Kotaku Analyzes The Analysts

How many places (including here) do you see headlines that declare “Analysts predict [insert mindblowing prediction here]…”? Video game industry analysts weigh in on everything from retail sales trends to the vast landscape of online gaming, lending their professional insight, number crunching skills, and frankly greater resource base than the average everyday gaming journalist. But had anyone ever taken the time to analyse the analysts? Are they accurate? Full of crap?

Kotaku, bless them, took on that very challenge by looking at some of the most prominent video game industry analysts in the business, checking out their predictions and marking them true/false relative to what actually came to pass. They looked at 10 different analysts and 10 predictions from each and frankly, some of the numbers weren’t that great. The most accurate analysts put up some decent numbers, with three ringing up predictions that came true 60% of the time. Two out of three ain’t bad right?

One of the analysts examined, Michael Pachter from Wedbush Morgan Securities, explains why we gamers should care about analysts, despite their inaccuracies:

“You don’t need analysts, but investors do. The companies that make the games [Kotaku] readers enjoy need capital in order to develop those games. Investors provide that capital. Without analysts, there would be lower demand for video game stocks, share prices would be lower, and compensation would be lower for the developers. That means lower quality games, and [Kotaku] readers would be unhappy. So in a perverse way, equity research analysts make it possible for publishers to make great games.”

The article, Analyzing the Analysts, Episode One describes the study methodology and has a brief rundown of each of the analysts, delving both into their qualifications, and a discussion of their accuracy results. Really interesting stuff, so please head over and have a look!