Getting Our Numbers Straight: Improving Game Sales Data
Box office watchers and Hollywood moguls get next-day reads on weekend movie attendance, and TV programmers get overnight metrics for a previous night’s prime time. The DVD, book, and music industry have several charts to consult on a weekly basis to gauge bestsellers and sales patterns. Isn’t it time that the games industry also had multiple and more frequent feeds of game sales data? NPD Funworld’s monthly totes of the console market are good as far as they go, many say, but in order for the industry to mature, it needs more frequent reporting, more accurate retail coverage, and more competitive pricing.
Game sales data is the kind of thing analysts and publishers love to grumble about, even while no solution seems to be on the horizon. Nielsen Interactive Entertainment general manager Michael Dowling has been dropping hints in various interviews that his company plans to challenge NPD Funworld’s virtual monopoly on game sales reporting, but even Dowling admits to EGB that it is too early to discuss Nielsen’s intentions. Industry figures tell us that Nielsen has only begun to reach out to them for input on a new service. But in talking to analysts and publishers, EGB discovered that clearly the market is hungry for more and better data.
Accurate Data Slippery
For overall accuracy, most analysts we spoke to credit the current sales data as consistent if not always in synch with publishers’ data. “We’re pretty happy with it,” says Boris Markovich, an analyst with TerraNove Institutions, who, like a number of financial analysts, uses current NPD reporting as an indication of trends. Nevertheless, Markovich echoes a universal complaint about overall accuracy. “The numbers themselves don’t correlate highly with the actual sales numbers the publishers put out.”
NPD, which has an essential monopoly on U.S. game sales reporting, relies on point-of-sale (POS) reporting from about 65% of the game retailers, “more than 30 PC games and video games retailers from all channels,” says Richard Ow, senior industry analyst, NPD Funworld. NPD then uses an online panel of 600,000 to track overall buying patterns, from which it extrapolates full market figures. “NPD Funworld information presents the closest possible reflection of market realities to guide manufacturers and retailers,” he argues.
“How inaccurate is it? Who knows?” says NPD’s most vocal critic, Michael Pachter, analyst, Wedbush Morgan. “But we certainly don’t know how inaccurate, and the sad thing is that NPD is not in a position to know.” Pachter criticizes NPD’s extrapolation model, because he feels that it cannot accurately track the different selling patterns of diverse titles, and it tends to rely more on specialty stores where, unlike mass retailers, sales of new titles sell heavily in the first days of release but then drop quickly.
Because NPD data does not include the largest mass merchandiser, Wal-Mart, it misses a different sales pattern in which casual gamers and parents buy titles long after the game launches, Pachter argues. He suspects that the NPD extrapolation model tends to over-estimate early performance of some titles and underestimate the title’s longer term sales. In fact, most analysts we consulted agreed that NPD data tends to under-count sales compared to publishers’ figures. To NPD’s credit, most agree, the method is consistent, so the numbers work well for trending and comparative analysis. “It’s relatively reliable for directional data points and if you don’t read too much into it,” says Markovich.
That Wal-Mart Problem
The biggest hole in sales data remains Wal-Mart, the largest retailer of games, which in 2001 decided to stop supplying sales data to any researchers. While NPD has a long previous history tracking Wal-Mart data, this segment can be difficult to track for games because the chain is so selective in the titles it does carry, and “some titles are distributed completely differently throughout their 3,000-plus store nationwide chain,” says Marc Bennett, president, North American Operations, Codemasters.
Ow responds that even without every POS feed, NPD’s large panel helps it model total sales, including Wal-Mart. “It is possible for individual titles to occasionally be over- or under-reported due to this methodology,” he admits, “but we have not found any systematic issues with our accuracy.”
“They do a good job on the small games and the big games, but a crappy job on the middle group,” says Pachter. He thinks Wal-Mart might be willing to come back into the sales reporting mix if it didn’t have private research firms reselling the data and revealing differences among the channels. Having all POS vendors report to a third party that wouldn’t break out the figures by venues might ease Wal-Mart’s fear of giving away competitive advantage.
More, Sooner, Cheaper
Almost everyone wants to see game sales data reported on a weekly basis, and wants to get it in industry hands sooner. Part of the problem stems from retailer cooperation. According to Bennett, NPD used to report on a weekly basis until mall operators started reporting only monthly. Many would like to see a return to weekly reports, at least with relative game rankings, if not unit sales. “If we could get weekly numbers, then we can get a better sense of how a game is performing,” says Markovich.
But some say that regular data is more than a nice-to-have convenience for an industry that wants to be taken more seriously. A reliable, constant feed of sales data is the hallmark of a mature market, a signal to investors that a new medium is joining the ranks of film, music, and TV. “It has a lot to do with the volatility of the stocks,” says Stewart Halpern, managing director, digital media equity research, RBC Capital Markets. “With weekly [reports] you can see what [a] movie box office has done, and that helps moderate a lot of the volatility relative to expectations in that sector. But with the video game business, people put out major releases, and a lot goes on, and it is not until a month later that you see [figures].”
And like all consumers, game industry executives want more stuff at a lower cost. NPD enjoys a monopoly position and so charges more than comparable data in other industries. “NPD charges an abominable amount,” cries Pachter. “I am hoping Nielsen gets in a price war.”
Markets like broadly circulated data, and current data pricing limits access. “What helps markets be efficient is the free flow of information,” Halpern says.
Room for Nielsen?
Is there room for a major competitor in game sales data? “Absolutely,” says Bennett, but a company like Nielsen would need to come in with key points of differentiation, not only in frequency and price but also breadth of POS coverage. Ow agrees that competition is good for any market, but he cautions that Nielsen and NPD generally follow very different metrics models, and Nielsen hasn’t revealed anything about a possible alternative approach. “After all, you can’t compete with a hypothetical,” says Ow.
While any number of vendors can duke it out over methodologies and pricing, what the industry really wants are more numbers about more regions and segments. Billy Pidgeon, senior analyst, Zelos Group, says that inaccuracies in sales data are only getting worse as the new markets emerge. While NPD tells EGB that it does poll online sales, Pidgeon would like to see better coverage here, and the inclusion of publishers’ direct-to-consumer sales. Pachter says that current figures do not account for sales into the video store rental channel, which can represent up to 100,000 units in some cases. Mobile gaming remains a big hole in market reporting, making it very hard to judge the health of this well-hyped segment, because carriers still won’t release sales figures. And of course, a perennial complaint is that whatever the weaknesses in U.S. sale reporting, overseas metrics are far worse. “If we could get NPD data for Europe, that would be huge,” says Markovich.
With used, mobile, and digital sales growing in ways no one is measuring, the field really is wide open for new and better metrics, in large part because the games industry itself is evolving faster than any single method has yet captured.
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