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Michael Pachter, games industry analyst at Wedbush Securities, has given his verdict on last week's E3 show, expressing caution of the Wii U strategy while noting "sound business decisions" by Microsoft.

Mike Rose

June 13, 2011

3 Min Read

Michael Pachter, games industry analyst at Wedbush Securities, gave his verdict on last week's E3 in his latest investor note, stating that the show was a great success, and an event that "continues to get better and better." He also explained, however, that he believes Nintendo's Wii U "is arriving two years too late," while Sony's PlayStation Vita has "the second-dumbest name for a device after Wii U." "We were once again impressed by this year’s E3, and the show continues to get better and better," said Pachter. "The hardware displayed was impressive, and each of the console manufacturers showed many core games for their respective systems." He continued, "The most impactful 'reveal' at the show was the Wii U, which, in our opinion, is arriving two years too late. Depending on pricing, the system will be either a phenomenal success or a phenomenal failure, as competitive bundles for Xbox 360 with Kinect and PS3 with Move are likely to be priced below $300 by the time the Wii U launches." Of Microsoft's E3 showing, Pachter noted, "Microsoft appears to us to be making several sound business decisions that will position its console with Kinect as the media center in the living room. While the company’s game lineup was not particularly surprising (only Halo 4 and a handful of Kinect games were 'reveals'), its integration of Bing search into Kinect was perhaps the most impactful announcement of the show." "As we see a migration from traditional television delivery to over-the-top TV services such as Netflix streaming and Hulu, the discovery features of Kinect with Bing search demonstrates the potential for Microsoft to become a meaningful participant in the delivery of OTTTV." Turning to Sony's keynote, he explained that the Vita is likely to take a solid portion of the handheld market come the end of the year. "Sony’s presentation was solid, and the pricing on PlayStation Vita (the second-dumbest name for a device after Wii U) was quite a surprise," he noted. "We expect the 3DS to sell well at holiday, due to a phenomenal lineup of content, but think that the PS Vita will capture some share early next year. Solid sales of each device should bode well for GameStop, which will likely receive preferential allocations. Sony also continued to try to integrate its other consumer electronics products into its E3 presentation by announcing a 3DTV PlayStation-branded bundle priced at $499, which we expect to sell exceedingly well." E3 saw impressive game lineups for the next 12 months, said Pachter. "While there were few surprises, the software lineup at E3 was once again quite impressive. We think that the biggest problem faced by gamers this fall is where to find enough money to buy all of the high-quality shooter games, with Gears of War, Call of Duty, and Battlefield each quite impressive." "We think that this year’s Need for Speed is the most polished version ever," he gushed, "and several titles planned for next year (including BioShock Infinite, our personal favorite) also appear destined to be huge sellers." Wrapping up his analysis, the industry veteran concluded, "In all, we think that the new hardware introductions have some potential to reinvigorate the video game market, and think that the core games scheduled for release later this year and early next are sufficient to allow the industry to again begin to grow." "We expect investors to remain on the sidelines until they see tangible evidence of industry growth, but we are confident that this will occur over the next several months."

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