Michael Pachter sounds off on the biggest issues and trends in the industry at the moment.
Michael Pachter may be controversial, but he has been correct about the industry, and the larger trends within it, more often than his detractors would like to admit. That’s why his insight is often considered so valuable. And that is why, whenever we get the chance to talk to him and get his projections of the future, we take it. As an analyst at Wedbush Securities, it is Pachter’s job to be able to know the larger trends in the industry, and their implications- and he does that job very well.
This particular chat that we had with Pachter was scintillating and an intellectually stimulating look at the possible directions this industry is headed in. From the Xbox Scorpio and PS4 Pro to Nintendo’s Switch, from VR to some of the biggest games in the industry, to the future of AAA gaming itself, we touched upon itself.
Note: This interview was conducted before the Nintendo Switch was announced.
It’s an interesting time in the industry right now. One of the big things happening these days is VR, we’ve been told it’s the next big thing since forever now. And the device that has the most potential to be big, a mass market VR proposition, is the PlayStation VR, which just launched. Reviews in general seem to indicate it has potential- but potential aside, do you think Sony will actually support this device in the long run? They have a history of launching projects, and then not supporting them, like what happened with the PS Move and the PS Vita.
Yeah, you know, I think that Move and Vita came in at kind of a late part of their categories’ lifecycles. Move came kind of after Kinect, and neither of them quite got off the ground. And the Vita, and PSP, came after the Nintendo handhelds, Gameboy, and DS, which had already become dominant. Especially Vita came on the downslope of handheld gaming. So I think that Sony was late with the Vita, and Move wasn’t really supported well with software. So I think that they chased a market that wasn’t growing in either case. It was mature, it was dominated by another player, in the case of the Move, by Kinect, and with Vita, by Nintendo with DS. And I think that they abandoned them because they understood the market wasn’t there.
I’m not sure that’s the case with VR. There isn’t a clear market leader- absolutely, there are other products that got to the market first, like Oculus and Vive, but you know, unlike a $129 Nintendo DS, with over a hundred million sold, by the time Sony launched the Vita, you’ve got an $800 HTC Vive, with an install base of probably less than half a million. So really not a big first mover advantage. And Sony are coming in at a lower price they’re $500 for a comparable setup. And the big advantage is that both Oculus and Vive require a relatively sophisticated PC setup. And while I think there may be as many as 5 million PCs powerful enough to support PC VR out there, I’m not sure how many of those 5 million owners are interested in VR, or in spending another $800.
"I doubt that you will get a standalone God of War or Uncharted or The Last of Us PlayStation VR game, I think you’ll get something akin to what EA did with Star Wars, where you might get a Last of Us experience."
So the entry level for the average fan who reads about VR is probably close to $2000, and that’s pretty pricey. Where Sony is approaching 50 million PS4 units sold, and every single one of those people can buy PSVR, and it operates immediately. So it’s a huge advantage, they’re not behind the curve competitively, they’re lower priced, and so the only open question is whether there will ever be enough content to justify the purchase of a VR headset. And I think that this is a chicken and egg outcome- if there are enough headsets out there, then it will be worthwhile for developers to come up with content. But obviously the more content there is, the more attractive a VR headset is. So Sony will have to come up with their own stuff, they will have to provide incentives to quality developers to come up with VR content, all of which they have. But you know, take a look at major publishers, EA, Activision, Take 2, and Ubisoft- I’m only really aware of Star Wars VR being out there. I think Ubisoft announced a project, but I really haven’t seen much from Activision or Take 2, and I don’t know that they have any plans until it becomes a big deal. So, you know, chicken and egg- they’ll give it time until it’s actually great, in which case there’ll be a lot of content for it. And if it’s not, then it’ll turn into Kinect and people will wonder why they spent $400-$500 on something that they don’t use.
So, on Sony’s end, on their part, do you think Sony might try to push PlayStation VR by putting, say, a top tier Naughty Dog or God of War game on it?
Good question- I doubt that you will get a standalone God of War or Uncharted or The Last of Us PlayStation VR game, I think you’ll get something akin to what EA did with Star Wars, where you might get a Last of Us experience. So maybe there’ll be something where you have to fight out of a certain level, you know, they add certain things. It’ll be interesting to see if they can integrate that into the core game, but it would really surprise me if they build up a ground up virtual reality game.
Interestingly enough, the thing is that you can wear a VR headset, and use its display as just a screen. So you can technically play a conventional PS4 game on a VR headset, and it’s just a very good big screen you’re playing on. So I think you can add a VR experience as part of games, and yes, I do think they’ll do that- the experiment they had with that a few years ago was when they added 3D to some of their games, and you had to toggle it on or off, and have a 3DTV to play it. But it wasn’t really all that compelling, and you heard nothing about it beyond the novelty, and when it launched. So again, it’s something I think they can do, but I don’t know if it’s something that they will. Not right away, but probably in the next 2-3 years.
Alright. And I also wanted to discuss the commercial potential of the PSVR, and the PS4 Pro as well. Sony say that they think that both of these could extend the lifespan of the PS4. Do you think this might actually happen, do you think they could collectively maybe push the PS4 over 100 million consoles sold?
Well, two things are going on with the PS4 Pro. One is that it’s got a much, much better GPU, I think they said it’s twice as powerful as the GPU in the standard PS4. And that I think is going to allow for impressive virtual reality experience. I haven’t seen the specs on PSVR with PS4 Pro, but the specs on Oculus are 2.6 million pixels per eye, and on PlayStation VR with regular PS4 are just 900,000 pixels- so theoretically, the PS4 Pro could take you up to sort of Oculus level. I don’t know if it’d be 2.6 million, or 1.8, or something in between, but theoretically it would be much, much closer. So I think that the PS4 Pro is going to have a very high PSVR attach rate.
But I think the other takeaway on PS4 Pro is, Sony is trying to manage transitions, and so let’s rename the PS4 Pro the PS4.5, for this discussion. And let’s just know that the PS4.5 is fully backwards compatible with PS4, so any game made for PS4 works on PS4.5. Let’s imagine that Sony carries that concept forward to PS5, so any game released for PS4.5, meaning any game launched after the Pro’s launch, also works on the PS5. And then let’s roll forward another few years, so PS5.5 is backwards compatible with PS5.
I think the plan here is to avoid the conundrum that every console manufacturer ever has had, where whenever they launch a new console, they immediately make the prior console, and all its software, obsolete. The PS4 Pro is meant to be a mid-cycle upgrade, keeps all software for the PS4 relevant, and when PS5 comes out, it will ensure that all PS4 Pro software is still relevant. So you really don’t wipe out the value of the prior console or its library, but continue to allow the gamer to have value for his software that’s at least 3-4 years old. And that keeps value much steadier. So I think the answer to your question is, sure, they’ll go way over 100 million. I think they could go as high as 120-140 million pretty easily. And what I am most encouraged about is that the PS4 Slim is priced at $249- we’re seeing a faster degradation of the price curve for the PS4 than we saw for the PS3. That’s pretty impressive.
And it’s the same with Xbox- you know, the Xbox 360, I don’t think it ever got below $300. Certainly you had sales, but I think the official price was $299 back when the Xbox One launched. So seeing the two major consoles at $249, barely three years after launch, is a really good sign. And if we can get a PS4 for $199, or $149, yes, they’re going to sell a ton of them.
Okay, so you think the quicker turnaround for cheaper consoles will help with higher sales.
Yeah, cheap is good. I mean, let’s be real, most people on the planet think that $400 is a lot of money. And most people on the planet appreciate that $300 is less than $400, and $200 is even less. Cheaper is better. And we know that McDonalds sells more hamburgers than restaurants sell stakes, because hamburgers cost a dollar, and stakes cost $20. So, you can feed yourself for a dollar instead of $20- it just makes sense. So if you dropped the price of a console to $200 – if Sony were able to – I think they could go as high as 175 million.
"The PS4 Pro is meant to be a mid-cycle upgrade, keeps all software for the PS4 relevant, and when PS5 comes out, it will ensure that all PS4 Pro software is still relevant."
Alright. I also wanted to talk a bit about games now, and one of the ones that was just announced a few hours ago was Red Dead Redemption 2. So far, of course, it seems that social media has gone crazy over it, with hundreds of thousands of retweets, and likes, and shares of posts. And in all possibility, it looks like it might even be bigger than GTA 5-
That’s a stretch! But maybe.
So you don’t think it’d sell more than GTA5? 65 million and counting, I believe.
Well, I can tell you that I have pretty consistently been wrong on the Grand Theft Auto series. When GTA3 came out, I modeled 325,000 units, and I missed by only 25 million. And when GTA5 came out, I thought it would sell 35 million, so I only missed by 31 million. So, you know, who knows? It’s entirely possible that Red Dead Redemption 2 is like the movie Titanic, you know, just one of those things you don’t expect to be phenomenal, but then end up being a phenomenon.
I will say that you can’t dismiss the talent at Rockstar. They are so good. Their games are so interesting, so well crafted, so fun to play, and so beautiful, that of course there’s going to be a huge audience for this. But I think that, when you compare the gameplay and story and fan interest in a series like Red Dead, I think it’s more comparable to something like Fallout, where it’s super interesting and well done and well-crafted game, but not as big as Call of Duty, for example. There’s something about GTA, where you get to be a bad boy, get to go on raids with gangs, and there’s all sorts of cool missions, and you really can’t do this as well in the older western setting. Because the weapons don’t allow it, the transportation doesn’t allow it- no helicopters or boats or cars, you have horses. So I think the appeal is less than GTA, but again, I was off by literally half for GTA sales, so, you know, I think Red Dead does between 15-20 million, and I’d be surprised if it did 40 million, but I’m sure a lot of people are thinking that. I mean, GTA5 did 66 million- and this game, it’s just highly unlikely that it’s the best-selling game of all time.
This game doesn’t seem to be launching on PC. It’s only announced for PS4 and Xbox One right now- and I know that the original Red Dead Redemption was never on PC, but GTA5 was, and GTA Online has been really successful on PC. So why would Rockstar not be bringing Red Dead Redemption 2 on PC right now?
The key words here are right now. I remember the announcement for GTA5 was Xbox 360 and PS3 only, when it was first announced in November 2011, I think. And then they waited until June of 2014, so literally two and a half years after the first announcement, and announced that it would be on Xbox One and PS4. And then- I forget the month, but I think it was several months later, they announced it for PC, which came out in 2015. So they have a history of bleeding out information about their games, and credit to them, it works. It keeps fans interested in their games. This announcement, for instance, coming the week Battlefield is launching, and then the trailer coming the week before Titanfall 2 launches… I think they’ll have another trailer around when Call of Duty launches, because they want to dominate the headlines. They are brilliant marketers, and they’re right. Here we are, you know talking about Red Dead Redemption 2, which is coming out in a year, and not talking about all the games that are coming out this week. So, they’re smart. They’ve diverted the conversation to them. That’s almost Trump like- stay in front of the news cycle, and it works. I think they’re the best at making and marketing their games.
Yeah, definitely. It’s especially interesting because they don’t participate at conventions, or go to trade shows. They just have their own hype cycles, and they are always, always successful. So I agree with you on that.
Well, it’s just like Kim Kardashian- she doesn’t have to. People just want to see her selfies, and they don’t care that she’s not at the Oscars or the Emmys, they care about her selfies, and when she puts them out. So, you know, people who are great at self-promotion deserve to be great at it, because they work at it, they understand their audience, and for them, it works in a big way.
Okay. And do you think that Red Dead Redemption 2 will have the kind of impact on the industry that Rockstar’s games usually do, sales aside?
You know, I think that there are- Rockstar has a mixed bag of results. So they’ve had games that are not as well received critically, but certainly, I can’t remember a game ever from Rockstar getting a Metascore less than 83 or so. And obviously, games like GTA5 have 97, which probably makes them the highest rated games, maybe Ocarina of Time is higher. But they’re consistently great. Every once and a while, they miss the market, like I think they did with Max Payne 3. Even games like Bully that didn’t have that wide of an appeal, but people loved it. It might not have been for everybody, but those who bought it loved it. And games like Manhunt, maybe a little too gruesome for a lot of people but really well crafted. And Rockstar too credit for LA Noire, but as you know, that was a third party studio. And Red Dead was a Capcom game, if you remember, the very first one- and these guys improved it after getting the rights to it. So I think everything they touch turns out excellent. It’s just hard to forecast commercial performance for newer properties.
But this thing has an audience. The last Red Dead did 14 million, I believe. So there are 14 million people since 2010, and 66 million people who played GTA. So 66 million people will absolutely give this a chance. So there’s an open question about how much this will sell, but there’s no question that it will be a phenomenal game. I would not take a bet on a Metascore below 90, and I would take a bet on a Metascore above 92 or 93, because Rockstar are that good.
"I think that, when you compare the gameplay and story and fan interest in a series like Red Dead, I think it’s more comparable to something like Fallout, where it’s super interesting and well done and well-crafted game, but not as big as Call of Duty, for example."
And do you have any indication, have you heard anything that may imply that they are working on a new Grand Theft Auto? It’s been years since GTA5.
The only information anyone has is the Rockstar Blog, where they confirmed they are working on all of their wonderful games. So, there were some blog posts back in Fall of ’14 that said ‘we’re hard at work on Bully, Max Payne, LA Noire, and Red Dead.’ And, remember, there are new IPs like Agent, that isn’t officially canceled, so one would think that they are working on that. And the parent company Take 2 has said repeatedly that Rockstar are working on a new IP as well. So while I think it is likely that they are working on another GTA, they are also working on at least Midnight Club, Max Payne, LA Noire, and probably two new IPs. So I don’t think it’s realistic to expect that their next game after Red Dead is GTA. I think it’s reasonable to expect it to be Midnight Club, which last came out in 2009, and after that there’s Max Payne and LA Noire in rotation, and there’s at least one new IP. So I don’t think you’ll see a new GTA until they’ve launched at least three or four other games. So the real question is, can they release more than one game a year. And as you pointed out, their last real game was 2013. 2014 was just a PS4 and Xbox One port of GTA5, and 2015 was the PC port, and 2016, nothing. So, they’re due, but it hasn’t been their history to launch 2-3 games a year. So I think it would be optimistic to assume they’ll start doing that now, but you just never know- they’re pretty talented.
Alright. Still staying on the topic of Red Dead, it’s not coming out on the NX- do you think there could possibly be an NX version in the works and we just haven’t heard of it yet?
I would say the chances of that are exceedingly poor. I can’t remember any game other than – there was a GTA made for the DS, which came out in 2009 – I’d be really surprised if they wasted their effort to port anything for Nintendo. I just think that Nintendo has wandered too far away from the mainstream for most of the publishers, so you’re just not getting mainstream games produced for Nintendo consoles- not ones made for other consoles, at any rate.
Okay, so let’s talk more about the NX and Nintendo, then, because that was going to be my next topic. Why do you think Nintendo is taking so long to announce it? It’s supposed to be out in March, it’s almost the end of October, and they haven’t announced it. Apparently they’re supposed to- but they haven’t. What do you think is going on there?
Well, you know, I am glad you asked me about Nintendo, and you know, I want to take an opportunity to formally and vocally apologize for being crass and unfeeling when I said that Mr. Iwata is late but not so great. I think that that was rude, and uncalled for. I did not feel he was a very good businessperson- he was clearly a wonderful, kind man, with a ton of talent, and he shepherded a great company during his tenure there.
So to answer your question, I think his replacement is less capable than Mr. Iwata was. I think Mr. Kimishima has done nothing different. And I didn’t think he has executed as well as Mr. Iwata. So as poorly as I thought Mr. Iwata performed as a businessperson, he was better than Mr. Kimishima by a large measure. And Mr. Kimishima, you know, I think he is continuing kind of managing by looking in the rear view mirror, and dwelling upon Nintendo’s past successes. And let’s be fair, I think that’s what Tim Cook at Apple is doing, I think he’s afraid to change the model that Steve Jobs put in place. So I think that Mr. Kimishima is afraid to change the model that Mr. Iwata put in place. And that means that, you know, you don’t play with the model too much. I remember Mr. Iwata saying five years or so, when asked about mobile, “I don’t like free to play, I like free to start.” And that suggested paid downloads.
Well that kind of download has been dead since 2007, and yet here we are with Mr. Kimishima running the company, and they announce Super Mario Run, and it’s a paid download. So you’re being run by a CEO who’s afraid to change anything that his predecessor put in place. And again, Mr. Iwata was running the company back in 2002, 2003, to 2015. And the world is changing. It’s moving away from that old model. So I’m afraid that the NX is going to be kind of a bastardized handheld that, although I’m sure is a compelling nice product, will be a tablet style handheld that docks into your TV and lets you play your handheld games on the TV. And I’m not sure that’s gonna be enough for people, meaning publishers, to embrace it. The only third party I have heard comment positively about the NX is Ubisoft. And let’s be real, do you remember ZombiU? You know, Ubisoft haven’t made any money supporting Nintendo consoles with the exception of Just Dance, which haas been phenomenal, in the last five years. They certainly have their Imagine games and handheld games, which were targeted at casual and female gamers, which did well, but that business is gone. Just Dance is dying. I don’t understand Ubisoft at all.
But you don’t hear Activision or Take 2 or EA saying they can’t wait for the NX. So the bottom line is, I think Nintendo are struggling with how to remain relevant in the console business. And I think the stroke of brilliance that was the Wii was one of those really amazing things that was the right price, the right product, the right time. And I think Nintendo is about to embark on its second effort to be different, and I think their second failed effort. I just don’t see NX being successful if third parties don’t embrace it. So if I were Mr. Kimishima, the first thing I would do would be to make sure that Red Dead launched on the NX. And if that’s not part of today’s press release, then that’s a problem. You need Madden on there, you need Call of Duty on there, you need FIFA on there, and you need Red Dead on there. And if those were all on the NX, I think the NX would be phenomenally successful. If we’re stuck with just Nintendo content, that’s a problem.
So I partly think that the reason you’re not getting any visibility on the NX is because Nintendo are trying to work with third parties, trying to get support for it.
So, it’s funny you bring up third party support, because there seems to be some indication that third parties seem to be on board with the NX. Ubisoft, like you said, and Warner Bros., and Japanese third parties have been pretty enthusiastic about it. So do you think it won’t have enough third party support, or do you think that what it does have won’t be mainstream enough?
The Japanese publishers are not relevant any longer. They are not relevant to making a console successful. I don’t know the exact number of PS4 consoles sold in Japan, but I bet it’s less than 10% of the global total- so here’s Sony with close to 50 million PS4s sold, and 10% in their home country… who cares about Japanese games?
Japanese games don’t largely perform well outside of Japan. There are many exceptions, you’ve got Resident Evil and Street Fighter, I know, and the occasional Final Fantasy, I know, and Nintendo games, obviously, all of them, do very well outside of Japan. But most Japanese publishers, except for like Kojima and Metal Gear, they don’t get the global formula. So we can count the successful big multimillion Japanese sellers outside of Japan probably on fingers of both hands, where you’ve got hundreds of western games selling well. So I don’t think Japanese publisher support makes much difference at all. I think what matters is, you need FIFA, you need games so the core console gamer is indifferent between buying an NX, and a PS4 Pro. You want everybody to think, ‘I can get everything on NX that I can get on PS4 Pro, so I will buy an NX instead, so I also get all that wonderful Nintendo first party content. And a FIFA player, a Call of Duty player, or a Fallout player, or a Red Dead player, doesn’t feel that way.
Okay. So, you don’t think that – unless it has western third party support – you don’t think the NX’s chances against Xbox Scorpio or PS4 Pro are actually strong?
Well, again, ‘unless.’ It’s too early to know that it won’t have third party support. Nintendo, the Wii had third party support, a lot of third party games which didn’t perform well, but they had third party support. The Wii U, lost third party support quickly, and flopped. So the NX, we have a sample size of one, Wii U- which didn’t get third party support. So let me answer your question differently- if the NX does what the Wii did, and gets a lot of third party support, it will be successful. If it does what the Wii U did, and doesn’t, it won’t be successful. I don’t think any console can thrive with first party content only. And I will say, of the three console manufacturers, Nintendo has by far the best content, I mean by ten times. But it’s still not enough. They don’t bring their games out often enough, and not in sufficient quantity to justify a purchase.
"Of the three console manufacturers, Nintendo has by far the best content, I mean by ten times. But it’s still not enough. They don’t bring their games out often enough, and not in sufficient quantity to justify a purchase."
I get it, Nintendo cannot take on the entire rest of the industry by themselves.
Right. Again, that’s the console model Nintendo thrived at with the Super NES, and the N64. Remember playing NHL Hockey, and gosh, there were so many great games on the N64 that weren’t Nintendo titles. All the sports games as an example. And even the Gamecube had third party support.
Fair enough. I also wanted to know, when do you think the NX is launching? Do you think it’s still on for a March launch, or could it be delayed, given the silence?
Well, I certainly think every day that goes by makes it less likely that it launches in March. It is highly unusual to debut a console only a few months before it launches. But Nintendo did that with the 3DS, I think they showed it for the first time a few months before it came out. So if Nintendo reaches out and schedules a big event for November, then I think that yes, the NX is probably due by March 31. So I’d like to reserve my opinion until we get past November. But if we get past November, and that thing hasn’t been announced or shown, then I think we can safely say that the chances of a March launch are close to zero.
Alright. I wanted to move on to Microsoft now. And they’ve clearly been on a roll recently, they’ve beat out the PS4 for three months at NPD, the Xbox One S has been a phenomenal success, and Forza Horizon 3 and Gears 4 had good launches. Microsoft are doing well in the UK, they’ve managed to garner a lot of goodwill for people. Do you think this could lead into a strong Holiday season for Microsoft, especially since Sony don’t have any big games planned?
Strong is relative, and I actually think that the announcement of the PS4 Pro probably froze some people and caused them not to buy PS4 Slim, because they are waiting. I think Sony will still dominate in non-English speaking countries, because they have a better brand. If you are up in France, or Italy, or Spain, or Germany, playing a PS1, then you love the PlayStation brand. And Xbox really didn’t have a successful console until the Xbox 360, and they gained some ground, but I think they lost bad at least half of that with the Xbox One.
So Sony is good. And the fact is that the PS4 Slim costs less than the Xbox One S, so I actually think that Sony has a huge advantage over Microsoft for the next few months. So yes, I think Microsoft will sell a lot, yes, I think they will consider this a very successful year, and yes, I think, PlayStation will outsell Xbox.
So, I did want to go back to the games that I just mentioned. Microsoft on their part have consistently delivered quality first party games, especially in the Holiday season, every year. And Sony have struggled with that, I can’t think of a single first party game from them this generation that wasn’t delayed. Do you think these delays hurt Sony in the long run at all?
I don’t. I don’t think that most people who get consoles at Holiday are people who buy them for themselves, except for the launch year. I think that most Holiday console purchases are gifts, and ask your mom if she knows what the first party lineup is for Sony and Microsoft this Holiday- and she won’t. So she goes into a store, and she’s just looking for the bright, shiny object. Sony advertises well, and the brand is probably better known than Xbox among grandmas and moms, so I think they sell well at Holidays in spite of having a worse lineup than Xbox.
And to be honest with you, gamers know the difference, but how many people reading this haven’t made a decision on a console yet? Everyone in this audience already has one or the other, and they may buy a PS4 Pro, but they’ll trade their PS4 in to get it. I don’t think that the timing of game releases matters at all to gift givers, and so I don’t think it matters at Holiday.
And frankly, I kind of think that there’s something smart about avoiding Holiday, because it gives you the opportunity to be in the limelight during months when you’re really trying to brand the console and make sure they get what advantage you have. So I’m not disrespecting Microsoft’s decision to launch Gears at Holiday, I think it was smart to have the game out, and it’s certainly gotten great reviews, and props to those guys for making a game that they inherited from Epic, and it’s been phenomenal. But… I don’t think that it would’ve mattered when it came out, October or May, it still would have sold very well.
So specifically for this Holiday season, you think the PS4 Pro is enough of an advantage for Sony.
Well, they’re also going to advertise PSVR- so you’re going to get advertising for PlayStation VR, PlayStation 4, and PS4 Slim. So I actually would expect Sony to outspend Microsoft globally on marketing 2:1.
And speaking of exclusives, the only big Holiday exclusive that Sony has, and ‘big’ here is relative, The Last Guardian. Do you think that does anything at all for sales, or do you think that it just gets drowned out by Call of Duty, Battlefield, and Watch Dogs?
The Last Guardian is a nichey, small game. It’s going to be beautiful and fun to play, but it’s not- you’re talking about against Call of Duty, which will sell 18 million units? The Last Guardian, I’d be very surprised if it sold 5 million, and in the west, 2 million. I just don’t see it as a big game at all. It’s great for the fanboys, they’ll love it. And it’ll be a great game. But it’s not a broad appeal type game.
"Yes, I think Microsoft will sell a lot, yes, I think they will consider this a very successful year, and yes, I think, PlayStation will outsell Xbox."
Okay, and I did want to discuss Call of Duty, which you just brought up. So the reception to Infinite Warfare has been pretty negative in general. People didn’t like the first reveal, they didn’t like the setting. And the beta tests were held some days ago, and the reception to that was fairly middling too. On the other hand, there’s Battlefield 1, which has had universally positive reception, and the reviews seem to be very strong. My question is, is this the year that Battlefield finally outsells Call of Duty?
Oh, good question! You know, I’d like to see Call of Duty’s reviews before I actually come out with- Battlefield surprised me, the reviews are consistently mid to high 80s. That’s pretty good. That’s better than the last couple of Battlefields, and certainly better than the last couple of games from DICE, the last two were Star Wars and Mirror’s Edge, those got low 70s. So this is really surprisingly good.
And I thought that the World War 1 setting might be an impediment, but it doesn’t appear to be that at all. I think that it’s sufficiently different from all the other military shooter settings that it is driving a lot of interest.
So yes, I think that Battlefield 1 will set a record for Battlefield sales, the old record is, I think, 15 million, and I do think this one has the potential to sell more than that. So the answer to your question is, is this Call of Duty going to be well below the worst selling Call of Duty game from the last five or six years? I doubt it. But if it got bad reviews scores, then possibly. So if I had to guess, I’d say Infinite Warfare sells 20-22 million, and outsells Battlefield. But if it gets a 65 review score, I’m going to be wrong. So gotta wait for the game to actually be that bad.
I agree with you, I think the near space setting is kind of a been there, done that, me too type gimmick. I think that it’s unfortunate for Call of Duty that we’ve got Titanfall, which is sort of the same setting, near future, but not in space, coming out a week before. So I think Titanfall is going to cannibalize Call of Duty as much as Battlefield does that. Again, if Call of Duty gets a mid 70s or lower review score, and you’re looking to buy a game, you’re gonna know. I mean, at least 20-30% of the people who buy games do look up review scores. So why would you bother buying a bad game, when you could get a good one instead? We already know Battlefield is good, so… my answer is, I don’t expect Call of Duty to be bad, and I think it outsells Battlefield, but if it turns out to be bad, then I’m wrong, and it won’t outsell Battlefield.
And, going back to the PS4 Pro for now, so this is a console that is more powerful than the PS4, but it’s not powerful enough to deliver native 4K resolution, at least not for most high budget AAA games. Do you think that Sony should have waited for about a year, and made it a higher end system comparable to what Microsoft says the Scorpio will be?
I don’t. 4K penetration isn’t that great. An in the US, it’s probably about 5% of households. And 4KTVs are still a bit too expensive. I literally just bought a TV, our second room television, and I had a choice between a 55 inch Samsung curved 1080p TV for $700, and the same TV in UHD for $1100. And I thought about it, and I realized, it’s not worth an additional $400. There’s no programming for 4K. There’s no broadcast television. I can watch Netflix in 4K, and play games when I get my Scorpio in a year, but do I want a TV for that now? And the answer is, no, I don’t. I can afford it, and I didn’t do it. So I think it’s foolish to chase this small slice of the market. I do know that these tech enthusiasts who are into super high tech, and early adopters, are all drooling about it, and they really want 4K native resolution on their games. But I think that Sony are a mass market consumer electronics manufacturer, and they are going after the biggest slice of the market, which is 1080p.
And on a similar note, the omission of the UHD Blu Ray Drive in the PS4 Pro, versus Microsoft, who do have it in the Xbox One S, and who will probably have it in the Scorpio, you don’t think that will matter at all?
When was the last time you rented or bought a UHD Blu Ray?
Oh, I’m exclusively streaming now.
Exactly! And that’s the point. Almost no one buys DVDs – well, I shouldn’t say that, DVD sales are down by about 50% in the last couple of years – and UHD disc sales are about 5% of the total, so who cares? You’re talking about such a small slice, why would you build something in to a console that’s going to be obsolete? Now, Microsoft chose to do it, I admire them and respect them for giving us something we don’t necessarily need. But I don’t think anybody cares, I really don’t.
Going back to Microsoft and the Scorpio, given that the PS4 Pro is launching at $399, and we know that the Scorpio will outperform it by quite a lot as far as the specs go, what do you think a good price for the Scorpio will be?
Well, I think Microsoft would commit suicide if it was more than $399. And the problem they will face is if they launched it at $399, the PS4 Pro might discount to $349 in the same week. So I’d be really surprised if the Scorpio was more than $399. But then again, I was really surprised when the Xbox One launched at $499 with Kinect, and it took them a while to unbundle Kinect and drop the price. So Microsoft has not executed well this cycle as far as pricing goes. Just as Sony executed poorly with the PS3’s pricing. So Microsoft’s playing catchup, and I’m hopeful that they don’t make the same mistake with Scorpio that they did with the Xbox One.
So the Scorpio’s billing here, and obviously it’s targeting the hardcorest of all gamers- it’s the ‘most powerful console ever made.’ Which sounds great, but then Microsoft come along, and say that all Scorpio games need to also run on standard Xbox One consoles, and they need to maintain feature parity. Don’t you think that this sort of undermines the point of the Scorpio? What point is there in having so much power if you can’t use the power?
It’s the same answer as the PS4.5. Back to Blu Ray drives, a Blu Ray player will play a standard definition DVD, and it will upscale it and make it beautiful. So it’s not only HD discs, it’s, you know, any definition. That’s what Scorpio will be. So someone will make a game that will work at 1080p and 60fps on an Xbox Scorpio, and they could also have that game upscale to 4K and 240fps when run on a Scorpio. So I really don’t think it’s as complex as it sounds. I think the box itself will recognize what is on the disc. And developers will have to make games that run on faster framerates, and they will. I really think this is going to work fine.
Okay. So moving on, to strictly, the real next generation of consoles, the PS5 and the Xbox- whatever they call the next Xbox. When do you think we see the next consoles from Sony and Microsoft?
2019 or 2020. Probably 2020.
So you think that these mid cycle consoles will extend the lives of their consoles by at least 2-3 years, then.
"I don’t expect Call of Duty to be bad, and I think it outsells Battlefield."
And also, going back Microsoft, there’s the consistent speculation, the persistent reports we get that Microsoft is getting ready to quit the console market. Do you think that will happen? Or do you think that Microsoft will actually get away from dedicated games hardware in the next decade or so?
No, I think Microsoft is going to try to build this transition from console to PC. And I think Microsoft will probably come up with a set of products that will play games, whether you own a console or not. Every Xbox game made by them is already on both, Xbox One and Windows 10. And I think they will start publishing games that will be playable on, and downloadable to, a Surface Pro. I think Microsoft is ready to embrace the migration of gaming off the console, to devices that people already own, and that would expand the market for software.
I think Microsoft would like to host it- they would like to host the multiplayer, and run the store for downloading software. So I actually think that they have the right approach, because the money is not in selling the hardware running the software, the money is in running online services and offering a storefront. So be like Apple, where you make money on the iTunes Store. And I think that’s what Microsoft would like to be for the world.
So, you think that Microsoft’s Play Anywhere will be profitable for them in the long run.
Oh my goodness, yes. I think that it will be immensely profitable.
And in the short run, right now, is Play Anywhere a commercially successful move for them?
I don’t know that they’re making any money right now, but I don’t think that it makes much difference, they’ll be making money in the long run. They have to build the business first.
So they’re laying down the groundwork for a future where the business is profitable for them.
Yes. I’m sure they’re making money on Xbox Live, and on their downloads for Xbox. So it’s just, who cares if they’re losing some of those profits to subsidize Xbox Anywhere?
Okay, I want to sort of move ahead to something we flat out haven’t talked about so far. This is about Sony’s partnership with Hideo Kojima. As you noted, he’s one of the few Japanese developers whose games do have mass market appeal. But right now we have Death Stranding, his new game that looks really high concept and abstract. And it’s just sort of a ‘WTF’ feeling. And Sony are apparently funding this game to have it be exclusive to PlayStation. Given that Death Stranding doesn’t seem to immediately strike a chord like Metal Gear, given that Kojima is known for his long, protracted development cycles and for going over budget, do you think this could be a risky move from Sony’s perspective?
Oh, you know, I think that they probably know exactly what they’ll spend developing the game, and my guess is, it’s $70-80 million, and that’s plenty. That’ll give Kojima enough to get his game done. And the fact that we are talking about this, years before it comes out tells you that they are getting a lot of publicity by spending this money. Frankly, I think a bet on Kojima is about as safe a bet that you can make. He’s just an amazing game developer, and as odd as Death Stranding probably will be, it’s going to be beautiful, and the gameplay will be phenomenal. So I’ll play it, I’ll buy it. And if I hate it, then I won’t buy Death Stranding 2. But honestly, I think they’re going to do very, very well. I think this is the guy you wanna have a partnership with. He’s just great.
Yeah! And, I wanted to end this with a short, sweet, and telling question: do you think that the age of the true AAA third party exclusives is over? A game that is only on one console, and not shared with PC, handhelds, mobiles, anything. Just that one console.
Yeah, I do. I think it doesn’t make economic sense to limit yourselves to one console. I think that, if you think that your game will sell, let’s just use a nice number, 12 million units overall globally, on both Xbox and PlayStation. And PlayStation has two thirds of the market, let’s go crazy. Then to go PlayStation exclusive, you’re giving up 4 million units of sales, which is $200 million. And, it’s not like your development costs are more or less if you only put it on one console- maybe it’s a difference of $5-10 million, but it’s not that much more. So you’re literally giving up a couple of hundred million dollars of potential profit. And if Sony doesn’t pay that much for the exclusivity, it’s not worth it.
So, I get it, if you’re Vince Zampella, and you start Respawn, and it’s the first game you are making as an independent studio, I kind of get it. But, you know, even EA realized that was a mistake, making Titanfall an Xbox exclusive, so yes. I think economically, it does not make sense to do a third party exclusive, unless the console manufacturer pays up and pays a lot. So I don’t see it. I don’t think you’ll get them again. Unless they’re tiny games, indie titles, sure. But not, not AAA console exclusives, no.
Alright, well that was all from us. Thank you so much for taking the time out, and for talking to us! It was a pleasure chatting with you!
Thank you, and likewise.