Interview With Wedbush Securities Analyst Michael Pachter About Next-Gen, the Switch, VR, and More

Industry analyst Michael Pachter of Wedbush Securities talks to us about everything from the future of the Switch and VR to current-gen consoles and when we can expect to see next gen systems.

Posted By | On 16th, Jan. 2019 Under Article, Interviews | Follow This Author @shubhankar2508


The twilight years of a console generation are always a pivotal point in our industry, but it’s probably never been as true as it is now. Because not only are we inching ever closer to the successors of the PS4 and the Xbox One, the two consoles themselves are also continuing to do surprisingly well, despite being over five years old, and looking at the lineup of their upcoming titles, there’s a lot more still to look forward to. Then there’s Nintendo, who seem to have forgone traditional generations and console life cycles entirely, and are taking the industry by storm, while other things like the budding VR scene and the prospect of cloud gaming continue to promise great things about the future. Conversations about these things and more are always pertinent, of course, but never more so than they are at this moment. 

Recently, GamingBolt conducted a lengthy interview with industry analyst Michael Pachter of Wedbush Securities, talking about all these things and much, much more. You can read our conversation below.

NOTE: This interview was conducted in December 2018.

ps4 xbox switch

"I think that next generation of Nintendo will compete with this generation of PlayStation and Xbox. They’re just behind by a generation. That seems to be their strategy, they seem very happy doing that, so I expect them to keep doing it."

The NPD figures for November for all three systems were surprisingly strong, I think all three systems sold north of a million each. Usually this late into their life cycles, consoles don’t sell this well- so why do you think both the PS4 and the Xbox One have been selling as well as they have, even five years after their launch?

Well, obviously there’s greater demand, there’s really good games, there’s some bundles. You’re getting some pretty good games thrown in, on the Switch in particular- Mario Kart was thrown in for free, which is a pretty big deal. And none of them are particularly expensive. I think the Switch is pretty expensive at $299, but the other two guys are pretty consistently priced at that or below, with giant libraries of content, so it makes sense.

And I think even Fortnite become quite a popular game has had an impact. You’ve got parents that are reaching down now and buying consoles for their nine year-old kids, and they weren’t doing that before.

Yeah, and the PS4 had a pretty good bundle with Spider-Man for Black Friday.

Exactly. And again, they can all do this with their own content, because they’re not giving away very much. I think all Sony had to spend for Spider-Man was pay royalties to Insomniac.

So do you see this continuing in 2019?

Yeah, I do. I think we’ll probably get a price cut on all of them. And Nintendo may position it as a reinvented Switch. My guess is that Nintendo will take the Switch and get rid of the “Switch” part, so it’ll be handheld only. They’ll probably just make the Joycons part of the integrated body of the tablet, and probably drop the price. Get rid of the docking station, and the external power supply- just turn the thing into a handheld that’s rechargeable with a power cord, you know, like a normal handheld, and charge $200 for it. So they do that, Sony can probably cut the price, Microsoft probably will cut the price. You’ll probably get a $199 Xbox and a $249 PlayStation, and a $199 Switch that’s handheld only, and that’ll probably be enough to drive unit demand to keep it constant year-over-year.

Yeah, that’s what’s interesting about Nintendo and their hardware revision, if they do end up doing it- do you think there’s a chance that they make a Switch that is more powerful, rather than something that’s cheaper?

Not in 2019, zero chance. Sure, there’s a chance in a few years, but not next year.

So would that be something they might consider to compete against the next-gen PlayStation and Xbox?

I think that next generation of Nintendo will compete with this generation of PlayStation and Xbox. They’re just behind by a generation. That seems to be their strategy, they seem very happy doing that, so I expect them to keep doing it.

Yeah, I think Nintendo have pretty much stopped caring about traditional console generation life cycles. 

Right.

15 Ways to Enhance Your Experience on PS4 and Xbox One

"Microsoft isn’t doing well enough with the Xbox One to put off launching the next one, and if Sony were to make the mistake of waiting till 2021, Microsoft will get an advantage- which is what happened with the Xbox 360. They got an advantage by launching first. Sony won’t let them have that advantage this time."

That was going to be my next question- when do you think the PlayStation 5 and whatever the next Xbox is will launch? Does 2020 seem likely to you?

Well, I think that Sony told you by skipping E3 in 2019, that it’s not going to be 2019. And by skipping 2019 – I mean, they didn’t give an excuse, but the fact is that they’ve pretty much announced all the games for this generation. We know about Death Stranding and Days Gone and all the games that haven’t yet come out – Death Stranding I don’t think even has a date yet – but there aren’t going to be any more current generation exclusives from Sony. So that’s why they’re not going to have a presence at E3. That tells you that they’re saving up the remaining first party titles to support their next generation launch.

Sony probably saw how successful the Switch was with Zelda: Breath of the Wild as a launch title, followed by Mario Odyssey just six months later. And I think Sony recognizes that if they really put their super popular AAA titles on their next-gen console, it’ll sell well right out of the gate. My guess is, yes, 2020.

Microsoft, I think, has always been on track for 2020, and they’ll still be at E3 obviously. But they’re a bit quieter about it- remember, they’ve got a streaming service, a subscription service, so they’ve got different things, and obviously a pretty well developed and profitable Xbox Live business. I think they’re just gonna try to kind of keep things going steady into the next generation. But yeah, I think 2020 for both systems sounds likely.

Do you think if the PS4 and the Xbox One continue to sell as well as they have been doing, if they do not lose momentum, that might make Sony or Microsoft, or maybe even both, reconsider that they can push back the launch of the PS5 and the next Xbox to 2021?

I don’t think so. I think what’ll be more interesting is what happens to the old-gen consoles. Microsoft has historically wound down production of its prior console shortly after launching its new one, and Sony has done the opposite, and kept the old one in production for a while, for as many as three years. I think Sony has a different view of the world. They think that they can still sell 20-30 million consoles in Africa, Asia, Latin America, and developing parts of Europe. So I think they’ll keep the PS4 alive at a $149 price point or something for the next few years.

Microsoft tends to think the Xbox Two, or whatever they call it, is gonna be so powerful, they’re want to sell everybody one of those, and no more Xbox Ones. So it’ll be interesting to see, but no, I don’t think they’ll be delayed to 2021. Microsoft isn’t doing well enough with the Xbox One to put off launching the next one, and if Sony were to make the mistake of waiting till 2021, Microsoft will get an advantage- which is what happened with the Xbox 360. They got an advantage by launching first. Sony won’t let them have that advantage this time.

Yeah, I guess it’s a matter of mindshare. The Xbox 360 had a huge advantage because it was on the market longer than the PS3.

At a lower price. And with people pissed about the $600 PS3. Sony got the advantage back by launching the PS4 at the same time as the Xbox One, at a lower price.

Speaking of Microsoft, there have been reports lately that they’ve been working on four separate Xbox models. That is kind of unprecedented for games hardware- like, there might be different variants of the same product at launch. Do you think that’s something that Sony might some day think of doing?

I don’t think Microsoft will have four, I don’t know where those reports are coming from. I expect a dumbed down console, like the Steam console, where it’s download only, and there’s no hard drive or disc drive. So I think a streaming device there will be a streaming device, like a $100 Xbox console that doesn’t run in 4K or 240 frames per second. And then I think there will be a more expensive $400 console that supports 4K, 240 FPS, virtual reality. I don’t know if there will be models. I don’t think you’re going to get completely different devices. 

Whether Sony does it, I think they will probably have that 4K and 240 FPS device. that’ll support PSVR. Whether they have a PlayStation Now device that is streaming only, I don’t know. Maybe there will be two each for PlayStation and Xbox, but I would be surprised if there were more than two, and I’m not sure whether Sony is committed to doing that.

Yeah, the reports I mentioned mostly revolved around the variants being discless and focusing on streaming and stuff like that. 

Yeah, because Microsoft is going to have a pretty well established business for that. I mean, Sony has PlayStation Now, but it’s only available if you own a PlayStation. And I think Microsoft, because of Play Anywhere, are further down the curve in offering games without a console. So I think it’s going to be, like I said, like a Steam box, a device that lets you stream without having to make the big investment in a console.

astro bot rescue mission

"When you say Astro Bot did well- sure, it sold a million units. But it’s not like there are 30 million people playing it. You know, it’s not Red Dead Redemption. It’s chicken and egg- you’re not going to see sales of a VR game unless you have big sales of VR headsets, and you’re not going to see big sales of VR headsets unless they’re free, or unless there’s a ton of content to support them."

That leads me to my next question- do you think there’s an infrastructure in place that’s strong enough right now for streaming and cloud gaming to be a proper, genuine alternative to the traditional way of playing games? Or do you think with xCloud, Microsoft’s more concerned with setting things up for the future?

Well the cloud works for sure for single player games. The problem with streaming is latency when you’re playing multiplayer games. If everything is being done in the cloud, and we don’t have parallel processors at the location that we’re playing, and you and I are 2,000 miles apart and we’re trying to play a multiplayer game, whatever we do has to go through the cloud to the central server, and it has to come back to us. There’s a lot of latency in that. We’re not talking about crazy latency. You know, a hundred milliseconds is a tenth of a second, and you will notice it, we’ll both see it. That’s why our local processing works. You know, you have an Xbox, and I have an Xbox, and we’re playing together, and our boxes are rendering at the same instant, and the only information that’s passed back and forth is that I pulled the trigger.

My box knows that I’m aiming at you, your box knows I’m aiming at you, because it knows where my gun was swinging before. So you can’t do multiplayer with cloud and have it be really effective, I don’t think. Fortnite is essentially multiplayer in the cloud, I guess- but you can do it with some games, but nobody really expects super, super fast twitch with zero latency. You want that in Call of Duty

So I don’t know that we’re ever gonna get that kind of streaming. That was what OnLive and Gaikai were all about. You know, Sony bought them both, but we haven’t seen anybody embracing streaming of multiplayer gaming, and I just don’t think that happens. 

But again, why do we care about streaming? Back in 2007, the answer was because storage was so expensive, and the CPUs and GPUs were really expensive, and GDDR RAM was so expensive. And what you’re going to get in the next five years is all of that stuff together costing $25 or $50. And that’s gonna be the so-called streaming device. It might have a CPU, GPU, and GDDR RAM, and flash memory. But I don’t think we need to be in the cloud if people are willing to spend $100 on hardware. And I think that $100 will end up being built into a television eventually. I mean, it’ll be built into an Apple TV, or an Amazon Echo device first. So I don’t know that we’re ever going to get to multiplayer cloud gaming, or that we’re ever going to need to. 

Yeah, but I guess there’s the advantage of being able to stream those games on any device. 

Again, to view, or to play single player, it works flawlessly. But to actually play multiplayer, it’s not flawless.

I guess Assassin’s Creed worked pretty well on Google’s stream. 

Yes. Single player- totally worked.

So something else that’s been a pretty big point of discussion for next generation is VR. VR has been doing very well lately- especially this year there was stuff like Moss and Astro Bot and Firewall. Do you think VR becomes more integrated in our consoles in the near future?

Sony probably will try. But we haven’t yet advanced to where the technology is wireless and inexpensive. So I don’t think that you’re going to have a PS5 that has VR included. I think it’ll be $400 for the PS5 and $600 for the PS5 with VR. The system itself will support VR, just like PS4 supports VR, and it’ll support VR at a higher frame rate and a higher resolution, but no, I don’t think it becomes fully integrated.

And when you say Astro Bot did well- sure, it sold a million units. But it’s not like there are 30 million people playing it. You know, it’s not Red Dead Redemption. It’s chicken and egg- you’re not going to see sales of a VR game unless you have big sales of VR headsets, and you’re not going to see big sales of VR headsets unless they’re free, or unless there’s a ton of content to support them. So we’re kind of in that never-never land where we can’t have one without the other. It’s just gonna take a while, it’s not gonna happen soon. It’s gonna be many years.

Yeah, I guess it’s kind of a Catch-22 situation. People won’t really be incetivized to make great games on VR unless they know VR is a proper, legitimate source of sales. 

Yes.

But I think games like Astro Bot – I mean Astro Bot more recently, but there have been others – they show that VR has potential. Like Microsoft has been pretty much ignoring VR. Do you think they’re going to dip their toes into VR, at least?

I think Microsoft will partner. I think they’ll support Oculus or something. I don’t think they’ll do it themselves.

Fair enough. So I’m gonna switch gears and ask you something about the Switch for a moment. I guess the question I have to first is, with how much momentum it’s gathered lately with the launches of Pokemon and Smash, do you think it hits that 20 million target that Nintendo has set for it?

No, no chance. Their President, [Shuntaro] Furukawa gave an interview recently and was asked about their targets. He said they’re very comfortable with the software target, and the hardware unit target is more challenging. So I don’t think they’re tracking to it. It looks to me like they’re tracking to somewhere between 16.5 and 18.5 million units. And 16.5 is the number if they just repeat what they did in December, January, February, and March last year. It will be higher if Smash drove some adoption. My guess is they’ll probably end up at 17.5 million. It wouldn’t shock me if they got to 18 or 18.5, but it would very much shock me if they got to 20. I’d say there’s no chance of 20.

Nintendo Switch

"I think there will be an update to the Switch that will still be handheld. I think they’ll probably stick with handheld forever. But you never know."

Speaking of software sales on Switch, we’ve been seeing very impressive numbers. I mean, Pokemon, Smash, Mario Kart, these are franchises that have always sold well. And it’s not that stuff like Zelda doesn’t sell well, but it’s been selling better than it usually does. And that’s true for other games as well, like with indie titles- so why do you think software on the Switch has been performing so strongly?

Well, partly because they have a lot of inexpensive titles. You know, games like Stardew Valley and Golf Story, the $10-15 titles. The other thing is that Nintendo honestly deserves to sell a lot of units for games like Zelda and Mario and Smash. They get 90+ review scores. I mean, they’re so good, that it’s not at all surprising that they’re getting giant attach rates. You know, Smash will probably have a 75 per cent attach rate to the instal base of Switch, which is probably 23 or 24 million right now. They will literally probably sell 18 million copies of Smash. They deserve to do that. They make an amazing game, and of course you want to buy it. 

And if you have a Switch, there really aren’t a lot of third party choices. I mean, Call of Duty and Red Dead aren’t there. So what else are you going to buy? You can buy an old Elder Scrolls, but, like how many people are playing Wolfenstein or DOOM on the Switch, or Diablo? Some, but most people are going to buy the newest thing, and the 90+ rated Nintendo titles are gonna sell well. So that’s why, because they dominate in terms of quantity and quality the software that’s available on the Switch.

On top of that, I think indies have, surprisingly enough, found a home on the Switch. Like Hollow Knight did really well, and like you said, there was Stardew Valley.

Right. And that’s mostly because at a $15 price point, it’s a low-risk proposition for the gamer. And low-risk especially because you get the reviews in, and something like Stardew Valley, people just love the game. So sure, that sells super well.

The 2019 lineup for the Switch also looks pretty good. How do you think that drives hardware sales for it in 2019? Do you think there will be growth, or will it sustain the kind of sales it’s had?

Probably not growth, and probably yes, it’ll sustain sales. I mean, who is left that doesn’t have a Switch, who’s waiting for a full-fledged Pokemon game, instead of buying one for Zelda or Mario or Smash? I mean, sure there’s somebody, but there aren’t 20 million people who’re waiting for the big Pokemon game. I think a price cut to $200 means a volume increase. I think if they do 17.5 million this year, and then they cut to $200, they could do 20 million next year pretty easily. If they don’t cut the price, I think the number drops to 15 million next year. 

And looking ahead a few years, do you think if Nintendo has the kind of long-term success they’re hoping for with the Switch, is the console-handheld hybrid thing something that they will stick with? Because historically they’ve liked to experiment with most of the new hardware that they put out.

Yeah, I think that this is not a hybrid. I know that they think this is a hybrid. This is a handheld. It may be convenient for some people to prop it up on the table and play with the Joycons or a regular controller, or slide it into the docking station and play it on the TV. But I continue to believe that the vast majority of the people who play on the Switch play it as a handheld. And I think the vast majority of new adopters are going to play it as a handheld. And the “Switch” ability to be a console that plays on your TV is a gimmick. I honestly don’t know anybody who keeps doing that. Some people who have it in the docking station will leave it there forever, I get that, but anybody that bothers to take it out and play it as a handheld just keeps it as a handheld. So I think it’s a gimmick that doesn’t have a basis, there’s no reason for it. 

Unfortunately, they named it the Switch, so I’m curious what they’re going to name the handheld-only version. Because it won’t be the Switch. They’ll probably call it the Switch Lite, but… it’s sort of like taking the DS, and taking away one of the screens. Would they still call it the DS? Probably, but it wouldn’t be.

Yeah, basically like what they did with the 2DS.

Right, yeah. It wasn’t the 3DS, it was the 2DS.

But from Nintendo’s perspective, what they’ve done with the Switch is, they’ve consolidated their development efforts on a single system, rather than dividing it between handheld and console. 

Yeah, but again, I don’t think what they did was innovative at all. They think it’s innovative, and they’re really proud of themselves, but it really wasn’t. It’s really a handheld. 

Yeah, but do you think having a consolidated focus is something they will continue to do, or do you see them making another dedicated home console in the future, and dividing their focus between handheld and console again?

No, I think there will be an update to the Switch that will still be handheld. I think they’ll probably stick with handheld forever. But you never know.

The Last of Us Part 2

"I think Sony are fools to bypass E3 2019. And they’ll be back."

And as an extension to that question, do you think either Sony or Microsoft try to do something like what Nintendo has done with the Switch?

No.

I think it was [PlayStation chief] John Kodera who recently said that they’re aware of the potential in the handheld market. But do you think the Vita was Sony’s last handheld effort?

Yes. I think they’re done. I think that the Vita proved that they suck at it.

Alright, I wanted to go back to something we talked about earlier, about Sony not being at E3. My question to you isn’t about why they’re not at E3- I assume because they’re gearing up for something big after E3. My question to you is, do you think this is a one-off situation for them, or do you think Sony has basically just given up on E3?

Oh, no, I think it’s a one-off. I think they made a bad decision. I think they somehow internally determined that the money’s not well spent- and they’re wrong. I don’t know what they spend on E3, but even if it’s $15 million, they get $15 million of publicity out of it. So I think they’re fools to bypass the show. And they’ll be back.

Yeah, I think their 2018 show might have had some influence on their decision, because it didn’t go very well, at least in terms of reception.

Well, they had that stupid walk-through that nobody understood, and it just wasn’t fun. And I think they probably spent a ton on that. And they’re very much guys who don’t acknowledge that they did anything wrong, so they just take their ball and go home, because it didn’t work well. 

But why do you think there was no PSX this year, then?

I don’t know… again- no games. So I think it’s all related to gearing up for the next generation console. They’ll probably announce the next gen console in Spring of 2020, and have their own event- maybe they’ll call it PSX. Maybe there’s a PSX in December of 2019, and they announce their next-gen console then. 

Alright, and I had another question about Microsoft, and their recent string of first party studio acquisitions. Phil Spencer has said that Microsoft wants to make sure that the studios retain their creative independence, but do you think in spite of that, Microsoft will try to get them to develop and cultivate new franchises that has as much cache as something like Halo or Gears? Or do you think they’re just going to let them do their own thing?

I think they would like to, but the studios that they’ve acquired, perhaps with the exception of Ninja Theory with Hellblade, haven’t made big games. Obsidian’s made big games for hire, so Fallout: New Vegas, and I frankly think The Outer Worlds looks great, so they might actually have a big hit their. But what’s The Outer Worlds going to sell, 5 or 6 million units, on multiple consoles? Which would be great! And that’s probably what it’ll do. But that’s not a Halo-type. I mean, Halo is 8-10 million units on one console. So 5-6 on multiplatform is about a third as big as Halo.

So no, I don’t think that any of the new studios does that. Hellblade- what did Hellblade do? There’s no way Hellblade was more than 5 or 6 million. So I don’t think so. I don’t think that any of the studios are accomplished enough to put out Bungie-type quantity titles.

I mean, any of them could be great. There’s a lot of studios that come out of nowhere- look at Rocksteady. So it’s possible. 

Yeah, speaking of The Outer Worlds, actually, I had a question about that. I mean, I’m sure this didn’t have any bearing on when they revealed it, but the timing for its reveal certainly seems fortunate for it, because with how Mass Effect did last year, and with how Fallout has done this year, The Outer Worlds looks like the sort of game that a lot of people are very hungry for right now. So do you think that’s something that could affect its sales or its reception in any significant way?

Well, it very much looks like Fallout. They trotted out [Leonard] Boyarski, who was the first Fallout creator on stage first, and then they showed a game that looks an awful lot like Fallout, so yeah! And I actually really like the Obsidian team, and I think they really do make good games, so it really might be great. Again, it’s a new IP, it’s gonna be hard to see it do Fallout numbers, like 15 million.

Yeah, definitely, it’s still relatively a niche title.

Yeah, again, if Obsidian puts out a game that gets a 92, then sure, it could do that many.

Starfield

"I don’t think there’s any risk to any future single player games [from Bethesda]. It just tells you that they weren’t ready to make a multiplayer-only game. They probably have to go back and figure out what they did wrong, and how to get it right."

And speaking of Fallout, Bethesda pretty much said very clearly before the launch of 76 that this is something that is completely new for them, and there’s going to be unforeseen issues. So that covers a lot of what happened with Fallout 76, and its servers, and how it played online, and how its PvP was received, but there was still a lot of stuff with the game, and stuff surrounding the game that had a lot of really weird issues. Like the duffel bag thing, and Bethesda accidentally leaking private information of a lot of the players- how does something like that happen? I mean, Bethesda is not a small, inexperienced company, they have put out a lot of huge games.

Other than The Elder Scrolls Online, they’ve never really done an ambitious online game, and Elder Scrolls Online was never that big. I just don’t think they’re very good at multiplayer, I think that’s what it comes down to. They’re a world class single player game developer, and they try to pivot, and do multiplayer, and it’s hard. 

So do you think what’s been going with Fallout 76 affects Starfield or The Elder Scrolls 6 in any way, especially when it comes to the issue of something like bugs, which has been a problem in Bethesda’s games for a pretty long time.

I don’t think there’s any risk to any future single player games. It just tells you that they weren’t ready to make a multiplayer-only game. They probably have to go back and figure out what they did wrong, and how to get it right. I have to say, it’s the first game in the Fallout series I haven’t played, and I don’t have any interest in playing it. I mean, it was so poorly reviewed that I’m just not gonna try it, and I’ve played all their games for hundreds of hours. 

Yeah, and I think one of the biggest issues people had with the game takes us back to the topic of bugs. In the past, people have been able to overlook bugs in Bethesda’s games because they have been so good, like Skyrim, or Fallout 3, or even Morrowind, which had a lot of bugs. But Fallout 76 was missing a lot of the things that made those games so good, so people weren’t as willing to overlook those bugs. So if their future single player games continue to have technical issues, do you think people will be able to overlook them again because of their strengths as single player games, or have they been burnt now with Fallout 76, and something like that will just burn them more?

You know, it’s sort of like when you have a movie franchise, and there’s a bad instalment. So I remember when, I think it was Mission Impossible 3, I might be wrong, it might have been 2, but one of those was bad, and there was a lot of speculation that that was the end of the franchise. The next one was great, and now they’re up to 6, and they’re fine. So you’re allowed to screw up once, you’re not allowed to screw up twice. So people will buy the next Fallout as long as it’s good, but if the next one is bad, then I think they have a problem. 

Yeah, obviously I think Bethesda has a lot of strengths as a single player developer, and hopefully people see this as a blip rather than as something that will define the future.

Yeah, I expect that people will look at it as a blip, but you never know. 

Something else I wanted to ask about is kind of related to Fallout 76. Service models have proven themselves to be very successful, with games like Rainbow Six: Siege, and Fortnite, and Overwatch, and that’s something that we’re seeing bleed into single player games as well. Like the DLC for Assassin’s Creed Odyssey is being doled out in a service-like manner, it’s episodic. I think by this point it’s a little pointless to assume that single player games will die out because of service model games, but do you think they’ll change because of this? Do you think service models are something we’ll see more of in single player games?

I think that every publisher is keenly interesting in recurring revenue, and the higher they can drive recurring revenue, the more profitable they are overall. So I think that building a game and having it continue for multiple years, like Grand Theft Auto Online, that’s really a big deal. I mean, Grand Theft Auto Online has generated roughly $400 million a year the last couple of years. And because it was so popular, it kept catalog sales up, and they were selling 10 million units of GTA, or 15 million. Maybe only at $20, but still, a lot of units. So GTA just kept throwing off $600-$700 million a year, for a company that only does $2 billion. So it’s a really big deal. And that’s what Ubisoft is trying to do, and I think that’s what Activision already did with Overwatch, you know, continuing to generate revenue.

That model is across Call of Duty standalone and Destiny with expansion packs, and Overwatch with ongoing cosmetics, and Hearthstone, which is all microtransactions. Everybody is trying to figure out where the balance is, to keep consumers engaged and spending money, and the best games in the world where the consumer keeps spending money, and doesn’t feel like they’re getting ripped off. So that’s what everybody is trying to do. 

You mentioned microtransactions, which I wanted to talk about. Recently, Ubisoft confirmed that Trials: Rising would have microtransactions, which would be cosmetic, but would be in form of loot boxes, and a lot of people weren’t very happy with that. It seems like people don’t have an issue with cosmetic microtransactions too much, but when it comes in the form of loot boxes, they don’t like that.

Well, the people who don’t like it are the guys who buy the game. So if you purchase a game, of course you think that for my $60, I should get the whole game, and I shouldn’t have to keep spending money. But, you know, you’ve never heard anybody complain about FIFA, and FIFA Ultimate Team’s card packs are loot boxes. You don’t know what you’re getting in your card pack. And nobody complains about Hearthstone, which is free-to-play, or Clash Royale, which is free-to-play, and all you buy is card packs. 

So the gamers that are complaining about loot boxes in any other game are just whiny little babies who think they’re entitled and think they deserve everything for free. If you didn’t pay for the game, shut up. If you did pay for the game, you have a right to complain about loot boxes. It really is that simple. 

star wars battlefront 2

"The loot box complaint got loud when EA decided to lock up Darth Vader in Star Wars. That was the dumb part. It’s like a balance- if you give the players enough for their $60, then they don’t mind that extra stuff. Like FIFA, the game itself, is awesome. You don’t need to buy anything to play the game and have a great time."

So why do you think there’s that inconsistency?

I think it’s primarily because they feel like they’re getting value. And really, the loot box complaint got loud when EA decided to lock up Darth Vader in Star Wars. That was the dumb part. It’s like a balance- if you give the players enough for their $60, then they don’t mind that extra stuff. Like FIFA, the game itself, is awesome. You don’t need to buy anything to play the game and have a great time. But if you want to build your Ultimate Team, you understand that you gotta get the players to do that. So it totally makes sense, the way that they’ve structured it, and getting that balance right is hard. The companies that do it thrive, and the companies that blow it have a lot of whiny little entitled babies complain about them. 

Alright, I had just one more question for you. You mentioned GTA Online, which reminds me of Red Dead Redemption 2, which has been selling very well. And I don’t think it’ll have the sort of long-term sales that GTA 5 has had, but how long do you think Red Dead sustains its sales?

Well, Red Dead is a different game. Obviously, it’s a super highly rated game, but that’s like saying, “will a western movie do as well as Avatar?” I mean, you could make the best western movie ever, but trying to compare it to the best-selling movie ever is a tough one. 

I think that Red Dead probably had 25 per cent of the appeal of GTA for sure, and maybe has 35 to 40 per cent. So GTA 5 sold 105 million units, maybe Red Dead gets to 35-40 million. But 50 per cent? I’d say probably not. GTA is modern, and the missions are modern, and the vehicles are modern, and the weapons are modern, and you can do stuff like, “let’s build a meth lab, and take the profits from that and buy a helicopter, and use that to smuggle drugs across the border”. With Red Dead, what’re you gonna do, get on your horses and go knock off a saloon? I mean, that’s just silly. So no, it’s not gonna have as big of an appeal, and Red Dead Online, same thing. It’s gonna be collaborative, sometimes competitive, but you know, we have to go and harvest a bunch of beaver pelts, and start our coat business or whatever. But that’s not as exciting as running a meth lab, I think. 

So I think that 30-40 per cent as big as GTA is probably right, and same with the online version. 

Yeah, GTA has a lot more mass appeal than Red Dead does, it’s a lot more accessible in that way.

And again, mostly because it’s modern. There’s nothing wrong with the western genre, it just doesn’t have the universal appeal that a modern crime setting does.

Alright, I think that’s all the questions I had. Thank you so much for taking the time to talk to us again!

Alright, have a wonderful new year!


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