What Industry Analysts Do, What Game And Tech News Sites Do

The way that game/tech sites report statements from industry analysts as though they were reliable, or even useful or noteworthy to consumers has always pissed me off. Occasionally they’ll report these statements as “Get a load of the crazy things analysts say!”, but even this is kind of missing the point. Here’s a couple of choice quotes from the most well-known games industry analyst, Michael Pachter, from a piece in Game Informer #13, that illustrate the problem with this approach:

“Over the longterm, I generally make a number of mistakes that offset one another, and the sum of all of my mistakes comes out very close to zero.”

Pachter is talking about earnings/sales predictions, and what he’s saying here is that it doesn’t matter if an analyst is right or wrong, especially about an individual prediction. He goes on to say:

“So, in order to do my job right, I don’t have to be right ever; I can be wrong with all my predictions, so long as the low estimates are offset by the high estimates, with the total being very close to my estimated total”


Pachtaku, I Choose You!

So why would game/tech consumers be the slightest bit interested in the predictions of a guy who, himself, basically doesn’t care if he’s right or wrong? The answer is simple: they wouldn’t. And nor should they be, as Pachter also says, “My job is not to talk to journalists, it’s to talk to investors,” (his only incentive to do so is self-promotion) and “most of what I say is just opinion,” (based on models, but still…) and most importantly:

“Since my job is to get the big picture right, I can afford to be wrong often on the small stuff.”

This is crucial, and illustrates the problem with game/tech sites’ reporting of analyst statements: they focus on the small stuff, not the big picture. They focus on analyst predictions of the pixel density of the next iPhone screen, or whether the PS3’s successor will be accompanied by an online cable network. While there’s something to be said for analysis of manufacturing supply chains to make predictions on hardware details, the cases where that’s relevant are pretty scarce, for a whole host of reasons.

The big picture that analysts are most concerned with is about sales and earnings, not specific details of products, or features or launch dates. When they make predictions about these details, they’re generally not based on much more than guess-work, and what research they are based on is focused on corporate strategy, not any kind of inside knowledge of product development.

Future events such as these may affect you, in the future.

Criswell predicts the decline of used game sales! Future events such as these may affect you, in the future!

The fact is, analysts are concerned with providing financial advice to investors, and specifically to really big institutional investors, not to individuals. ¬†What they say is generally of no actual interest whatsoever to the individual video game or gadget consumers who read sites like Kotaku or Engadget. But the drive for ad revenue based on hits, and the controversy that drives hits, means that game and tech sites will publish analyst statements even though doing so doesn’t serve the interests of their readers. And this is a classic example of how ad-based funding subverts news reporting, a problem that few sites seem willing or able to address. It’d be a small step, but swearing off reporting analyst statements at all would be a good start.