It is with cap in hand that we humbly apologise to Michael Pachter for calling him an ass.

Although we stand by the point we were making - that Wii Sports shouldn’t be unbundled from the Wii - we were wrong on two counts.

Firstly, the tone of our post was needlessly insulting to Mr Pachter. He’s actually a very nice man and undeserving of our ridicule.

Secondly, it was not a prediction he had made, but merely a statement of a possible course of action. If Nintendo wanted to maintain their price advantage over their rivals without too much of a cost to themselves, then it is conceivable that they could unbundle Wii Sports.

Now we’ve got that out of the way, we can move on to the meaty part of this post, a brief interview with Mr. Pachter to further clarify his position. It’s an interesting set of comments, we’re sure you’ll agree.

WiiWii: When you (or someone else in your line or work) makes a statement about a course of action a company could take, I (and many others) usually assume that you’re also saying this is a course of action they should be taking. Is this actually the case?

Pachter: To respond to your questions, I am not paid to recommend anything other than investment in stocks. I am an equity research analyst, meaning that I advise institutional investors (mutual funds and hedge funds) about whether they should buy or sell certain stocks. My area of expertise is video games, although I cover other sectors (such as movie rental). That means that I cover video game publishers, including Electronic Arts and Nintendo, and cover several other stocks like Blockbuster, Netflix and others. I have views about what these companies will earn in the near term and over the longer term, and fashion my “analysis” as advice about these companies’ prospects in a competitive environment. As part of my job, I regularly speak to reporters and industry publications, and my comments to Gamasutra were merely intended to address how Nintendo could choose to maintain one of its competitive advantages (price).

I have no stake in the outcome, and although I may have personal preferences regarding games or hardware, I try to keep my personal views from biasing my financial analysis. I don’t know what Nintendo plans to do, but it seems to me that it would be prudent of them to sell as many Wiis as possible, while keeping their profits as high as possible. I think it is logical that they would choose to maintain a pricing advantage over Sony and Microsoft, and think it is inevitable that the competitors’ hardware will be priced at $249 eventually. In the case of the Xbox 360, that could happen this year. So my comments about Nintendo unbundling Wii sports from the console were intended to lay out one possible strategy that Nintendo could pursue in order to retain a pricing advantage over Microsoft, in the likely event that the Xbox 360 is priced competitively with the Wii later in the year. Nintendo could also choose to do nothing, and could instead choose to bundle even more software with the hardware at the same price point, creating a different advantage.

WiiWii: How does an analyst usually expect their comments to be received and interpreted?

Pachter: I don’t expect my public comments to be perceived or interpreted in any special way. My comments to our clients are important, and I expect those to be interpreted in such a way as to enable the clients to make intelligent investment decisions. My comments to the press are intended to respond to the question asked in as thoughtful a manner as possible. I value the “free” publicity I get from being a source for many reporters, and that publicity generally leads to a more widespread impression among our institutional clients that I am an expert. The more confident that my clients are in my expertise, the more likely that they will do business with my firm. I am paid to generate business for my firm, and am generally quite good at this task.

I do not intend to provoke, and definitely do not intend to offend any consumers with my comments. I am merely offering views about how I see the competitive environment shaping up, and am hopeful that this will help my clients make better decisions.

WiiWii: In line with your previous statements about Nintendo unbundling Wii Sports, are you suggesting that this is the course of action that Nintendo should be taking?

Pachter: So to specifically answer your question, I don’t recommend that Nintendo unbundle Wii Sports, nor do I predict that they will do so. I DO predict that Nintendo will try very hard to keep Wii sales as high as they can while maintaining profitability. I think that they will ultimately cut the price of the Wii, and offered up the thought that a price cut would be less costly if Wii Sports were unbundled. Some consumers would not like that, and others would not know or care. We’ll see what Nintendo ultimately chooses to do.

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This entry was posted on Thursday, January 31st, 2008 at 3:43 pm by Bulent Yusuf
Interviews, Misc news.