- In October 2010 the NPD Group announced that total content sales in the U.S. for the first half of 2010, across all channels, were estimated at $2.6 – 2.9 billion. But based on the year-over-year growth rates given for the 1Q and 2Q figures for 2011, it now appears that the 1H 2010 figure was closer to $3.3 billion, an increase of nearly $400 million.
- Judging from comments made by Anita Frazier in a note to the press in April of this year, all other forms of video game content sales in 2010 except for traditional new retail content accounted for $5.8 billion. Given the previous bullet point, we can estimate that all those other forms of content sales broke up into $3.3 billion in the first half of 2010 and $2.5 billion in the latter half of 2010, a decline of 24%.
With content reaching consumers through so many different channels, the job of measuring what consumers are really spending seems quite challenging. Can you tell us a bit about how the data is collected for the Total Consumer Spend research?
David McQuillan: Our methodology for developing the Games Industry: Total Consumer Spend estimate leverages many sources, including but not limited to, point-of-sale (POS) data, multiple syndicated NPD consumer trackers covering games and gaming-capable devices, data sourcing from multiple calibration partners, and more.
While it’s a different methodology than what people are used to seeing from POS sales data, it is based on a large number of consumer reported transactions and calibrated using sound market research methodology.
I think it’s just so different from what people are used to in the games industry that it takes some getting used to, but our clients are getting more and more comfortable with how it can be used to help them with their business decisions. As a point of reference, there are many industries, such as the toy industry, which is solely tracked through consumer reported purchases and does not have a POS component to it. It’s not unusual at all.
How often are you producing estimates for customers, and how does that compare to the frequency of data collection for the report? Can you elaborate on that process?
DM: We currently report the information on a quarterly basis. The frequency of data collection varies from weekly or quarterly depending on the primary consumer data source. We synthesize the various sources as they become available and issue our estimate at that time. Our first priority is reducing the turnaround time of our quarterly estimates and our next priority is to increase the frequency of reporting the bigger picture.
We haven't noticed any industry stakeholders – publishers, hardware companies, and retailers – commenting on the Total Consumer Spend estimates. What response are you seeing from them?
DM: We have many clients purchasing the service including retailers, publishers and the financial community. As an indicator of client interest in the information - expanding our tracking of the games industry beyond the physical format - we have been encouraged by many of our current clients to expand this market sizing estimations into Europe and Asia.
[Ed. note: According to the latest press release, coverage of the UK, France, and Germany will begin in early 2012.]
Of course, our clients would like to have the data at a more granular, more frequent level – a goal that we share. This is a first step on what we expect will be a dynamic journey that will require a flexible methodology, which we have developed. The industry and business models are changing too rapidly to not remain nimble.
In our earlier conversations, we noted what appear to be some discrepancies and revision of earlier consumer spending figures for content. What are the factors driving the refinement of those figures?
DM: We are continually expanding our market coverage. One recent example is the expansion of our mobile coverage to expand beyond smart phones to also include deck phones. We are also making refinements to our methodology either in terms of the approach or as the sources of data are improved upon or expanded.
Our goal is to provide the best estimates of the market based on what we know today and the information available to us. We are very candid with our clients that these estimates don’t provide the same level of precision at POS data, but it still provides the best market estimate using widely accepted market research best practices.
In August the NPD Group announced that it had worked with many video game industry players to develop a coherent taxonomy for classifying video game content monetization methods. For example, the sale of content can now be classified by the delivery channel (e.g. brick & mortar store or online retail) or segment (e.g. console or mobile phone), as well as several other categories. How does that figure into how the Total Consumer Spend estimates are produced and reported?
DM: The Games Industry Taxonomy provides the industry with a framework for discussing the rapidly changing market. We will use this taxonomy, which we will revisit and modify as needed due to market changes, to help inform additional areas of spend that need to be captured through whatever data source is best suited to it.
In the details of the report we do refer to the taxonomy to help facilitate the adoption of a common language with which to reference the state of the industry.
Back to those restatements of revenue – will there continue to be restatements of earlier public revenue estimates from the Total Consumer Spend report?
DM: It’s likely.
For example, right now we don’t report on revenues generated by “gaming in the cloud”. As we collect more information we will add that to our estimate as well, and using trend data we may adjust previously reported periods.
We only will do that if there is a client benefit to doing so. Our first priority is to make sure our clients have the best information currently available to inform their business decisions, and we also make a portion of that available to the public, like media outlets, to the extent it helps inform their reporting.