Posted by: seanmalstrom | November 25, 2009

Analyst Funny Pages

Some people read the funny pages in newspapers for laughs. I read video game analysis.

Check out this “analysis“.

When you were a child, you were told about the story about the boy who cried wolf. He cried wolf and all the villagers came. He did it again, and again, and again. Eventually, the villagers stopped coming. Thanks to a particular DS9 episode, I know the moral isn’t because the boy lied all the time. The moral is that the boy kept using the same lie over and over again.

The moral to the story of the analysts who cried Wii is no different. When they first proclaimed the ‘fad’ of the Wii to be over, people rushed in. They did it again and again. If you look at the comments on that Gamasutra page, everyone is like “Shut up already, we’ve heard this a zillion times”. The error is not that the analyst is wrong. It is that the analysts keep repeating the same exact error over and over again. Politicians know at least to keep changing the errors as repetition of them spoils the ruse.

Let’s go through this.

Revealing the results of a broad fall-holiday survey, Creutz says Wii owners are buying fewer games now than they did a year ago — while Xbox 360 and PlayStation 3 plan to buy more.

Using a ‘broad fall-holiday survey’ is not analysis at all. There is plenty of sales data to suggest trends. But all of that is conveniently ignored.

I believe such a “survey” is to create the analysis they want to talk about as real sales data doesn’t suggest what they want at all.

This is partially a function of the economic climate — core gamers are the group least likely to trim entertainment spending when budgets get tight. Consumers who own only a Wii, however, are least-likely among all current-generation platforms to increase their software purchases this holiday, he says.

Then why does Wii Fit, which is $90 being a balance board, keep selling left and right? Why does Wii Sports Resort, along with Motion Plus devices, keep selling? This software is just magically ignored.

The economic climate favors the Expanded Audience, not the Core Audience. The Core Audience is composed of mostly younger males. Look at the unemployment numbers. Most unemployment will be the younger people. Disruptive companies thrive in recessions. What limits Expanded Audience is not money so much as disinterest.

This is why Wii Fit remains a best seller everywhere. It isn’t Core Gamers buying that $90 bathroom scale.

Over half of Wii owners also own an Xbox 360 or a PlayStation 3, Creutz says — but of those who own more than one console, only 23 percent consider Wii their main platform, which means bigger holiday wish lists among core gamers are more likely to benefit core market games rather than Wii titles.

“While core gamers who own a Wii own more Wii games on average than casual gamer Wii-owners, the average title ownership spread between the two categories of gamers is much lower than it is for owners of Xbox 360 and PS3 consoles,” says the analyst.

It is really incredible the lengths these people are going to scare publishers away from the Wii. The “Game Industry” is truly scared of the little white console.

Creutz concludes that core gamers who own multiple consoles are primarily buying Wiis to play Nintendo titles, and not games by other publishers.

Then how does Wii have the highest third party game sales out of all three consoles? This, also, is magically ignored.

“We believe that the optics of this hardware cycle have been significantly distorted by the explosive growth of the Wii console,” says Creutz.

The only thing that has been distorted by the explosive growth of the Wii is the “Game Industry” sense of growth. The “Game Industry” is not growing. The “Game Industry” is in free fall. If you subtract the Expanded Audience Wii sales (which are likely more than 50%) from the total Wii console number, you end up with a total number of consoles which suggests massive decline in Core Gaming.

But, shhhhhhhhhhhhhh. Don’t let the analysts know this. (Actually, they already do know this. They just don’t want you to know it. And they very much don’t want investors to know it.)

Wii was the primary driver of industry growth in 2007 and 2008, and remains the top-selling console in America. But according to the analyst, “its success did not correlate with strong performances by the U.S. software publishers as a group.”

And with Wii hardware and software sales declining, investors have become much more cautious about the games business — meaning further negative impact for U.S. publishers.

“While we believe the Wii is likely to be a drag on overall software sales through the holiday, the impact should be limited to those publishers which have invested significantly in Wii development, with the biggest negative impact likely to be felt by Electronic Arts, which (unwisely in our view) heavily invested in Wii development for [calendar 2009],” says Creutz.

I’ll tell you what is really bothering them.

The “Game Industry” did not make the Wii phenomenon. Therefore, the “Game Industry” cannot break the Wii phenomenon.

Remember how solid all the analyst predictions were on the “Revolution”? I believe these numbers were based entirely on the “Game Industry”, that coalition of third parties, deciding who they wanted to be the winners and losers to be. The “Game Industry” wishes for a console they can control and manipulate. However, with just one (as Sony had), the console company could start to control them. So it is better to have two consoles and have the “Game Industry” play them against one another.

The “Game Industry” doesn’t like consoles with First Parties. They cannot control the console. They froze out Sega. They’re trying to do the same to Nintendo. But Nintendo is disrupting the “Game Industry” itself.

These analysts *know this*. They know this because I have chatted with a few of them.

The aim seems to be the “Game Industry” to target publishers and other third parties and get them to try to leave the Wii platform. They are predicting “Wii deflation” because they believe if they can convince enough third parties to leave the Wii, it will decline.

Remember that even when Nintendo did the Gamecube, a console that was easy to develop for, had superior graphics, the “Game Industry” froze it as well.

I wonder if Nintendo knows that their real opponent is not so much disinterest or Microsoft and Sony but the “Game Industry” itself.

Third parties leaving the Wii is actually suicidal. They need the Wii. They need New Generation. The Core Market is collapsing. If third parties do not want to collapse with it, they need to learn the ways of New Generation fast.

Have you noticed that 100% of all analyst readings always are negative on Nintendo? What are the odds of that! I do not ever recall seeing an analyst prediction for Nintendo to do well or better than expected. It is always down. And, bizarrely, it is always up for Sony. PS3 is always poised to comeback every time an analyst opens his mouth.

I don’t know about you, but the odds of analysts always going negative on the Wii and always going positive on “Core Gaming” clearly points to an agenda. It is not probable that every analyst prediction is bullish on “Core Gaming” and bearish on Wii.


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