Game On: Wedbush’s Pachter says Cohen as GameStop CEO ‘not a surprise’

For this bonus edition of “Game On,” The Fly spoke with Wedbush Securities analyst Michael Pachter about a number of topics in the video game space, including the departure of PlayStation (SONY) boss Jim Ryan, the success of Xbox (MSFT) title “Starfield,” the situation with Unity (U), and more.

GAMESTOP CEO: Chewy (CHWY) co-founder Ryan Cohen was named CEO of GameStop (GME) late last month after joining the company’s board in January 2021. Pachter said the move was “not a surprise.” “He quite ungracefully fired the former CEO, and because he did so with an utter lack of class that he ensured no sane person would work with him,” the analyst said.

“He replaced them with his own team, which is fine, but he never announced a strategy,” he added. “So he hired three Amazon (AMZN) people. One left after seven months, the second was hired and fired a year later, the third was hired around the same time and fired exactly two years later. When I say Ryan Cohen was not gracious how he fired them, there was no announcement, just an 8-K filing saying, ‘Matt Furlong was terminated effective immediately.’ It didn’t say, ‘He’s leaving the company to pursue other opportunities.'”

“When he fired Furlong back in June, he announced that would be executive chairman but not CEO…but then a ‘whopping’ three months later he stepped in himself,” Pachter continued, noting that he doesn’t believe Cohen will actually reduce the level of cash burn at GameStop because revenues are declining.

UNITY: Commenting on Unity backtracking on the runtime fees it announced for developers last month, Pachter expects the move to have “no impact at all to the development community” and that the game engine maker simply made a miscalculation. “The initial change was a bit draconian and wasn’t communicated well, (but) I’m confident Unity had not thought that through,” the analyst told The Fly. “Unity was not thinking about the hyper-cash impact of in-app purchase games.”

“Unity seems to think this was a rounding error when they rolled it out, and the development community pointed out all the things they didn’t think of,” he added. “They heard the feedback and adjusted accordingly.” The Fly notes that this interview occurred prior to the announcement that Unity CEO John Riccitiello would retire.

‘STARFIELD’: Though the last few years have been up-and-down in terms of Xbox’s first-party gaming output, its recent release “Starfield” seems to be a hit, with the role-playing game from Bethesda Softworks achieving over 10M players within its first three weeks of availability. When asked if the game’s success mark some kind of turnaround for Xbox Game Studios, Pachter said, “”It reflects the value of acquiring established studios with established IP. Obviously, ‘Starfield’ is a new IP, but it’s basically ‘Elder Scrolls’ in space. We all knew it would be big, and there will be an ‘Elder Scrolls’ after this, so we no longer view Microsoft as just making ‘Forza’ and ‘Fable.'”

“They’re going to have ‘Call of Duty,’ ‘Diablo,’ ‘Starcraft,’ and ‘World of Warcraft’ soon,” the analyst added. “I think they’re going to have plenty of hits with so many studios.”

JIM RYAN: Late last month, Sony Interactive Entertainment said that president and CEO Jim Ryan would retire in March 2024 after nearly 30 years with the PlayStation business. When asked if there’s anything to look into with this announcement, Pachter said Ryan did well in the position and that he is nearing a typical retirement age, especially for this particular position. “I actually think he has done a fine job. I don’t remember any of his predecessors approaching 64,” he said. “I think this is when he was always planning to retire.”

In terms of whether his successor, who has not been named, will fare as well as Ryan, the Wedbush analyst said that “it depends on who the successor is.” “The job has typically been for a Western guy, but I think the next person in the job is definitely going to be a Japanese person,” he said. “But there’s no heir apparent; all the guys I know in the West are old, so they won’t replace him. If I could criticize Ryan, it’s that he didn’t surround himself with big up-and-comers. But I don’t know.”

“Game On” is The Fly’s weekly recap of the stories powering up or beating down video game stocks.