I need to get a job as a stock speculator. These guys get more predictions wrong than weathermen, and yet they still get paid large amounts of money to make said predictions, so long as they readjust their wrong predictions to make more predictions. Such is the case with the latest from Wedbush Securities analyst Michael Pachter, who has admitted that review scores for recently released Call of Duty: Black Ops were higher than expected – something I have to admit I called – and is therefore raising sales expectations for Black Ops by two million units, up to fifteen million units.
“Black Ops should be the best-selling game of 2010. Throughout the year, gamers have tended to forgo spending on marginally-rated games, preferring instead to play free multiplayer for top-rated games (85% or better) such as Modern Warfare 2. We expect Black Ops’ record-breaking pre-sales, strong early reviews, and immense marketing campaign to translate into solid and sustainable sales, unlike competitor Medal of Honor, which had sales that dropped off quickly due to lackluster reviews.”
After admitting that 1) he was wrong, and 2) maybe the press wasn’t as biased as he said it was, Mr. Pachter once again reiterated his campaign to have Activision “monetize” (read: make subscription based, like World of Warcraft) online play for Call of Duty, this time saying that investors were looking forward to it.
“Once the dust settles on Black Ops, we think investors will look next for the company to provide more granular detail about Blizzard and about its plans to monetize multiplayer. These future revenue streams from Black Ops, StarCraft II, and other games should trigger multiple expansion, as investors attribute high value to recurring revenue. The company has thus far been reticent to provide much detail about the Blizzard lineup, which faces a difficult comparison next year.”
Though investors will always want ways to increase revenue streams, I need to point out that they’re not the ones who have been screaming the loudest to have Activision charging for online play: he is. Mr. Pachter has been saying for as long as I can remember that Activision needs to be the leader in monetizing online play for as long as I can remember, on the basis that people that don’t buy online access for one game every month will turn around and use that money to buy other games that they also won’t play online. I’ll use the same logic now as I did those other times. Mr. Pachter is implying that gamers, when asked to pay more money, will go ahead and start paying more money, and if not for one game, for multiple games. He figures gamers will go “OK, I’ve already paid $60 for this game on my $350 system, and (for 360 gamers) $60 for Gold, and now they want $16 a month for the right to play this game online… well, I guess I have to spend that money on something else!”. At best, a few “whales” (the term used for casual gamers who heavily invest in certain games) will pay what they’re told, whereas the rest will become alienated and either buy much fewer games – spending less money on the industry in the process – or stop spending money on games altogether. That’s going to have a ripple effect on other developers, and either lead to actually decreased revenues for Activision, or decreased sales for everyone else, which will only benefit a few larger companies and further alienate the marketplace due to a selective monopoly on what is a casual hobby for most. Activision is the most aggressive company out in terms of pushing the financial envelope – they were the first company to charge $60 for downloadable PC games and $15 DLC map packs, after all – and if they haven’t implemented something like this yet for their console games, I have to assume that they’re not going to for awhile.
Mr. Pachter’s parroting of this line strikes me as manipulative. It’s almost like he’s following the Big Lie style of forecasting: repeat something so much, that it eventually becomes truth. Considering the latest salvo comes among news that he once again misforecast the market – this time due to curious reasoning about the integrity of the games press – I would have to take this with a grain of salt, even more than I usually use for a Pachter analysis.
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