Pachter: Nintendo "Still In Denial" About Failure of Wii U

Each February, Game Informer travels to Las Vegas for the D.I.C.E. Summit, where industry leaders gather to discuss the trends cresting and surfacing in the interactive entertainment space. This year we sat down with Wedbush Securities managing director and former Pach Attack star Michael Pachter to discuss a few of the big issues facing publishers and platform holders in 2015. Read on to get his takes on broken games, the console race, and Nintendo's murky future.

The past two years we've seen an extraordinary amount of games ship broken. These aren't just middling titles, either. We're talking heavyweights like Battlefield, Halo, and NBA 2K. Are shareholders getting voicing concerns about the number of broken games that publishers are shipping? 
No. I think you can chalk it up to growing pains. The real problem is I don't think the console manufacturers are being good partners with the publishers. They weren't fully thinking about building out the server infrastructure and getting everybody together a year before launch and making sure that developers were doing everything right. I almost think online multiplayer is an afterthought, like Microsoft had this giant server farm for Xbox Live and just assumed that when they release the Xbox One that everything would work and it just doesn't. Everything is a different architecture. It's all different.

I'm sure you hear gamers whine and ask "How come it's all broken?" But everybody knows how ambitious this stuff is. Like Assassin's Creed Unity – four-player co-op where you're not all going in the same direction. In Left 4 Dead it doesn't make sense for four guys to go four different places because you would all die, so you pretty much had a consistent point of view. Unity is not that way. The four of you can go off in four different rooms and it gets really complicated. I think the consoles allowed the publishers to get really creative, but their creativity exceeded their technological capabilities. 

The Xbox One had a lot of problems coming out of the gate, but by the holidays those issues were largely behind Microsoft. Do you feel like the company is in a position to make progress against Sony, the current leader?
The truth is that Kinect was a really great concept that didn't address a real world problem. Kinect allowed players to voice control and motion control things, but most of us didn't need that. I don't need to say "Xbox on." I don't mind pressing a button on my controller – that's all you have to do. It's not that hard. It's actually harder to say "Xbox on."

The reason we have game controllers is because someone came up with the concept that d-pads and analog sticks are an efficient way to control things on screen. It's intuitive, just like a steering wheel is intuitive for a car and the joystick is intuitive in a helicopter. It just makes sense and we get it; we don't need to go waving our hands around. Microsoft saw the success of the Wii and thought "we're going to take that to the next level with voice and motion sensing," and we didn't need that.

Don Mattrick embraced that idea. He made sure the Xbox One was centered around Kinect, but gamers were like, "That was $150 I wish I had back when I bought it last time, so I definitely don't want to buy it again." That killed them. The messaging and DRM absolutely left a bad taste in people's mouths, but we all should have been over that a week after E3. When Microsoft said don't worry about it you knew that they meant it. 

Being a console owner is like belonging to a church or a political party – that's who you are. You are an Xbot or you are a PlayStation fanboy. People weren't buying the Xbox One and clearly a bunch of people migrated to PS4 from Xbox 360 because they didn't want Kinect. So I think unbundling Kinect was the right idea. I'm not sure why Xbox didn't start outselling PlayStation right after they removed Kinect, because they didn't until they cut the price to $349 and started giving away free games.

But it now shows you how serious Microsoft is about winning. I'm curious to see if Sony is as serious about winning because when you speak to the Microsoft guys and you say, "Do you really care if Sony sells more consoles than you, but you sell 150 million consoles of Xbox? Microsoft would – and I'm paraphrasing – say, "F***in' A yes I care." If you say the same thing to Sony, they would say, "If we sell 150 million consoles who cares what Microsoft does? So I think the attitude at Sony is to perform well and make a lot of money, and I think the attitude at Microsoft is to win. People have different opinions about what's the better way to be. I think investors would rather see Microsoft make money, but maybe there is some long-term strategic benefit from being first place. I don't know.

Do you think Microsoft needs to keep the price cut in place?
First they came in and said, "From Thanksgiving through January 3, we are cutting the price temporarily to $349." On January 16, they said, "Effective tomorrow we have special promotional pricing of $349." It didn't say temporary, and it didn't put a date of when it ends, which is really curious. It's not officially a price cut – it's promotional pricing. This allows the retailer to advertise regularly $399 and now it's $349, but I have a feeling it will never go back up.

I think the interesting thing now will be does Sony match? Because I think Sony was sincere in saying that they don't care if Microsoft moves a lot of consoles, but the truth is they care this week. They don't want to be in second. They don't mind if they end up in second, but they want to be in first as often as they can, so it's good for gamers. If the price of the PS4 comes down to $349, everybody wins. At $349, you're getting a lot.

The thing I think is more a deciding factor that almost nobody talks about is how competitive PlayStation Plus has gotten. The online experience is very good – they used to be kind of wonky on PlayStation Network – and you get a lot of free content. You get free stuff on Xbox Live, too. If you actually take advantage of the free stuff you get, what a bargain that is. 

So then they do PlayStation Now, and obviously there isn't total overlap, but I can get half those games for free on PS Plus. Why do I need to pay another subscription? In a way, they kind of shot themselves because they've done such a great job giving away free stuff on PlayStation Plus. I do get PlayStation Now if you don't have a console, however. 

Do you think that giving away so many games as a part of PS Plus is going to create a culture where the consumer opts not to buy new indie games because they think they may get it for free down the road?
It will among the 25 million PS Plus members and 25 million Xbox Live Gold members, but not for the other 100 million people. There are a lot of people who buy consoles still who don't play multiplayer. Guys who play racing games and single-player RPGs. 

Let's talk Nintendo. Obviously the third-party ship is vacant for Wii U, but Nintendo still continues to make strong first-party games. Do you think that is enough to sustain the platform or do they need to make a drastic move and announce another console in the near future?
I think that they are not a particularly introspective bunch. I think that they are still in denial about the Wii U failure. You keep seeing this stat so we're up 82 percent – yeah, 40,000 units went to 70,000 units. Who cares? You're still trailing the other guys by a mile. 

They need a new console that's competitive with Xbox One and PlayStation 4. If Xbox can sell at $349 Nintendo could make it and sell for $249. They won't because they still live in that old console world where they think they need to make a profit on the hardware. That means if they make a competitive console it would be more expensive. 

The problem is I think they did a bad job with third parties with the Wii and they've done an abysmal job with third parties with the Wii U, so I don't think third parties would come back for a new console. If they come out with a new console and it is essentially identical programming language with the Xbox so the cost to port a game is zero, I'm still skeptical that third parties would support it. They possibly would, but only if the cost was so low. And that's the problem. Ubisoft got really burned on the Wii U making dedicated titles like ZombiU. Activision stopped making Call of Duty for the Wii U, and EA hasn't ever made a game for the Wii U. I don't think they come back.

Nintendo had brand messaging problems with the Wii U – some people thought it was an add-on for their Wii. Now Nintendo is launching a new handheld called the New 3DS that has games exclusive to it, which could create confusion with consumers looking to buy a new game for their regular 3DS. Why can't they figure this out?
Like I said, they lack introspection. I think that starts with leadership. Iwata makes a lot of bad decisions. I think he surrounds himself with people who allow him to make these bad decisions. It starts at the top. I think he is not a good leader. 

I think the Wii was a dumb name and it's still a dumb name. I remember when the North American guys called me. It was April 1st and they said, "Before we tell you why we're calling you this is not an April Fool's joke – we promise. We've decided on the official name of the Revolution. It's the Wii." I said you have to be kidding me. 

Wii 2 would have been a good name. [With] Wii U, people thought they were buying the GamePad for their Wii. Who didn't do their homework? 

What's the dark-horse game you could see becoming a blockbuster this year?
Critically, there are plenty. Commercially, I have to confess I have no idea what moves people. I don't get why people buy games. I don't get why they buy Call of Duty every year. To me, it's just not that different. I don't get why Titanfall didn't sell better because to me that was a super novel, fun shooter game. It sold great, but...I don't get why Smash Bros. sells well.  

The game I think looks the most interesting and novel in a conventional way is The Division. I think that game looks really fun and really cool. I think it looks like a really great game. That's the one if I would have to say it's going to surprise people with the upside. But again, I thought Grand Theft Auto III was going to sell 300,000 units.