A Tree Falling in the Forest

I pride myself on my “brilliant grasp of the obvious.”   But sometimes concepts bathed in divine light before my eyes are hidden to the entire world leaving me sitting like the solitary school-boy laughing to himself in a corner while the world doesn’t know why.      My gift tells me Zynga is in a good place. For those of you who feel I put too many words to my thoughts on this blog, this time I will get to the point before I digress.   Even though you cannot swing a dead cat without hitting a Zynga naysayer, show me one person in the business who would not give their left nut – women included – to be in Zynga’s position today.    Lots of these well intentioned but sadly misguided folks are offering advice and statements about what should be done, and I will certainly start listening,   as soon as one of them shows me the 2 plus billion dollar company (Zynga’s current “depressed” value) with 60 million people a day checking in that...

For the fourth straight month mainstream media is reporting declining sales and the demise of our business. I am amazed when I read an article about rumors of seconds old Playdom in discussions with Disney for an acquisition at a valuation of USD 600 million or Zynga securing financing at purported USD 2 billion valuation while analysts and commentators say the game business is dying. Are they making games, or just money? We are not in the midst of a declining market, we are suffering from a lack of measurement. Genius analysts are out there with quotes like, For the month of June, Pachter predicts game software sales measured by NPD will decline by 8% from the same month last year. Doug Creutz of Cowen & Co. predicts a 17% decline for June, and said he expects the slowness to continue through the summer. and they treat it like it is relevant to anything at all. It is kind of like saying "buggy whip sales" are falling through the floor so consumers obviously d...

I guess doom and gloom stories get more attention than happy stories. From personal experience, I can tell you, it is easier to write an angry rant than a happy smiley one. At least it is more fun. Maybe this is why Jeetil Patel and Wagner James Au decided to predict the end of the game business last week. Mr. Patel chooses not to recognize diversification, so he says game companies must eat each other to survive - "This would imply that publishers need to gain share cycle-to-cycle to achieve similar levels of profitability." Mr. Au's story rose to number 1 on gametab when he chose to compare a month's GTA IV sales to several years of San Andreas sales to tell us the market is just not what it used to be. Mr. Au is right, it was a much better world when Presto made The Journeyman Project for USD 175k and sold it direct for USD 99. It was even better when Jordan Mechner made Karateka for a negligible amount of money in his bedroom and Broderbund sold through 500k. Mayb...

Where do these guys come from? This morning a new doom and gloom analyst report came out from Goldman Sachs about the game business. Apparently, for the first time in the history of the business, software sales will peak mid cycle. Thank you for the clarification Mr. Higginbotham. Don't listen to me though, this is what he says: Goldman Sachs analyst Robert Higginbotham has stated that video game sales may have peaked this year. And as one of the biggest beneficiaries of the video game boom, leading retailer GameStop may be negatively affected by a slow down, he said. "We see GameStop shares as poised for a pullback as industry growth remains on a path toward deceleration from its current peak," Higginbotham wrote, according to MarketWatch. Assuming his analysis is correct on the software side, which I will address below, apparently, Mr. Higginbotham does not believe Gamestop will enjoy any benefits from the inevitable price decrease in consoles. As I wrote in the l...

The game analysis business is very competitive. They like to make important or controversial announcements to get some ink. As we see in the graphic I stole from Kotaku's " Analyzing the Analysts " post, historical accuracy does not seem to be an impediment to their continued pronouncements. But sometimes, analysts askew wild statements like "EA will postpone GTA IV" or "iPhone is not a viable gaming platform" in favor of an appearance of real live analytics. In this case, UBS's Ben Schachter established a premise, supported by a bunch of numbers to predict GTA IV sales. Unfortunately, he ignored some facts. Why cloud the model with real world facts, when your predictions can be so much more accurate without them? Schachter says the performance of GTA IV should be measured by tie ratio to the installed base. This is a great addition to the universe of video game analytics. Really. It is the first time I have seen it incorporated into t...