At moments that an industry undergoes a fundamental change, market research is most valuable. Retail game sales are down. Digital sales are way up. Mobile and tablet have everyone excited, and equally clueless. Today more people than ever before play games. The industry is now a mosaic of new platforms (both hardware and software-based), and offers a slew of new distribution methods and revenue models. For the first time, the games industry is a truly a global market, as even markets that historically were inaccessible to publishers have now become viable. Opportunity abound, but where do we begin?
Despite these massive changes, companies that traditionally provide publishers with market insight have been acting like it’s business as usual. Retail sales continue to be the focal point among the major firms, leading them to the persistent observation that the industry is in decline. As an industry analyst myself, it’s embarrassing to see how companies that get paid to help others understand gaming markets have so far failed to innovate or even update their own model. Same shit, different day.
Renewal and innovation in the games industry is a good thing: it allows new companies to enter the market and forces existing publishers, developers and distributors to adapt. The shift toward online, free-to-play, downloadable content and mobile gaming has allowed the games industry to finally become a mainstream form of entertainment. No longer dominated by a single homogenous demographic, the market today is more diverse and offers more opportunity for a wider range of interactive entertainment. It is a clear sign that games are maturing. As we, collectively as an industry, enter this next stage, each of us deals with these macro-level changes in their own way. And, just like platform holders, publishers and developers, the research that helps guide decisions and makes sense of what’s happening in the market needs to change, too.
What’s the problem?
The questions that we confront today are very different from a few years ago. To answer them, researchers have to overcome at least three key challenges: access, fragmentation and expertise.
Getting access to key industry data is much more difficult. Different from the retail-based games market, where retailers share sales figures allowing an assessment of title performance and competitive information, the digital era knows few leading companies that provide access. Facebook, Apple and Steam are all very important hubs in the games industry, and so far they have shown little interest in providing market transparency. Their argument is fairly simple: there is no advantage for them in it. In fact, their digital data sets are a key asset in their respective strategies, and offering it up would merely bolster their competition.
The games industry value chain is more fragmented than ever before. Previously, there existed only three console giants and a (much smaller) PC games market. Today there exists a host of digital platforms like downloadable content, free-to-play browser-based MMOs, social network-based games, and mobile games across a host of technical standards and markets. The challenge facing video game market research today is not the absence of data, but rather the abundance of specialized, partial data sets. There are plenty of solutions that offer daily traffic estimates for social games, or approximate downloads for the various mobile app stores. Others rely on traditional survey data, casting a wide net a few times a year across a range of topics in an effort to map out the gaming landscape. Relying on a single methodology or on a specialized data set makes it difficult to describe the games industry, as it presents an incomplete picture of user behavior and preferences. For example, overall traffic for a particular title or genre may show a month-over-month increase. Without understanding why this is the case, however, this information provides only partial insight. The reliance on a single data source or, worse, a skewed data source, greatly reduces one’s ability to describe the market as a whole.
In an industry that is increasingly information-driven, knowing how to interpret that information is crucial. As entertainment markets go, the games industry is very complex. Sure enough, most of us are aware that it is a hit-driven business, but what does that mean in practical terms? Well, for market researchers it means that you cannot just hire anyone off the street to provide insight and analyses. Rather, it takes years to fully understand how the games business works. Because of this, there are few true experts on the topic. The quality of your market research is inversely related to whatever number ‘some guy’ heard from ‘a friend’. Sure enough, there exists a host of small consulting outfits, manned by people who previously held a senior position at some well-known publisher. But understanding the industry mechanics, from financial analysis to consumer insight, is a skill only mastered over time. Drawing insight from the available data generated by digital games is as much an art as it is a science, and demands a dedicated effort and expertise.
How do we solve this?
plea at GDC this year to eliminate social injustice from the games industry, by making games geared to minorities, and received a standing ovation. Market research helps to develop, publish and make available interactive experiences that resonate with all gamers out there, not just a subset. Better still, knowing the market keeps companies in business even when they have a bad run. To operate alone in a volatile industry like interactive entertainment means you increase the risk. Ain’t nobody got time that for that.
The only way for the games industry to get the research it so desperately needs is through building relationships and working together. Four years ago, I started asking companies to help me compile a dataset on digital games: in exchange for market insight, we ask that companies share their data. This has proven very effective: today we have access to the monthly spending of over four million paying online gamers from 50 different publishers across 450 different titles, worldwide. Having an open conversation with publishers, developers, service providers and investors has allowed us to build a comprehensive methodology that provides critical market information, title-specific revenue estimates, and deep consumer insight. To build in a redundancy and ensure we’re not misreading any trends, we combine this quantitative dataset with regular qualitative research studies. This gives us multiple touch points in describing the market, assessing market share and figuring out what truly drives the market.
- Case in point 1: The emergence of new business models like free-to-play demands expertise. By sharing data, even if it is anonymously, we’re able to get a better sense of what works well in the market, and how we can improve our games. This helps reduce the cost of figuring out how to best serve customers and, ideally, reduce the amount of garbage free-to-play games aimed solely at nickel-and-diming users, leaving more money to develop richer experiences.
- Case in point 2: Different markets have different preferences. So, too, when it comes to how people like to pay for their games. Having a complete picture of the different payment options that users look for when they’re ready to send you money is a key piece to successful digital publishing. Just because your game only has a modest audience base, does not mean your efforts are not sustainable.
- Case in point 3: The cost of user acquisition on Facebook, Android and iOS has increased tremendously in 2013. By sharing this information anonymously, we were able to provide contributors with detailed insight on when to spend, and when not to spend, their marketing budgets.
And so to repeat my earlier point: at moments that an industry undergoes a fundamental change, market research is most valuable. Working together helps build better games. So if you, too, feel that video games research sucks, shoot me a line.
joost at superdataresearch dot com