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Marketplace Research (Who do you trust?)

From gamasutra's "Music Up" post mortem:

"A confidential sales report suggested that no single-player PC game would be sold well over the next couple of years in China, even Sakura II. Massively multiplayer games are expected to drive the market, surpassing even the popularity of pirated games."

I was under the impression that Korea's baang phenomenon was a unique one enabled by its particular culture.  (Which wouldn't extend to China, or western civilization.)

But I appear to be in the minority.  It is widely believed that the single player experience won't sell games as well as (massively) multiplayer games in the near future.  (Even on consoles.)  But, "surpassing even the popularity of pirated games?!"  That one's a bit hard to swallow.

So, when deciding on your next project, and your researcher comes to you with data that conflicts with your gut instinct, what do you do?  Or, how do you verify the dependability of the market research you get?

(As a developer, I always get nervous making predictions about a segment of the marketplace in two years.  That's why I'm not in marketing, I guess.)

David Blume
Wednesday, September 4, 2002

When all else fails, bet on the status quo.

Current market research has value, provided you know what the statistics mean and exactly what questions were asked to get the results.  Future market research has it's limits, though.  How many "B2B portals are expected to grow from $20M is sales in 2002 to $600B in 2007" lines do you need to hear?  On the whole, my opinion is that there is too much extrapolation of trends.  Things change, but often much more slowly than expected by "market researchers".  (Gartner Group is famous for these pronouncements)

I liken it a bit to the bull vs. bear on Wall Street.  2 analysts with 50 years experience between them wildly disagreeing on the future direction of, well, everything.  Buy?  Sell?  I don't know, but really, neither do they.

Really, nobody knows the future.  Large companies will place a bet on both red and black.  Smaller companies take their chances.

Also, keep in mind that you don't have to target the "largest segment".  The middle of the bell curve is the most crowded with players.  I'm sure there's a large market of people who are sick of getting their ass kicked in online Quake that would like single player entertainment.

Go with your gut.  Solve the problem at hand.  People want to be entertained.  Entertain them and you have a product.

Bill Carlson
Wednesday, September 4, 2002

id software's next big thing (Doom 3) is going to focus primarily on the single-player experience. Admittedly they're not representative of the "average" development studio, but they clearly don't feel that ganes _have_ to be massively multiplayer.

Having said that, they were working on a online-RPG game of some kind. Then there was a disagreement about company direction and they switched over to Doom 3. Time will tell whether they should have stuck with the online RPG.

Adrian Gilby
Wednesday, September 4, 2002

These studies don't just pull numbers out of thier butts though. They look at disposable income, demographics, PC penetration and growth, pricing systems etc.

The real reason there is so much piracy in China is that most software companies refuse to have a scaled pricing system to match antional income levels. The average wage in China is about $1000/year the avg in the US is 40,000, yet legit software costs about the same. So would you pay $1600 for what is now a $40 game to you? Would you pay $20,000 for a $500 version of Office? Not if you are sane. As for the argument that it would be pirated anyway, it wouldn't. Most software installed here was bought from pirated CD shops for about 5rmb ($0.65). That translates into something like $25 dollars - but with no support, no manuals, and no licence. I have seen some companies with a Asia only version (EA has  few), and they sit side by side with the pirated CD's selling for 18rmb ($2), and they hold thier own.

Anyway, as long as the pricing doesn't change (and it looks like it won't) it is a pretty safe bet that piracy in the third world will continue. I'm sure market research takes that into account too.  Then again, if you being called a pirate for not paying the equivilant of $20,000 for office, you may be wondering who the real pirates are.

Robin Debreuil
Thursday, September 5, 2002

Trust your gut.
If you look hard enough you can find  a study that says "Doom, Doom2, Quake, 2, then 3, look bigger sales with each one, the next hit should be huge."
There are just numbers. I have heard that 50% of all statistics are wrong :-P
About your specific example, online gaming requires good broadband connections. The whole industry is tied to the telcoms and cable companies. I do not know anything about growth in Internet access in China. Here in the USofA I may never get anything better than a dialup connection. I agree that it is a one time thing in Korea.

Doug Withau
Thursday, September 5, 2002

I agree with Doug.  "Trust but verify."  Those specific numbers are weird because another silly number I hear alot says that 75% of people only play singleplayer.

However, if the CONFIDENTIAL data gives some scenarios of reality, and that reality can be verified, then great.  Some advantages of "massively multiplayer" games is that piracy is much harder, and people may be drawn into subscribing to a service.  Maybe some parts of China are getting real internet connections, there's a nascent desire for social gaming, and your game can play on 56k.  If this is true, maybe the data is right.  There may be a gaming boom waiting to happen because the market wasn't there before, even if the technology isn't great.

The nice thing about China is that I hear distribution isn't straightforward.  Less western competition.

Gartner though... yuck.  I sat through one of their lectures.  Basically all you have to do is canvass cheap sources of info and then find out what the buyer wants to hear, a little bit before BusinessWeek writes the same thing.  So thoroughly bad, since you can just email the real people in the know.

Thursday, September 5, 2002

'The average wage in China is about $1000/year the avg in the US is 40,000, yet legit software costs about the same. So would you pay $1600 for what is now a $40 game to you? Would you pay $20,000 for a $500 version of Office?'

.....except the "average" Chinese wage earner is a rice farmer off in the middle of nowhere.  If you really want to come up with a "reasonable" price for software, you need to know the income of your target market and the purchasing power multiplier for China.

'I have seen some companies with a Asia only version (EA has few), and they sit side by side with the pirated CD's selling for 18rmb ($2), and they hold thier own.'

Sure, software will sell if it's the same price as the pirated stuff, but that doesn't mean the "right" price is at that level.  The ease of IP violation drives down the price anyone's will to pay.

Jason McCullough
Thursday, September 5, 2002

.....except the "average" Chinese wage earner is a rice farmer off in the middle of nowhere. If you really want to come up with a "reasonable" price for software, you need to know the income of your target market and the purchasing power multiplier for China.

That is right, it isn't just the number but the purchasing power, however the $1000/month is (very roughly) talking about the target market in cities. We hire tech type people here for about 1000 rmb/month, which is about $120/month, jobs like McDonalds (not the lowest) are 4-5rmb/hour, so about <$100/month full time. Laborers are more like 500rmb/month ($700yr). Good programmers are something like $250/month. This is in Xiamen, Fujian, a very wealthy city and a special economic zone. Larger cities might be a bit higher. As to farmers, which are the vast majority of the population as you pointed out (80%+), I haven't checked recently but I would guess around $200. I don't think the average wage across the whole country is $1000/yr yet, I could well be wrong there though. There are certainly some very rich people in the countryside so it might be geting close to that by now...

For disposable income, rent is relatively high in the cities, food is cheap, utils etc are reasonable. I would guess its is about the same percentage wise as the US. Internet connections are everywhere, ADSL 500mb is about $12/month and it is very good (other than the fact that google is now censored - sorry I'd give you more accurate stats if it wasn't!). Dialup is simlarily cheap, and connections (and computers for that matter) are often shared (like in an apt). The majority of gaming happens in internet cafes though, and they pretty much all use pirated software at this point.

Anyway the point is that no one is going to drop $500 on office, or even $50 on counterstrike. It is up to these companies to put prices that reflect the economics of the region. If they choose to just get their brand in via piracy and wait till the country gets richer, then you can't take the complaints too seriously. I'm not even saying that is a bad strategy, just you are sure of what will happen in the short term.

I do think the gov't here has seen the light with piracy though, not because of US pressure as much as the fact that they graduate thousands and thousands of very bright software engineers every year, and they still have no software industry to speak of. Ping!

"Sure, software will sell if it's the same price as the pirated stuff, but that doesn't mean the "right" price is at that level. The ease of IP violation drives down the price anyone's will to pay."

I agree 100%, but unrealistic pricing drives piracy too. I think EA is very smart to do what they do, because they not only drive out piracy, they develop a sales channel. I'm 99% certain that todays piracy shops will be tomorrows software stores here. They are legit business that also sell hardware and nicknacks. Ironically one of the games I most often see though is NHL hockey - I love hockey, but duh! Still it is a cheap time to do research. I'm sure the basketball games sell better, hmm, maybe thats why I always see the hockey ; ). The other thing, is there are starting to be some companies here that are making software for the domestic market, at domestic prices, and some of them are starting to grow (it seems anyway). So wait outside too long and you may find that you waited outside too long... Everyone seems to think they will swoop in and dominate once everyone has a computer and money for  software, but they may find a mature competitive market that they know nothing much about. Or even eventually competing products on their home turf. One thing for sure is there is plenty of talent and opportunity here, but very few people tapping it - probably because of language I would guess.

Robin Debreuil
Friday, September 6, 2002

David, trust no one. Robin, they might not pull the numbers out of their butts, but they just might as well have.

I half come through a finance bakground, via management consultancy, and I can tell you, the figures mean nothing if you do not know what the assumptions were.

As a case in point, during the boom Gartner (urrrrgghh) and others were coming out with wild predictions of the sizes of xyz markets in 5 years. How did they come up with these figures..... Here is an example.

Company X is entering the widget industry. It is worth £100m today. With VC funding, they expect to have 20% of the market by year end, and be growing at 50% per annum for the next five years.

That makes their business alone worth £20m in yr1, £30m in yr2, £45m in yr3 and so forth.

Now next time idiot from TRF Research comes along, he goes to the 10 different companies in the industry, who each "own" 20% of the market  and be doing £20m in business by year's end.... Hey, we have VC funding right, and this is the NEW economy.

He does the math, and 10 companies at £20m each by year end makes the industry overnight a £200m one.

Next time company X does their projections, they will say that they are still on track to capture 20% of this now £200m industry (hey, it was in business week and in that £25 000 per time Gartner report, so it must be true!).

Repeat this as many times as it is printed in the press, factor in the "guaranteed" 50% per annum growth rate, and it is very easy to end up with stupid figures.

I am not dissing all projections. I am just saying that unless I know every single assumption that went into arriving at that figure, and I agree that every assumption is a valid one, then I just might as well pull a figure out of my butt.

Friday, September 6, 2002

Well then I guess the conclusion might be watch out for funny smelling numbers - you can't tell where they came from...

That is a really illuminating story, whew. Reminds me of the whole 'million homeless in America' fiasco (invented number passed around until it was true), but worse somehow. I was thinking more like if you do an internal market study while trying to target a game, you could give weight to the numbers. I understood anything that is for or by the media or stock anal-ists etc is a bit more suspect because they generally have an agenda to begin with. That being said, I didn't realize it was as bad as you describe - wow... Sounds like wired magazine on a slow news month.

Robin Debreuil
Friday, September 6, 2002

Hey Robin,

I will remember the anal-ists jibe next time some idiot gives me smelly figures or a STRONG-BUY recommendation. Excellent.

Saturday, September 7, 2002

The entire tech forecasting industry is a joke.  Period. 

Saturday, September 7, 2002

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