Playing at Video Game Analyst

by L.B. Jeffries

15 December 2009


Predicting the direction that the game industry is headed is something of a dubious talent to most people who play games. The most successful analysts like Michael Pachter are impressive because they have to predict how well a game is going to sell and consequently a company’s profit margins. There are deadlines by which their predictions must come true and a specific moment where you can say that they were wrong. An in-depth article at Kotaku by Tori Floyd explains that the job requires crunching a lot of sales data, how many consoles were in the market at a given time, and then guessing how a similar game will do under the current circumstances. Pachter made a lot of impressive educated guesses in 2008, like the overall profit increase of the industry from 2007 or the precise date of the PS3 price cut. The average response when a gossip blog like Kotaku posts this stuff is to point out that obviously a four hundred dollar console is going to have to drop in price to be realistic, but knowing when to tell an investor to buy or sell stock does take skill.

Beginning with that caveat, back at the start of 2009 I decided to write a blog post predicting what the tech trends would be in 2009. Since people make money by predicting this stuff, I thought I’d score myself to see how an amateur did. This should not be confused with really doing anything useful or comparable to someone like what Pachter has done. Identifying a social need and concluding that someone will fix it takes about as much skill as bouncing a ping pong ball into a pool. My background in this field is a Business Law class that I got a C in, a long conversation with a drunk broker, and re-reading the portion of Freakanomics that explains how the crack cocaine industry works. So, how well did someone like me guess the year 2009 would play out in video games?

Overall Prediction: Functionality is going to be the defining trend of successful consoles.

Basically, I argued that the consoles and gaming devices that do things besides just play games are going to do a lot better than traditional platforms. I’m going to say this proved true. The I-Phone and I-Pod Touch are dominating in sales. Apple has so far moved about 21.4 million of the things with literally thousands of apps and games going on the market every day. While quality control is a bit lacking, this trend has produced several decent multiplayer games and one gaming masterpiece. That’s a lot of ground to cover in two and a half years for a new platform with what is essentially a new interface.

Compare that to the PSPgo, which has only moved about 28,000 units in Japan. The device does nothing but play digital games. The DSi, on the other hand, has moved 10.17 million units. It’s also got a camera, decent Wi-Fi, and supports SD cards. While Nintendo is right in claiming that this isn’t meant to compete with the I-Phone, it’s definitely a respectable replacement for an I-Pod Touch.

Prediction #1: Having Netflix on your console is going to move a lot of units.

True. Xbox 360 sales have been going strong all year, and I think it’s fair to say a great deal of credit goes to how easy it is to watch movies through the internet service via console. Microsoft believed this enough to create an exclusivity contract for the service that Sony found their way around. I’m not going to claim that the very strong years that both Xbox 360 and PS3 had is totally thanks to Netflix. People have finally figured out how to do something on the PS3 besides guide nukes and calculate quasars, so the price drop and impressive games for PS3 this year obviously deserve a lot of credit. More interesting is that the one console that does not offer any media functions whatsoever, the Wii, has seen a steep sales drop this year.

Prediction #2: Something like streaming or a tiered commercial service has to come along that is easier and more efficient than what a pirate has to go through.

The jury is still out on this one, but the first steps for implementing something like the above were announced. I’m not going to pretend that I have any idea how cloud computing specifically works, but On Live is basically promising to give me access to games that will play on a low end PC with great graphics and speed. Even the people stealing games have to cough up the money for a machine that can run them decently. Early reports have been positive but the service only works if you have a great internet connection. Given the choice between dealing with torrents and mucking about with a stolen game’s code, the average person is probably going to opt for the live service since it’s the same bandwidth either way. You don’t beat pirates, you just offer something that takes less effort than stealing a game.

I’ll also add that the problem that I identified, paying for sixty dollar games, has been addressed by brief sales on STEAM and other ways to maintain long tail viability. Price drops happen sooner than ever with games, particularly ones that are sold online, because there is no resale loss. This is an enormous topic, one that will get its own post next year.

Prediction #3: Developers will begin to experiment with the sixty dollar pricing model by making games episodic. These will sell.

True. This had already been going on by the time that I wrote this. Siren: Blood Curse was an interesting experiment on the PS3 and TellTale Games have both been going strong for a while. I’m giving myself this one because several more AAA episodes came out this year featuring purely episodic content that have all sold well. The Lost and the Damned and The Ballad of Gay Tony are both doing well despite being console exclusive.  Though, I haven’t found any exact numbers for Fable 2’s episodic release, however, giving away the first episode for free is a bold step in the right direction. All of TellTale’s products have also done well this year. The social need basically works like this: starting a game that takes 100 hours to beat is a bit like starting a giant book. It’s perfectly doable; it’s just intimidating. Breaking such a game up into chunks ensures that the player will hang on until the end and consequently be a lot more satisfied with the product.

Prediction #4: DLC is and will continue to be used by companies to make more cash out of pre-existing IP.

True. DLC sales for CoD 5 are now over 45 million. I don’t really know if that’s because people like shooting Nazi zombies or that they actually used the other maps, but that’s still a lot of easy money. Almost every major release is offering DLC that can be bought right when the game is released. Dragon Age actually has NPCs that sell it to you in game. Companies now even use DLC to help boost pre-order sales by offering you a free piece of junk in-game.

I also did a lot of jabbering about maintaining the viability of multiplayer games by using DLC to keep the game changing and vibrant. I would’ve used ODST as proof of this but they decided to turn it into a full blown game. I have a feeling that you’ll be seeing even more of this in 2010 when companies are trying to make do with what they’ve got in a tough economic climate.

Prediction #4: Forum Games are going to be increasing in popularity and you really need to dump all of your money into a company making them.

Holy s*** was I right about this one. The top game on Facebook in August of 2009 was Farmville at 56 million users. That easily beats WoW’s 11 million. A game about raising a fake dog even beats WoW on Facebook. Of course, none of this is going to matter once Civ Facebook comes out. I’m going to go out on a limb here and say that you ought to invest in that. Actually, that’s not really going out on a limb.

Like I said at the start of the post, most of this stuff is obvious. I don’t have access to any hard financial data and just pulled together a weird variety of articles for my sources when producing this piece. People in forums make this same point when video game analysts are discussed, but it’s easy to just complain in the comments section. The only real way to prove it is to have someone make a bunch of predictions and then a year later see how many they got right. Either I’m really good at predicting future trends in the game industry, or it was never very hard in the first place.

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