever AAA titles they release against the launch of PS4/720.
You're right, I didn't think of the Virtual Console. I never actually used it on the Wii so I'm not really sure how big it is. Is it the equivalent of the stores on PS360? I would think that the biggest factor by far will be the AAA titles you mention.
Player1x3 said: ...also, if I might add, I've never seen such an enormous amount of irrational defense for Wii U anywhere on the internet. Some people here just have big problems with facts and accepting reality of a situation their beloved console is in
I could say the same thing for people's irrational determination to make the "Wii U is dead" argument sound conclusive.
Except that that argument has some sort of backing up behind it, not just ''wait till... *insert excuse here*
Your "backing" (all of you) consists of a fundamental misunderstanding of why people do or don't buy Nintendo consoles.
In case of Wii U that is quite obvious. It doesn't have the same ''revolutionary'' appeal to the mass market Wii had, and there's no reason why anyone would choose a WiiU over a cheaper console that's been on the market for 6 years, has about the same graphical power and much bigger and better library of software.
Player1x3 said: ...also, if I might add, I've never seen such an enormous amount of irrational defense for Wii U anywhere on the internet. Some people here just have big problems with facts and accepting reality of a situation their beloved console is in
I could say the same thing for people's irrational determination to make the "Wii U is dead" argument sound conclusive.
Except that that argument has some sort of backing up behind it, not just ''wait till... *insert excuse here*
Your "backing" (all of you) consists of a fundamental misunderstanding of why people do or don't buy Nintendo consoles.
In case of Wii U that is quite obvious. It doesn't have the same ''revolutionary'' appeal to the mass market Wii had, and there's no reason why anyone would choose a WiiU over a cheaper console that's been on the market for 6 years, has about the same graphical power and much bigger and better library of software.
Wii U has more graphical power. But you're right about the other points.
Player1x3 said: ...also, if I might add, I've never seen such an enormous amount of irrational defense for Wii U anywhere on the internet. Some people here just have big problems with facts and accepting reality of a situation their beloved console is in
I cannot believe it either. The fact is the Wii U is doing terribly and now that pricecuts are not even helping it is looking like the Wii U truly is in dire straights. Saying it isn't so, or changing the subject to completely different consoles with their own unique circumstances just makes you look desperate.
Also I will say that I got a Vita on launch and recently thought it was in big trouble too. In fact I was worried it was just gonna die off in a year. But then SONY dropped the price in 1 country and sales exploded. The Wii U's has not...
You're the one who wanted sensible discussion.
Nintendo has NOT DROPPED PRICE. Individual retailers have dropped price. Guess what; they did with with Vita in Japan too, before an official price drop.
The only people who look desperate here are the ones rushing to make the Wii U's defeat a closed subject or something.
Well it's a story that has been seen before - a Nintendo console with little 3rd party support relying on Nintendo franchises to carry it through. The GC and N64 sold in the region of 20 - 30 million when that approach was taken, and that's when those systems were released close to consoles with similar power.
However this time around the consoles which are closer in terms of power to the Wii U are not the other 8th gen consoles but the 360 and PS3. The reality of the situation is that the Wii U's sales are very, very low and distributors are clearly concerned about the low volume of sales. Mix this with the console losing 3rd party support & exclusives it is very, very hard to imagine a way in which it could make a come-back.
EXACTLY! I am not saying the Wii U is doomed, I am saying I cannot think of how they can turn it around. Plus if it does fail, what will they do next?
I am not trolling, I just want someone to put as much thought into figuring out how they can come back to sell 40m+ as I did into analyzing that I don't think they can. A price drop clearly won't be enough, and I doubt games will to. Can anyone rationally explain another thing they can do?
Wasn't this the exact same discussion people had about the 3DS in it's first year?
"3D is a gimmick!"
"Vita is coming and it's so much more powerful and has a much better screen."
"Why should I get the 3DS when PSP/DS has a bigger library and is cheaper?"
There were tons of arguments on why Nintendo was doomed because of the 3DS but it all came down to hardware, and how it was barely stronger than PSP (or arguements that it was weaker.) and because of that there was no way in the world Nintendo could save themselves from failing. I'm going to call it right now, Both the PS4 and 720 will start the exact same way the Wii U did. They're gonna have great initial sales as the diehard fans and interested parties buy the systems, and then they're going to trickle off into nothing as the inevitable software drought hits. This happens with pretty much EVERY console. I don't see it changing anytime soon. It takes time for consoles to have big enough libraries to justify a purchase/upgrade from the previous gen.
I'm the result of someone exclusively playing Final Fantasy XI from the PS2 release till 2010, and only stopping for small bouts of catch up.
3DS Friend Code: Tate - Uh.. stuff happened... I need to get a new 3DS
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FFXI Character: Formally Tatewaki of Cerberus, Now Arngrim Of Sylph. Retired forever. ; ;
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All time favorite game: Chrono Trigger.
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First of all 3ds was never as bad as the wii u. Secondly the 3ds picked up buti sb ack to being in terrible shape outside ofj apan. Third if ps4 and 720 follow wii u developers will abandon homec onsoles so hope they dont. Lastly it doesnt happen to every console.
Wasn't this the exact same discussion people had about the 3DS in it's first year?
"3D is a gimmick!"
"Vita is coming and it's so much more powerful and has a much better screen."
"Why should I get the 3DS when PSP/DS has a bigger library and is cheaper?"
There were tons of arguments on why Nintendo was doomed because of the 3DS but it all came down to hardware, and how it was barely stronger than PSP (or arguements that it was weaker.) and because of that there was no way in the world Nintendo could save themselves from failing. I'm going to call it right now, Both the PS4 and 720 will start the exact same way the Wii U did. They're gonna have great initial sales as the diehard fans and interested parties buy the systems, and then they're going to trickle off into nothing as the inevitable software drought hits. This happens with pretty much EVERY console. I don't see it changing anytime soon. It takes time for consoles to have big enough libraries to justify a purchase/upgrade from the previous gen.
The thing is the 3DS wasn't ever doing this badly and N had room for a price cut. The Wii U is already being sold at a slight loss and it seems the forced price cuts from sellers are not even picking up sales.
In addition to that, the 3DS had monster hunter coming and it was really the only mobile option for third parties, whereas the Wii U already has competition in PS360 that third parties know will sell plenty of copies...
The counterargument would be that being a console maker means they are effectively prevented from releasing major multiplatform games, because doing so would undermine their own console's software advantage (losing exclusives), and that this restriction loses them SO much market opportunity that it overwhelms any advantage they obtain by the ability to define their own hardware, get royalites, etc. But I would argue that as the generation goes on, the amount of flagship Nintendo games becomes so great on the Nintendo console that a lot of the audience for their games might pick up the Nintendo console anyway. But I may here be greatly overestimating the amount of multiplatform ownership. Even if that reason isn't borne up by the evidence, I still think the benefits for Nintendo outweigh the drawbacks. 
