Sunday, January 19, 2014

Sales Figures, Profits, and What's Good

I have seen many people pull up sales figures and various other indicators of a product's value. The problem is not that they are pointing to these, but that they don't understand how it describes the value of a product. Many video game fans, specifically those who just don't like Nintendo, will point to Wii U sales and claim Nintendo is a bad company.

Another fallacy I have seen is Nintendo's own president pointing to the forecast being wrong and claiming that the 3DS is somehow failing. Yeah, that's really smart Iwata, why not just say "Nintendo sucks" and remove all doubt?

These are fallacies, not because they are inherently wrong or lies, but because they are misrepresenting the information. 3DS did not do as well as they had hoped, that is the fact. This does not mean it is unpopular or selling less than other systems, all other indicators actually state the opposite. The Wii U, one of the two systems Nintendo sells, is having trouble gaining traction. This does not mean Nintendo is in trouble or a bad company, all other indicators state otherwise.

So what do all these numbers and all this data mean? On their own they mean .... nothing. They are completely meaningless on their own. A sales projection will never be perfectly accurate, and often real sales will fall short. The projections are what are shown to the investors to show confidence in your own product. That means you will want them to be a bit higher than realistic, but not so high as to demonstrate arrogance. If the projections are, say, 20% above the actual sales, the investors can safely chalk it up to hopefulness. If the projections are 50% above the actual sales, then you have some explaining to do, but if the sales at least recover the investments, it's a good product.

I know, this makes the projections seem almost inconsequential, and often they are. Always remember, don't panic. Most companies fail, the vast majority in reality, and never even recuperate the initial investments. Investors know this, they play a game of chance when deciding where to place their money by weighing the market and various aspects of the product itself. How well a product does compared to the projections does not tell how good a product is, it only tells what the risks will be involved for future investments.

Sales figures are the key to what is often called "consumer confidence," basically how good something is. But remember, they are not always telling. If you look at a market where only one product is available, and lots of people need it, you cannot use sales as a measure of consumer confidence, because the market is cornered and there is nothing to compare it too. With gaming we have a lot of things to compare it too, and the number of systems entering the gaming market increases every year.

A company is only as strong as it's best selling product, it's least selling product tells nothing of the company's strength. Yep, so the Wii U has no bearing on how well Nintendo does. Stop bringing it up until it outsells the other products. Right now the 3DS is the strongest system for Nintendo, and oddly the entire market. The 3Ds continually outsells all other systems, from all major gaming companies, and holds records in software sales.

The key is the consistency in which this is happening. Since it's release the 3DS, and all it's variants, is producing more sales for Nintendo than any system for any company. Considering the competition that it faces, that's saying a lot. Console gaming is taking a huge hit in sales from the increase in popularity for other platforms. Specifically portable devices that are not inherently designed for gaming. So as a whole the entire industry is balancing out with these other markets, mingling and mixing, thus there will be lower numbers compared to previous generations of similar consoles.

As a whole though, the gaming industry is still doing really well. The reasons for this will stray from the topic, so I will save them for another article. In spite of the balancing out with platforms that are not gaming specific, video games are more popular now than ever, and keep increasing in popularity. So Nintendo did do something awesome with the 3DS, it's a megalith now, a household name and item. I pull out my 3DS in the coffee shop once in a while and have lots of people stop to chat about it, many times I hear "I just got mine, I love this thing." That is consumer confidence that even sales numbers cannot show.

On a final note, someone once said that GTA was "on everyone's list." They had said it was more popular than any game on the 3DS, specifically, in spite of Pokemon X and Y outselling GTA V. The thing is, just because it's "on everyone's list" doesn't mean everyone bought it. If you want your game to be popular, then tell the fans to actually buy the game, then you can claim it's as popular as another.

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