I have a problem. Well, lots of problems but for now let’s limit it to Market Analysts. They who are called on by all media outlets to pass comment on the latest comings and goings in the world of technology, and the very people that we, as gamers, should all hate with an indecent passion…
I don’t malign people the jobs they do.
For example, did you know there’s a job title of “Bikini-shoot photo-reflector holder”? That is as it says. There is also the “Director of Sleep” for Travelodge, where the person in question simply gets paid to sleep in a random room four nights a week to ensure they are of a high standard. There are jobs out there that we all want, or are inherently jealous of, and we hate the people who get them. “Dolphin Feeder”. “Hand Double” (No really, people whose hands are used in place of real stars hands!). Girls, there are even Shoe Models, women who wear nothing but the most heinously expensive designer heels for photoshoots and promotional purposes.
But when it comes to Market and Industry Analysts, I take a deep breath and do my best to contain the contempt I feel towards them. Not because I malign their jobs though – but that so many of them are so unbelievably bad at it that a dead housefly would be a better choice!
So it was decreed that this weekend, with the Wii-U poised and ready to be unleashed onto the unsuspecting masses that would be you and me, that the analysts would be wheeled out in the papers, for gaming sites, for the BBC. And inevitably it sees the return of Michael Pachter, a pantomime villain of an analyst whose arguments and predictions have been so countered and so undermined so much by the very people he should be dictating to that I am shocked that he retains any kind of status as an analyst at all!
Now, no doubt the guy – who is managing director of equity research at Wedbush Securities and therefore clearly no fool – has his piece to say. Indeed, reports are in the flesh he is a terribly nice, polite chap. But he is notably famous not for his correctness, nor his incorrect assumptions as we can’t all be right. He is most famous for his Anti-Nintendo stance. This has been a defining and dominant part of everything he says and does and it is clear he sees no good in Nintendo. He may have a point, if he didn’t come across as the sort of man with a grudge against the company. When Nintendo was doing poorly, he smugly threw stones and when it was doing brilliantly with the Wii, he said that Nintendo was going to be dead sooner or later. I am sure it must be hard to constantly misjudge a company and this might have a lot to do with his infamous opinion on Nintendo, but in the face of all the data put against him, he does come off as naive at best. At worst, his arrogance can be explored and dismissed, as a Mickey MacDonagh did last month on Not Enough Shaders. It’s a good read.
Pachter is not alone though as many have voiced concerns about Nintendo and of course they would be right to. The Wii-U is by no means a guaranteed success; there are many questions hanging over its head, chiefly among which relates to its online network and how in a world where the Internet is so widely prevalent and speedy they will cope when hundreds of thousands try to get onto it in the first few hours of its life, testing and pushing the infrastructure and hardware in a way that you simply cannot account for with software tests bombarding it. The unpredictable nature of users, coupled with the mix of speeds and games being demanded, will definitely test it. Also a good question is whether or not we will have any actual surprises before E3? The release of a new console is never really one of software triumphs, it is usually one or two games dominating proceedings for the initial life as others do their best to get their titles onto the market in a decent condition, but this means the Wii-U will have six months to a year of uncertainty. The Wii succeeded because people bought wholesale into Wii Sports, which came with the machine. It was the game which sold the console. Nintendo’s current attempt at the same is NintendoLand. And only time will tell if that title succeeds in demonstrating the Wii-U to an audience which found itself spoiled and thriving on Wii Sports.
Indeed, that is my greatest criticism from an analytical viewpoint. The Wii Sports phenomenon was important and its importance cannot be understated. You would expect Nintendo to have bundled an entirely new Wii Sports bundle into their new system, even something as silly as Wii Sports HD. Some of the old ones touched up and some new ones thrown in for good measure. It was the piece of software, some would argue the Wii’s killer title overall, that it was bundled as default in each console effectively ensured the success of the Wii as a console, and ultimately the derision of the third-party market as many who found themselves in the Wii world discovered many of its new devotees were not interested in their content at all. The absence at this point of the Wii-U’s life of a Wii Sports release as default is actually as surprising as it is disappointing. I am sure Nintendo want to move on and do new things but I fear and feel that by not doing a new Wii-U Sports for its old users that they may struggle into the middle of next year.
But that’s the thing; I can say that but truth is I can’t know this. Michael Pachter for all his rhetoric can only provide an opinion, as can I, and it is our job to take his viewpoint – and other viewpoints – into consideration but they shouldn’t hold the kind of deep weight that they do. There’s a good reason why; they’ve never really been right.
Analysts at the end of the last generation predicted Sony would romp to victory in sales, Microsoft would be in second place and Nintendo languishing in a distant third. What happened? The Wii Sports thing happened, and Nintendo were catapulted into the stratosphere in terms of sell-through, demand and profit. Indeed, the system was so desirable it survived the recommended retail price being put up! It’s an occurrence that has never happened before and likely will never be repeated. The Wii may be an anomaly in this but likewise, who would have thought Sony would fall from grace so spectacularly? The poor PR coupled with the technically difficult Cell Processor has constantly divided people right from the off, and will continue to do so into the future. In terms of the more traditional gaming sphere, Microsoft and the X-Box 360 has been a third-party powerhouse, dominating in terms of variety and choice. When the X-Box was so light in this regard, it was another massive change that no-one could have foreseen.
No-one got it right. In fact, analysts rarely get anything right.
If you were going to analyse the market as it is right now, the smart money would be on Sony making an exit in the next few years. Poor sales across the company and a reliance on outside support and parts has seen it fail to make any money overall in five years. As Sony restructures and diverts and reforms certain aspects, it will invariably have to take an extremely critical viewpoint of its own Playstation division, notably the limp and lifeless sales of the PS Vita as a current serious problem. If money is being diverted to it to keep it alive, at the expense of other areas, then this new more critical viewpoint will have to decide if the Playstation brand is worth keeping alive or whether it is a monetary sink that no longer benefits the company as a whole. I would hope, as a gaming fan, that they do try to make a better go of it. I would be upset to see it go but at the same time, I was sad to see Sega go. It doesn’t change the fact for five years the company was losing large sums of money across the board. You have to be realistic and if the Vita falls, then the whole division will bottom out. It entirely depends on how desperate and how much actual value is in the brand as a whole; even if it loses money, the brand may have value above its financial status that can be borrowed on to great effect.
Likewise the insistence that Casual Gaming will impact Nintendo. Really? If it impacts the Wii-U, would it not also impact the Orbis or Durango? If casual gaming is such a threat to market stability, why is it that only Nintendo has to worry about it? If the argument is that the Orbis and Durango are focusing on being media houses, then I have bad news for you about the arrival of Smart-TV and 4G Networking. The very things that consoles used to use to sell themselves as progressive – apps like On Demand TV and LoveFilm/NetFlix/NowTV (No bias here, mentioning all three thanks!) as well as the inclusion of social networks like Twitter and Facebook – no longer hold the worth or weight they used to. As Smart TV becomes the norm and the TV takes over as a hub for these services, consoles will invariably have to find themselves differentiating from the TV and becoming something else – perhaps as a games console? The point here is games consoles may invariably find themselves competing in terms of services with the very thing they require to even be usable – the television. If the television and its evolution is doing the same things that differentiate consoles right now, then consoles will need to find new mediums to explore if not video games, and this is an incredibly risky venture. One that is a dark road, where we cannot foresee the hurdles or options laid out along the way. To stand out, games consoles will have to have a unique selling point again. And ironically, games consoles have always had a unique selling point – that they are games consoles.
Also the handheld market shows that the Nintendo 3DS is selling perfectly well and in some cases, above expectation in spite of its poor start. Even with the rise of the Smartphone, the Nintendo 3DS is surviving and indeed, thriving in the market, making Nintendo plenty of money. It shows that there is a market out there in spite of the inclusion and arrival of the Smartphone, and that full-priced games are still selling strongly and in large volumes. Admittedly, the Vita is not doing so well but the 3DS proves that it is not for want of a market – it’s selling to the market that is the most important thing, and the Vita simply lacks the commercial weight and content that the 3DS offers. Many will bemoan that Nintendo charges a bit too much for its eShop content – I cannot disagree, but this is why we have competition and why it is so necessary in the world. If Nintendo has no threat of a rival in the handheld space, no-one forcing its hand, then there is no real need for them to drop their prices. The market effectively belongs to Nintendo. They dominate it completely, and therefore they can make their own rules. That’s the great thing about a monopoly – the absolute control, and it is us the consumers who often suffer terribly for it.
Analysts may have data but it is their apparent disinterest in that data that tends to find them being called out by those of us with a more rational sensibility. You can argue this in different ways, that they are paid to have a particular opinion i.e. as a Strawman to the inevitable rush that proceeds to follow after, or because they hold a grudge or perhaps their involvement in another company that has influenced them. Analysts are human beings and are as fallible as the rest of us – moreso because they are being asked to talk about a market that has never really followed expectations, has never been predictable or fitted inside the typical mould that would be expected. Combining these two together is cause for much alarm, but the media does it and I can’t think why. We do of course need rational criticisms of new technology but rarely does this come from the analysts, who may want shares to slump or rise conditionally for their own benefit or have ulterior motives for their commentary.
Perhaps then the greatest gauge for the initial success of the Wii-U should come from its pre-order sales, and if you haven’t put in a pre-order yet; it’s not likely you will get one for Christmas without paying someone else a small fortune. The Wii-U has in most companies sold out. That’s it. All gone. Tens of thousands of units – if not hundreds of thousands – in the next six to eight weeks will be shipped to people across the world, and we will then get a consumers reaction to the technology at hand. As for the first year? All consoles have a pretty poor first year in terms of software, ideally the Wii-U could move to push more games out but with no actual competition in the market as of yet, in terms of next-generational leaps, it may take the first year as a given and save its powerhouse names for times when they are desperately needed. E3 in June will definitely spell out a more solid, concrete vision in terms of software in the near future but it is a six month wait before the E3 Hype Train gets into motion. Many will lack the patience to wait for that to happen.
Analysts have their place but ideally, for you and me and many others, their input has all the value and worth of a week-old potato chip. Because analysts can’t tell you or me what to like, they can’t predict what games will sell, they can’t predict the market no matter how much they may want us to believe they can and they can’t influence the games being made. In all fairness, they exist as a media quango, the sorts that money goes to when something needs to be said by people who have no real valuable insight into the industry at all, yet do so anyway because someone with some gravitas and experience is needed to pass comment, even if the comments are founded on little more than speculation at best. They come, they surface when something happens to someone and they feel the need for a quick kick in their crotch and then they go silent again, waiting for the next moment where they can come out and punch someone for no really good reason at all. Like the whole ruckus a couple weeks back over accountability for games reviewers, so too must we cast a critical and cautious eye on the analysts who only seem to spawn when it befits their purpose. Either for the money, the press coverage or just because they believe they have a valid role to play.
Thing is, Analysts cannot analyse a market that has always been so unpredictable. Because if they did, they would end up talking themselves out of a paying job – “Well I cannot really pass comment as all the data we have accumulated over the years suggests that we cannot possibly predict the next two or three years with any actual certainty.” Effectively, the response from the BBC or any good paper would be; “And we’re paying you because..?” Honesty in this case would expose their job titles for the shallow and pointless words that they are. They aren’t analysing, they aren’t changing the industry and they’re not basing predictions on anything that would resemble solid data to anyone else. To call it a con would perhaps be extreme, but like “Consulting Consulter of Consultancy”, it’s a job title that you wouldn’t willingly stick on a CV for its vague and laughably ineffectual nature.
It may be a little unfair to suggest they shouldn’t have any part to play though. Because one, that would be wishing them out of jobs – which is definitely a bit of a no-no in my world. For all the mistrust inside I have for them, wishing them out of their job is a morally crummy thing to do and I can’t really have any part in that. And two… we need comical pantomime villains to boo! And they have been performing this service for industry fanatics for many years. So don’t take them seriously and don’t let them get to you. Ultimately, they have absolutely no valuable insight into the market and have no actual power to do anything about how you or I spend our money. We call the shots. Our money is what talks. A company that makes money will continue to live to fight another day – another year in this incredible, crazy and chaotic whirl which we call an industry. Companies that don’t will invariably die. That is progress for you. No-one can say with any actual certainty what will happen in the next two or three years. Shareholders will tend to flock to success and abandon failures. The Wii in terms of shares has been the most viable demonstrator of this very fact; record high share prices in the boom, but when Nintendo and others couldn’t capitalise, their share prices floundered. People will flock to success and abandon in times of hardship. That’s the nature of shares for you. They’re attracted to success. And predicting success in this market is like predicting next weeks lottery numbers. You MIGHT get it right. But the odds are staggeringly low.
Just don’t let these analysts hear us sniggering at them. It must be hard enough as it is. They’re usually well-educated, well-informed people with decades of experience in technology or financial sectors and the best software and teams money can buy them. And all they can do is continue to blag their way through the ever-changing industry and try to stay relevant without giving away that their entire position and job description is founded on no more than gossip, hearsay and greed. That they haven’t been right, and may never be right. Because there is no stability, no predictability, no constant by which to base sustainable long-term models on. Their entire career as an analyst in this field rests on a job title that really has little to no meaning to it.
The job must be emotionally crippling them inside, the torment must be unbelievable. All that education and experience and they’re stuck in a role that cannot change anything at all. And for that, I pity them.
I really, really do.