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The Analyst Primer

The Phylum of the Wild Analyst

Despite their tendency to gather at the same quoting holes, Analysts in their native environment tend to gather into very distinctive groups, each of which have very different needs and habits. If we approach them quietly we can get an overview of how they work in their native environment and a better idea of how to approach them without either scaring them off or making them angry. In this first article, we will look at the classes of Analysts in general. In the subsequent writings, we will delve into each of them, looking at their specific habits and observing some of the alpha members of each tribe.

Financial Analysts: Taking stock of, well, stock.

The first class is that of the Financial Analyst. These are folks whose purpose in life is to look at the financial health of an industry or company with the eye to providing research reports to investors in the stock market, usually institutional investors. They usually work for big investment backs such as Deutsche Banc Alex Brown and Prudential, although individuals can set up shop too, such as the UK-based Games Investor. If the investment bank analyst title rings familiar, such as the folks who just got in trouble for hawking Enron stock, that is right. These folks haven’t had that conflict of interest hit them quite yet, mostly because the game industry stocks didn’t go nuts like the rest of the bubble over the last few years. But the analysts in this area that are affiliated with financial institutions are feeling greater pressure not to be seen as doing anybody any favors, so be careful in trying to make ‘em your buddies right about now.

The Financial Analysts’ focus is predicting the health of a particular market segment or the prospects of a particular company. They will never give a quote that your new title is going to rock the socks off the planet. They might say that the trend for sales of sports titles is increasing, or if you are a big enough company, comment on your overall title and promotions mix. If you are at the top of a genre, they may use you as an example in a report, but if you are successful enough for that, you won’t really need the little boost of PR you’ll get from that. The value you can get from them with an individual title is indirect. They do talk to the press and other influencers a lot, and if you have a cool title, you can get industry buzz out of them if you get to be part of the answer to the perpetual trade show question “What have you seen that’s hot?” They also help provide the basic health of the industry or future trend data the can calm an angry Board of Directors, or help you calm a skittish potential investor in the company.

Financial analysts are usually MBA types, with strong numerical and statistical backgrounds. That means they often believe that trends can be predicted by applying economic and statistical formulas to their crystal balls. Their big need in life is to be the expert in their field for the folks back in the office. They all share the financial analyst background, but they get sent out to the trade shows and on the phone to learn the industry as much as possible. To be valuable to them is to be a resource to help them understand the industry and trends better than anyone else. However, one very, very careful caveat in dealing with them is to never give them something that could be considered insider information. This puts them in a very difficult situation. Instead, invite them to briefings; give them all the press materials side by side with the press. To differentiate, spend more time with them showing them the games or explaining the information that has just been disseminated.

The Men Working on the Retail Chain Gang

The next classification of analysts is the Retail Analyst. They are the group that tracks the retail chains. These folks serve at the pleasure of one of the most important groups in our world, the buyers and merchandisers of the retail stores. These are the folks who will decide how big an order to place for your title and whether to highlight it in that Sunday circular. They do care about how cool your game is and if there is going to be a market for that type of game at all. They are also sniffing all around your butt to see if you smell like a winner. For them this has a lot of aspects, beyond the coolness of the game. They are looking to see how effective your packaging is so they know if it will jump off the sheves. They want to figure out how good your press coverage is likely to be and when it will hit relative to the sales cycle. And they want to know how much you are planning to spend on marketing and how effective that campaign is going to be. They’ve seen lots of great games in the $9.95 bin.

The retail analysts (Retail Analysts) are a combination of ex-marketers and journalists. They spend their lives living around sales types, so they have high level BS detectors. They also don’t get treated as well as a general rule by folks who aren’t in sales or retail channel and this bugs ‘em. Whoever talks to them should treat them with the respect that comes to someone who holds one of the keys to your sales order. And the pitch should be not just why is the game cool, but how you guys are making it so customers jump out of their Barcaloungers to go to Wal-Mart and get it. Probably a team of the product guy and channel/sales guy would work best. Just make sure they pretend to really love and respect each other for this meeting.

This particular group has been having a very hard time in recent years. There are a number of publications for the retail chain that have gone out of business. This isn’t because the retail chain doesn’t want information, but they are getting it in other ways. “There are much fewer publishers these days.” says Karen Conroe, a Group Brand Manager for Ubisoft. “So the retailer buyers get the information directly from the source.” According to Conroe, the junior buyers tend to watch the game industry websites, but the senior buyers often won’t even do that. “It’s brutal. The senior buyers go on their guts. They want to see your marketing program and don’t even want to look at the game unless you are pitching it as a technology innovator as it’s big sales edge.”

The one type of analysis that has proven of perpetual value is typified by The NPD Group (www.npd.com). Their main claim to fame is a gathering of the sales figures from a collection of sources and presenting them both in current and historical form. The theory is last years sales are as good an indication of the future as anything else. They also provide analysis based on these gathered figures. The big challenge, of course, is the largest retailer in the country, Walmart, does not share their sales figures as a matter of random principle. (Nobody can figure out why…we think they’re just being snooty.) One of the best measures for the accuracy of figures like NPD is comparing them against your own sales figures. “We found our figures could be off their estimates by as much as 30 percent,” according to Conroe. “But these numbers are very valuable to us. We are the experts, we just need the data.” she said.

The Trendy Analysts

The next class of analysts is that of people who make their entire living off of predicting the trends in the wonderful world of technology business. These folks are usually offshoots of editorial outlets and so tend to be ex-journalists. They tend to produce two types of reports: overall industry sales trends, and technology predictive reports. The primary consumers of these reports are industry executives who don’t necessarily know about a particular area and need to be educated, and managers who are preparing MRDs (Market Research Documents) to help justify building a particular title or technology product. The rational is that since there is no advertising with these reports, there is no pressure to be anything but brutally honest. All the funding for the reports come from their high price tags, or the yearly fees paid by large institutional subscribers.

The irony is they will give out these reports, or at least the top level of them to journalists like water. The more often they are quoted, the more the credibility of the reports are raised and the more subscribers they get. The big dogs in this group are IDC and IDG. (Actually, IDC is owned by IDG these days). IDC is IDG’s research arm. Their main game industry analyst is Schelley Olhava. Her official title is Sr. Analyst Consumer Devices, and she comes from research background at a big company, and spends as much of her time covering home networking and games. Like most of her peers, when you read her bio, a big portion of it is dedicated to showing how much she is quoted by impressive sounding press. This is the analyst’s equivalent to “publish or perish” in academics. The types of publications IDC puts out are Trend reports, news flashes and user surveys. The prices range from $4500-$1500, but since the latter price can be attached to things as small as a one page news flash, clearly the focus is on getting your company to subscribe. Companies such as IDC cover huge areas of the business community, so even finding game coverage specifically can be a challenge to navigate.

One of the most respected Analyst groups in the game space is DFC Intelligence (www.dfcint.com). This is a much smaller group, but they are dedicated to doing trend analysis of the game industry as their primary focus. Their president, David Cole, is actually an ex-lawyer who started the group in 1994 to focus on the game area. “I became convinced that it [the game industry] had some of the greatest growth potential of any of the "new digital age industries,” Cole says. “We currently have seven people and generally run anywhere from five to ten. We use a lot of freelance work. The type of backgrounds we look at varies greatly. We have had quite a few MBAs, ex-industry executives, as well as journalists. The hardest thing to find is someone that has a research background, analysis capability AND writing capability.”

They spend a great deal of time talking to folks at all levels of the game developer/publisher food chain. To be successful with them, they want people to be straight and understand their business. When they talk to developers/publishers “We like to get real insight about their business and where they think the industry in general is going” said Cole. “What we don't like is people contacting us, pitching a lot of hype and not seriously understanding what our coverage is about. We are pretty good at reading through hype and are more likely to be responsive to someone that is also willing to be honest about their business and products, warts and all.”

The Game Industry Analysts

The gaggle that describes the Game Industry Analysts is very interesting indeed. These are the folks, some gamers, some ex-journalists, and some misc. who have hung up shingles to create what they each hope is the gamer and game industry professionals first destination. Their goals in life are quite different from the previous groups of analysts. “The number one goal of game sites is to drive traffic; the number one goal of the rest is to protect their credibility” according to one industry executive we spoke to. The revenue is primarily generated by advertising, as opposed to direct selling of their reports and commentary for high price tags. This means they are quite susceptible to the standard pressure from advertising to editorial, particularly in these exceptionally difficult times.

The big players are IGN.com and Gamespot.com. Both focus on the industry from the point of view of the advanced user, which also happens to work for industry executives. The products advertised on their sites are game titles to the consumers, but the industry execs tend to got to the sites on a regular basis to check and see what’s going on, and the editors of these publications are often quoted as experts in the mainstream press. Gamedaily.com is more focused directly at game industry folks, with primarily a news and update focus. You can tell by their advertising, which can range from a Nintendo Gamecube ad to the latest version of Maya. They don’t do a great deal of analysis, acting primarily as a pass through for press releases and updates.

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