2.\u00a0\u00a0Manufacturer reported information:\u00a0This would involve a combination of publicly reported information and confidential self-reported information.<\/p>\n
- \n
- \u00a0Strengths: This can be used to extrapolate across a number of markets if you have enough companies reporting<\/li>\n
- \u00a0Weaknesses: Highly subject to misreporting and misinterpretation.\u00a0 Need multiple providers and need the ability to cross check with other data collection methods.<\/li>\n
- \u00a0Key Use:\u00a0 Always use as a triangulation point if available.\u00a0 But never rely on solely.<\/li>\n<\/ul>\n
3.\u00a0Consumer surveys:\u00a0This is asking consumers about their behavior<\/p>\n
- \n
- Strengths: Strong for spotting broad consumer trends and overall product perception.\u00a0 Can also get some solid insights into cross media preferences and demographics.<\/li>\n
- \u00a0Weaknesses: Highly subject to misreporting and misinterpretation.\u00a0 By itself it is almost useless in trying to extrapolate overall market size or product<\/li>\n
- Key Use:\u00a0Use with caution.\u00a0 Best for when a firm understanding of a market has been obtained and you want to gain more understanding of a very specific issue on consumer attitudes and preferences.\u00a0 Never use to extrapolate market size or product performance.<\/li>\n<\/ul>\n
4.\u00a0Monitoring consumer usage:\u00a0This method involves tracking how consumers use a product without having to rely on self-reporting from the consumer.<\/p>\n
- \n
- Strengths: Not subject to misreporting if done properly.\u00a0 Can be used to size<\/li>\n
- Weaknesses: Expensive, potentially intrusive and hard to do.\u00a0 Doesn’t necessarily tell you about actual spending behavior.<\/li>\n
- Key Use:\u00a0 If available can be a key source for analysis and also as a triangulation point if available.\u00a0 However, it will usually be limited to a very specific product, platform or consumer type.<\/li>\n<\/ul>\n
5.\u00a0 Industry Insider Surveys: This method involves talking to key people that work inside the industry and have a deep understanding of key subjects.<\/p>\n
- \n
- Strengths: A core method that is an absolute necessity to obtain a true understanding of what is really going on.<\/li>\n
- \u00a0Weaknesses: Completely qualitative.\u00a0 Time consuming, hard to assess what is true versus hype and involves talking to many hard to reach people.<\/li>\n
- \u00a0Key Use:\u00a0 A necessity.\u00a0 Networking and detailed interviews with many industry insiders beyond what is published or delivered at an industry conference is a necessity for in-depth understanding.\u00a0 However, it needs to be combined with other data collection methods.<\/li>\n<\/ul>\n
Most research firms use only one, or possibly two of the above methods.\u00a0 However, all of the methods have major issues when aggregating even a single market such as the U.S. or even understanding an individual platform like the Xbox 360.\u00a0 These issues are magnified substantially when it comes to estimating multiple markets and multiple platforms on a worldwide basis.<\/p>\n
DFC Intelligence’s triangulation approach uses multiple methods to triangulate and extrapolate overall market size, product performance and directional trends.\u00a0 Of course, with this approach it is necessary in many cases to do an apples-to-oranges comparison across different research methodologies and different tracking mechanisms and different markets.\u00a0 Every research project requires a different solution based on the goal of the project and the availability of information.\u00a0 However, by 1) having an understanding of the limitations of each different approach; 2) using as many different data sources as possible and 3) being upfront about the limitations of ANY market sizing research, it is possible to spot inconsistencies among reported data and come up with a reasonable market estimation that can consistently track market growth and trends over time.<\/p>\n
Yet data sources alone are not the end all to our research. The key assumptions research firms bring with them to their data sourcing is also critical.<\/p>\n
There were several key assumptions built into DFC’s belief system that informed our triangulation approach from the start.\u00a0 These subjective beliefs can often be as critical as raw data because they often determine how the data collection process is organized.<\/p>\n
Among core early DFC assumptions, first, and foremost, was the core foundation that consumers really like games and are willing to pay more for them than many other forms of entertainment.\u00a0 Back in 1994, the market was dominated by 16-bit video game cartridges that sold for $50 to $75, about the same MSRP as today’s top games.\u00a0 However, while many retro gamers will take issue, the games of 1994 generally provided much less multi-faceted entertainment value than the games of today.\u00a0 Nevertheless, most everyone under the age of 20 were flocking to these games.<\/p>\n
The main issue of concern was that, by and large, adults did not play video games in significant numbers. This led many outside observers to relegate video games to the status of toys, and conclude that the segment was close to reaching the saturation point among its youthful consumer base.\u00a0In other words, analysis of the video game industry followed the traditional analysis of the toy industry.\u00a0 It was DFC’s belief that the video game industry would emerge more along the lines of the music and movie industries and be far larger than just toys for kids.<\/p>\n
DFC’s second major assumption was that as game consumers aged they would continue to play games.\u00a0 This was an extremely important distinction because it meant that instead of losing consumers every year the game industry would just grow older and larger over time.\u00a0 This same phenomenon occurred with the music industry in the 1980s.\u00a0 In the early years, rock and roll music had appealed mainly to an under-25 demographic.\u00a0 The launch of music CDs saw a large number of adults going out and replacing their music collection.\u00a0 As a result, the music industry tripled in size in a few short years during the late 1980s.\u00a0The music industry has had its struggles, but bands like the Beatles and Rolling Stones continue to have success with marketing their catalogs across multiple platforms to a truly multi-generational audience.<\/p>\n
It is now obvious that on both core points, DFC was right about the game industry.\u00a0 Revenue from video games has exploded and it is clear that the demographics of gamers have aged along with its initial consumers.\u00a0Consumers love video games and they have become a core part of not only the U.S. entertainment culture but also have had success on a staggering global level.<\/p>\n
The third assumption was that games would come down in price with a wide range of pricing options.\u00a0The thinking was patterned after the high tech industry where evolving and expanding technology led to cheaper hardware, as well as new software delivery mechanisms that led to cheaper content. Our view was that online networks and broadband penetration would both lower the price of manufacturing and increase distribution options.\u00a0In the 16-bit days, prices were over $50 because cartridges stored game code on then expensive memory chips that cost $15 to $30 to manufacture, and which had to factor in the major cut the brick and mortar retail\/distribution infrastructure took from each sale.\u00a0\u00a0DFC thought that the low cost of CDs and the ability to deliver products digitally would greatly expand the market as prices came down.<\/p>\n
On this point, DFC was off by quite a few years.\u00a0 With the launch of CD-based games prices did come down to the $40 range for a while.\u00a0However, manufacturers realized how much consumers love and are willing to pay for top games and they eventually pushed the price up to $50, $60 and even more for certain products.\u00a0Meanwhile the emergence of a broadband, online network was far slower in coming than most anticipated.\u00a0Even in 2010 online distribution and storage of a large game is simply not cost or time effective for most consumers in the U.S.<\/p>\n
Another area that DFC had forecasted would help bring down game prices was the potential to have consumer spending subsidized by advertising.\u00a0Most major entertainment forms are able to attract advertisers when they reach a critical mass of users that spend a large portion of time interfacing with the products.\u00a0Revenue generated from advertisers helps lower the end cost to consumers.\u00a0Of course, television and consumer magazines are two great historical examples of allowing high-end products to be delivered at a very low cost to the end-user.<\/p>\n
DFC was also off in thinking that advertising would help lower game prices.\u00a0 In short, DFC’s belief that consumers love games was so accurate it meant traditional economic principles that should have meant a downward trend in pricing did not occur.\u00a0 Consumers were willing to pay a premium for games, or at least the right game.\u00a0 Revenue wise, top game product launches are the biggest the entertainment industry has ever seen.<\/p>\n
Instead of saying that the core assumptions made in 1994 are wrong, DFC Intelligence likes to believes that its assumptions were actually on target, it was just more a question of “when, not if.”\u00a0 Unfortunately the “when” is always a huge unknown.\u00a0 In other words:”When will broadband and digital storage costs allow for seamless download and storage of game products with a large client?” “When will pricing of games truly reflect their true entertainment value?” “When will advertisers find a way to effectively reach the massive amount of consumer leisure time being sunk into games?”<\/p>\n
These strategic issues are all areas of core concern for DFC.\u00a0In terms of the last issue, on advertisers effectively working with the game industry, DFC Intelligence is launching some major initiatives: 1) DFC is doing some detailed segmentations of the game industry to provide better clarity for all parties involved; 2) DFC is planning to deliver some new research specifically on how consumer products and service companies can effectively use games as part of their marketing mix and 3) DFC is helping sponsor the GameReach event in Boston in May 2011.<\/p>\n
![\"GameReach\"](\"http:\/\/www.dfcint.com\/dossier\/wp-content\/uploads\/2013\/03\/GameReach.png\")
<\/a>GameReach, is a new conference devoted to exploring every aspect of game-based advertising, messaging, and marketing. GameReach is an all day event that will feature leading game industry professionals, researchers, and top advertising and marketing experts.\u00a0The goal is to inform about current best-practices and identify leading edge ideas that are at the center of a major shift in how organizations reach and interact with their customers and audiences.<\/p>\nGameReach came out of the core belief that the growth of computer and video game audiences on a global basis is reshaping media consumption and audience patterns.\u00a0 Marketers and advertisers need to adapt to both reach, and connect to self-identified gamers and people playing games.<\/p>\n
WILL DO AS SIDEBAR<\/b><\/p>\n
GameReach 2011 is part of Games Beyond Entertainment Week – a festival of one and two-day conferences exploring the use of video games and video game technologies in fields beyond entertainment including education, health, marketing, and more.\u00a0 The festival is being held in Boston, MA from May 24-27.<\/b><\/p>\n
For more on GameReach and Games Beyond Entertainment Week visit <\/b>www.gamesbeyondentertainment.com<\/b><\/a>\u00a0\u00a0<\/b><\/p>\n
The thinking behind DFC’s initiatives is that there is a lack of common understanding about how the game industry works, \u00a0the different types of platforms, consumer demographics and the various types of games.\u00a0This is true not only for outsiders looking at the game business.\u00a0 There is also the lack of a common taxonomy within the game industry.\u00a0Game industry professionals tend to think in terms of a specific game type, distribution method or platform. In other words, a developer of games for the iPhone often has a different vocabulary from a marketing manager of a major console franchise.\u00a0 An executive focused on action shooting gamers often has no understanding of the ways companies are reaching consumers on Facebook.\u00a0Even PC game developers often speak a foreign language to console game developers.\u00a0 In short, the game industry has enough trouble communicating within itself, so outsiders from other industries are likely to get very confused.<\/p>\n
Some major issues are: 1) consumer behavior is constantly evolving; 2) there is increasing overlap among consumers owning multiple game platforms and having more diversity of taste in game play and 3) distribution methods are very different based on product type, geography and demographic. Due to the lack of understanding of the consumer digital entertainment sector, many companies have shied away from the space, or even worse tried to enter the game market only to fail miserably.\u00a0 DFC Intelligence’s goal is to provide a strategic understanding of the various segments in the game industry and from that point examine how these segments interact.\u00a0 This requires a wide range of approaches using various different methodologies.\u00a0 At the heart, of this approach, the initial first step is to segment the market and come up with a common taxonomy for what is being covered.\u00a0 Many observers forget this first step.<\/p>\n
It is only after the initial segmentation can the data collection process starts.\u00a0 It should be noted that every topic or issue covered will require a different data collection method.<\/p>\n
As an example we use the following qualitative segmentation of potential game platforms.\u00a0 Of course, it should be noted that this is just an example of an initial roadmap that would be used for further research.\u00a0 Obviously filling in the numbers and details is a much larger project.<\/p>\n
![\"Qualitative_Platform_Seg._1\"](\"http:\/\/www.dfcint.com\/dossier\/wp-content\/uploads\/2013\/03\/Qualitative_Platform_Seg._1.png\")
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![\"Qualitative_Platform_Seg._2\"](\"http:\/\/www.dfcint.com\/dossier\/wp-content\/uploads\/2013\/03\/Qualitative_Platform_Seg._2.png\")
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![\"Qualitative_Platform_Seg._3\"](\"http:\/\/www.dfcint.com\/dossier\/wp-content\/uploads\/2013\/03\/Qualitative_Platform_Seg._3.png\")
<\/a><\/p>\n![\"Wii_Fit\"](\"http:\/\/www.dfcint.com\/dossier\/wp-content\/uploads\/2013\/03\/Wii_Fit.png\")
<\/a>Nevertheless, it is becoming essential for all companies in the business of delivering products and services to consumers to have at least a basic understanding of the game business.\u00a0 Video games as a core leisure time activity are taking up a growing share of not only consumer entertainment dollars but also consumer leisure time.\u00a0\u00a0This is leisure time that potentially could be used as a way for companies to deliver marketing messages to consumers.\u00a0 Furthermore, game platforms have the potential to also deliver many applications beyond just games. This could include applications that are more educational or information-based as opposed to pure entertainment.\u00a0 Already game systems are becoming a great fitness tool with products like the Wii Fit and Microsoft Kinect.<\/p>\n