Pachter: "Sometimes, I add two and two and get seven…"

Original photo credit – Hot Grill

Coffee Beans

     Michael Pachter continues to make news in the video game world. On July 16th, Edge-Online.com published an article where they quoted Mr. Pachter as saying, “Activision never said anything to me, but I know that [for] big games like Call of Duty they said, ‘No, we’re not putting it on there [the Wii U*] if you don’t give us a conventional controller’. So they [Nintendo*] gave in.” *bracket text added for clarification

     Was Michael Pachter’s opinion on this topic of Activision, or even another third party developer, basically demanding Nintendo make the Wii U Pro Controller or they would not support the Wii U console a well informed opinion? Was it an opinion based around the known facts of the Wii U’s controllers and the history of Activision’s support of the Wii, as people should expect coming from a “Managing Director” at an “Equity Research” firm?

     Well, when I saw the quote I decided to contact Mr. Pachter for clarification because I thought it might have been out of context, and wanted to give him the benefit of the doubt. After a few email exchanges with him, and pointing out what I thought was one obvious flaw in his opinion on this subject, Mr. Pachter replied, “Sometimes, I add two and two and get seven, but I still add two and two.“

     What was the context of this quote, and what flaw did I see in Michael Pachter’s original statement? More importantly, did Mr. Pachter explain his statement after I mentioned why his original opinion made no sense, in a way that made sense? Brew yourself some coffee, and take a look at one partial email exchange with Michael Pachter below, as well as a visual aid I hope can help with Mr. Pachter’s bad math!

*The PS3’s controller “d-pad” is counted as one button/input, like the d-pads on the Wii U GamePad, Wii U Pro Controller, and Xbox 360 Controller

The Brew & Caffeinated Thoughts

     In one email exchange after a few paragraphs, I closed with “If you want to go around saying the world if flat, when the facts prove otherwise, you certainly can do that, but don’t be surprised when people don’t take you seriously. I was actually trying to get clarification on the issue, and see how you reached the ‘opinion’ you did. That’s my point.”
     In the response email he sent, Mr. Pachter said at one point, “You have a right to your opinions, and you of course have a right to think that my opinions must be based on facts. However, it is my view that my opinions can be based on whatever I see around me, and putting two and two together gets me to opinions all the time. Sometimes, I add two and two and get seven, but I still add two and two.“

     I think the problem with Mr. Pachter’s defense of just coming to the wrong conclusion, or opinion, is that he wasn’t even analyzing things around him that were obvious, and he certainly wasn’t just using simple math. He was creating a problem where the solution was already known and he did so by ignoring facts and history.
     First, he ignored that the Wii U GamePad has more buttons and control input options, than the Wii U Pro Controller does. How does the Wii U GamePad not equal the Wii U Pro Controller, when the GamePad offers more buttons and input options than the Wii U Pro Controller does? Is there a third party developer that would look at the Wii U GamePad and think it doesn’t have enough input options?
     Second, he must have also forgotten that Activision has published every single Call of Duty game, except one, for the Wii. As I wrote about before, Treyarch has developed or ported each Call of Duty Wii game, and they are developing Black Ops 2; why wouldn’t Black Ops 2 be on the Wii U considering Treyarch’s support of Nintendo’s current console? Now, if he had said EA demanded a more traditional controller, that might have been a little more believable based on EA’s spotty support of the Wii with their FPS games this generation.

     Personally, I think Mr. Pachter can have any opinion on video game subjects and topics that are still a mystery such as the Xbox 720 and PlayStation 4, or something such as “Michael Pachter’s Top 10 Video Games of All Time”.
     I know he meets with many video game representatives and people within the video game industry, but when he makes a statement that contradicts known facts, he should be able to explain why his statements make sense and why they should be taken credibly, when the evidence and facts show otherwise.

    I think the one thing his statement showed though, is that Michael Pachter is not irrelevant to the video game industry and especially to the video game “journalism” side of things. I think his statement was not only incorrect though, but I also haven’t seen much in his response emails that makes me think he believes he was wrong and the only clarification he has given ignored Treyarch’s support of the Wii this generation.
     I did ask Mr. Pachter if perhaps he had skipped his daily cup of Yuban coffee that day and think perhaps he answered it decaffeinated, but I haven’t received a response to that question yet.


Questions
     Do you think Michael Pachter is well informed about the video game industry, and that his original comment and his response about it to me made sense based on what we know of the Wii U’s controllers?
     Or, do you think Michael Pachter should never speak another word about the video game industry again, and a thousand of Cupid’s arrows would not change the way you feel about him?
     If you could ask Michael Pachter one question in general, keeping it civil, what would that be?

>Michael Pachter On Wii Play Motion, A Year Ago

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Coffee Beans:

     If you just started following my blog in the last year, you may not have seen two posts last year that I did on Michael Pachter.  One post was titled, “Analyzing the Analyst: Michael Pachter is Wrong“, and the second post was titled, “Michael Pachter Responds!  Thoughts on the Wii Vitality Sensor“, which showed part of a response Mr. Pachter sent me in regards to the first post.
     Today I’m showing some more excerpts from the email exchanges, that will look at part of our conversation regarding Nintendo’s supply issues they were having last year with the Wii Fit Plus with Balance Board bundle, and also the supply issues with Wii Play.
     One reason for releasing these exchanges now, is that Wii Play Motion was just released this week, and I actually mentioned(predicted) it last year(with just a slightly different name, but VERY close to what it ended up as).

     So, the text below is from a portion of Mr. Pachter’s first email he sent to me, followed by part of my response to him, and his reply again.  To understand his initial response below, you may want to start at the POST that started the exchange, HERE.

     Did Michael Pachter think Nintendo would release Wii Play Motion over a year ago, and what were his reasons?  Let’s take a look!

Emails:
     Michael Pachter’s initial response on March 15, 2010:
     “I suppose it’s fair to say that I ‘ignored’ the ‘fact’ that Wii Fit Plus with Balance Board and Wii Play were in limited stock.  It’s hard for me to reconcile how Nintendo could be so unprepared for demand.  I knew that there was a tight supply(although both were in stock wherever I visited, quantities were low), but can’t understand how Nintendo could mess up the supply chain so badly on both.

     By ‘so badly’, I mean that all the balance board items (both Wii Fit and Wii Fit Plus) sold through 777,000 unites in January[2009] last year, and only 373,000 units this year.  The balance board sold 644,000 in February[2009] last year and only 40,000 this year.  In other words, Nintendo should have known that there would be 300,000 or more of demand, and had to supply only that many, somehow made it in January, then inexplicably ran out of supply in February.  I do not question your conclusion that this was likely due to a supply issue, but for me to call them out on the supply situationi would be to say that they are poor managers of the supply chain.  Without a statement from them acknowledging such, I chose to say that sales “are beginning to fade”, and concluded that demand may have played a part.  I’m OK with your reaching a different conclusion, but am reluctant to call Nintendo management out on their odd choice to let supply dry up.

     The same is true of Wii Play, with no rational explanation.  Sales in January and February last year(2009) were 415,000 and 386,000 units, or around 50% of Wii sales.  This has been relatively constant since launch.  For Nintendo to suddenly “run out” of extra controllers is mind boggling.  Yes, I know that they are out of stock in many places, but I genuinely don’t get it, and to see the attach rate drop to 25% in December, 30% in January and 15% in February really makes me wonder if this is also demand driven.  Who actually knows? Nintendo does.

     As an aside, prior to writing the note, I had a half hour meeting with Reggie, and although he said the balance board was in tight supply, he was as surprised as I was by the Wii Play number, and said he would look into it.”

     My response to Mr. Pachter on March 16, 2010, and me addressing the Wii Play stock issue:
     “My ‘analysis’ on Wii Play, is I think Nintendo is phasing Wii Play out now, and that is part of the reason the game is ‘sold-out’ at different locations.
     If you do a quick search on WalMart.com, ToysRUs.com, and Amazon.com for the term ‘Wii Remote’ you will only see the Wii Remote bundled with WM+ being sold.  BestBuy.com and Target.com are currently the only two sites I checked offering Wii Remotes sold alone.  A quick local search of those stores showed most are either ‘out-of-stock’ or have ‘limited’ quantities of just the regular Wii Remote with no WM+ attachment.

     We know that Nintendo has the Wii system at Wal-Mart now, bundled with Wii Sports Resort and the Wii MotionPlus accessory.

     I think it makes a lot of sense for Nintendo to release a new Wii Play game, but make it, ‘Wii Play Plus‘, or something along those lines, that will include the WM+ accessory and new mini/micro games that use WM+.“

     Mr. Pachter responded on March 16, 2010 saying:
     “I don’t think your guess about phasing out Wii Play is right.  They would rather sell an extra controller for $60 than for $20, so Wii Play is a great deal for them.  The Wii-mote with WM+ is $55, so maybe it’s a comparable deal, but we didn’t see a huge spike in sales there (I don’t subscribe to the accessory data, but asked Reggie about it).  Reggie had no clue that Wii Play sales fell off a cliff (I saw him at 3 p.m. Pacific, 90 minutes after the NPD data came out, and he had not seen the software numbers).  He knew all about the Wii Fit Plus with Balance Board supply issue, but had no explanation as to why it was in tight supply.  I told him I was going to write about it, and that I would be kind (meaning I would not point a finger at NOA management screwing up the channel).  If you’re right, you would think he would have been better prepared.”

Filtered Thoughts:
     This was just a portion of the email exchanges that Mr. Pachter and I had.  When I read Nintendo announced Wii Play Motion, I literally LOLed, and wondered if Mr. Pachter had forwarded my email response over to Nintendo.  While I called the game, “Wii Play Plus”, Wii Play Motion is basically the exact game-type I thought would have released last year, in 2010, to replace the original Wii Play.
     I am glad to see Nintendo release Wii Play Motion, but I really do think it’s late to the Wii MotionPlus party.  Nintendo has released at least two other games(Wii Party and Mario Sports Mix) since the Wii MotionPlus unit was released, and I thought it was absolutely ridiculous for neither of them to support WM+ controls in some way.
     As for Mr. Pachter’s responses, he took time to explain his views(though the Wii Play and controller pricing he mentioned confused me a bit in the second response), and he even provided data from the previous year(2009) to show the declining sales.  While Mr. Pachter did not think a Wii Play sequel made sense in 2010, I will send him a link to this post, and see if perhaps he thinks it makes more sense now.
     Mr. Pachter ended the second email response with, “Other than that, we pretty much agree about everything.  I suppose that the point is that either Nintendo screwed up supply, or demand is dropping off.  It could, of course, be a combination of the two.  It will be interesting to see what happens when supply for the balance board improves.”

Questions:
     Do any of you think, like I do, that Wii Play Motion releasing this year is a little late?
     If any of you have been playing Wii Play Motion, what do you think about it?  Is it a bundle you would recommend to other Wii owners looking for some Wii MotionPlus games, or should they perhaps look for the software only, at a lower price?

If any of you are interested in Wii Play Motion, you can see it on Amazon.com linked below:

Thanksgiving & 2010’s Video Game Turkey Award

Coffee Beans:
     Well, another year has passed, and today(technically yesterday) was Thanksgiving.  I hope that you all had a good Thanksgiving, and perhaps an excellent Thanksgiving meal at some point today.
     I started a pot of coffee when we woke up this morning, then fixed another one early in the evening; and I was even able to play some Call of Duty: Black Ops multi-player for a little while today.
     Mrs. CoffeewithGames and I spent the day relaxing at the house with our son, and Mrs. CwG prepared us some excellent food:  turkey, green bean casserole, baked macaroni and cheese, mashed potatoes, rolls, cherry pie, and of course canned cranberry sauce!

     If you weren’t following my blog last November, you may have missed my, “2009’s Gaming Turkey Award” post.
     The “Gaming Turkey Award“, now the “Video Game Turkey Award“, goes to either a video game company, or a person, within the video game industry; that through their actions or words, repeatedly caused uproars in the video game community; and in return, the company/person was roasted/baked/fried(like a good turkey is!) with comments from video game community.

The 2010 Video Game Turkey Award goes to…

…Michael Pachter!
     Why does Michael Pachter get the 2010 Video Game Turkey Award?
     Well, here’s a partial list of things that Michael Pachter said/did in 2010, that caused uproars in video game communities:
     January 2010 – Pachter started off 2010 with a prediction, continued from 2009, that Nintendo would introduce the Wii HD.
     May 2010 – Michael Pachter spoiled David Jaffe’s new Twisted Metal game appearance before E3, even causing David Jaffe to “lie” about the issue.
     July 2010 – Pachter said Activision should charge for Call of Duty’s online multi-player.
     November 2010 – Mr. Pachter had another comment in an interview, that set message boards and comment sections on fire on certain sites; he said, “I use the press to promote myself…“(this was a three page article/interview, and that one line is what everybody focused on)

     Those are just four quick examples of where Michael Pachter said something in 2010, and the results of what he said caused him to get baked/fried/roasted in the comments sections on video game websites.
     I even take issue with things Michael Pachter says, and wrote a post about it titled, “Analyzing the Analyst: Michael Pachter is Wrong“, earlier this year.

Questions:
     First, did any of you play some games on Thanksgiving this year?  Second, do you agree with my 2010 Video Game Turkey Award?  If so, what things did Mr. Pachter say that caused you to bake/fry/roast him with a comment somewhere?  If you don’t agree, who would you give the 2010 Video Game Turkey Award to?

Analyzing the Wii Manufacturing Costs

Analysts like Michael Pachter and others are now more or less singing a chorus that the Wii needs or would benefit from a price drop. While they can analyze that all they want, I just find it interesting how much it may actually be costing Nintendo to manufacture the Wii console.

In December 2006, Engadget.com had an article* that discussed how much the Wii cost to manufacture back then. The article says at one point, “…it seems that Nintendo’s brainchild is only costing $158.30 to manufacture, before you consider the Wiimotes…”.

On the chart they were looking at, there was also a “wholesale price” of $195.99 and their article stated, “ which could be a more realistic figure of how much Nintendo is shelling out when taking external costs (like Reggie flying all over the world) into the equation.”

Fast-forward to April 2009, analyst(oh how we love them), Koya Tabata, is basically quoted that, “manufacturing costs are down a full 45%”, according to a second Engadget article*.

Assuming the Wii console bundle was originally costing Nintendo, $195.99, for everything in the box(minus Wii Sports, as I don’t know if that was included in the wholesale price), and now the manufacturing cost has been reduced by 45%, here’s how much it may be costing to manufacture the Wii console with one Wii remote and nun chuck included:

$195.99 x 45% = $88.1955

$195.99 – $88.20 = $107.79

From the original manufacturing price estimate of $195.99, to the new estimate in manufacturing costs reduction being 45%, I would say Nintendo can manufacture and distribute the Wii, for less than $120. If correct, this would mean a Wii retailing at a MSRP of $149.99 or even $129.99 is possible, but not probable, in the very near future.

How much does it cost Nintendo to manufacture a Wii, including everything in the box, in 2009?

Based on the analyst’s assumption manufacturing costs are down 45% for the Wii, the amount of $107.79 is what it should be costing Nintendo to manufacture a Wii, including everything in the box, currently in 2009.

How much does it cost Nintendo to manufacture JUST the Wii system itself?

$158.30 x 45% = 71.235

$158.30 – 71.24 = $87.06

$87.06 is the amount it should be costing Nintendo to manufacture just the Wii system itself, if the analyst Koya Tabata is correct that manufacturing costs are down 45%.

That may seem like a low cost to manufacture the Wii, but we must remember, the Wii is simply two GameCubes duct taped together*…

Do you think Nintendo is charging too much for the Wii based on these numbers? Or do you think when looking at numbers like these, that an analyst like Michael Pachter may be right in assuming that Nintendo will announce a Wii Plus HD next year and sell it alongside the current Wii?

*http://www.engadget.com/2006/12/15/wii-manufacturing-costs-ring-up-to-just-158/

*http://www.engadget.com/2009/04/07/analyst-suspects-wii-manufacturing-costs-are-down-45/

*http://www.gonintendo.com/viewstory.php?id=14251

Analyzing the Wii Manufacturing Costs in 2009

Analysts like Michael Pachter and others are now more or less singing a chorus that the Wii needs or would benefit from a price drop. While they can analyze that all they want, I just find it interesting how much it may actually be costing Nintendo to manufacture the Wii console.

In December 2006, Engadget.com had an article* that discussed how much the Wii cost to manufacture back then. The article says at one point, “…it seems that Nintendo’s brainchild is only costing $158.30 to manufacture, before you consider the Wiimotes…”.

On the chart they were looking at, there was also a “wholesale price” of $195.99 and their article stated, “ which could be a more realistic figure of how much Nintendo is shelling out when taking external costs (like Reggie flying all over the world) into the equation.”

Fast-forward to April 2009, analyst(oh how we love them), Koya Tabata, is basically quoted that, “manufacturing costs are down a full 45%”, according to a second Engadget article*.

Assuming the Wii console bundle was originally costing Nintendo, $195.99, for everything in the box(minus Wii Sports, as I don’t know if that was included in the wholesale price), and now the manufacturing cost has been reduced by 45%, here’s how much it may be costing to manufacture the Wii console with one Wii remote and nun chuck included:

$195.99 x 45% = $88.1955

$195.99 – $88.20 = $107.79

From the original manufacturing price estimate of $195.99, to the new estimate in manufacturing costs reduction being 45%, I would say Nintendo can manufacture and distribute the Wii, for less than $120. If correct, this would mean a Wii retailing at a MSRP of $149.99 or even $129.99 is possible, but not probable, in the very near future.

How much does it cost Nintendo to manufacture a Wii, including everything in the box, in 2009?

Based on the analyst’s assumption manufacturing costs are down 45% for the Wii, the amount of $107.79 is what it should be costing Nintendo to manufacture a Wii, including everything in the box, currently in 2009.

How much does it cost Nintendo to manufacture JUST the Wii system itself?

$158.30 x 45% = 71.235

$158.30 – 71.24 = $87.06

$87.06 is the amount it should be costing Nintendo to manufacture just the Wii system itself, if the analyst Koya Tabata is correct that manufacturing costs are down 45%.

That may seem like a low cost to manufacture the Wii, but we must remember, the Wii is simply two GameCubes duct taped together*…

Do you think Nintendo is charging too much for the Wii based on these numbers? Or do you think when looking at numbers like these, that an analyst like Michael Pachter may be right in assuming that Nintendo will announce a Wii Plus HD next year and sell it alongside the current Wii?

*http://www.engadget.com/2006/12/15/wii-manufacturing-costs-ring-up-to-just-158/

*http://www.engadget.com/2009/04/07/analyst-suspects-wii-manufacturing-costs-are-down-45/

*http://www.gonintendo.com/viewstory.php?id=14251