Vgchartz interviews Sean Wargo of www.tmsage.com, formerly of NPD/PC D - News

by VGChartz Staff , posted on 31 December 2007 / 4,732 Views

In November, Sean Wargo, who currently works at www.tmsage.com, and formerly worked at NPD approached Vgchartz to learn more about the processes behind Vgchartz. After speaking for a few weeks, I asked if he would be up for an interview to shed some light on NPD, and how VGC is perceived on the outside. The text below is a slightly edited version of our conversation. If you work in the industry and would like to be interviewed by Vgchartz, feel free to contact me at jmazel@vgchartz.com

TheSource (2:48:08 PM): Alright. First I'd like to ask the obvious question(s). Who are you? What is your background? Where did you go to school? What do you do currently? Our readers know nothing about you heading into this.

TheMarketSage (2:48:47 PM): Got it. Let’s see...

Who am I? Sean Wargo, President of The Market Sage, a market opportunity consulting practice focused on the CE space.

My company helps companies launch new products by preparing due diligence on the particular opportunity. Specifically I help them figure out what opportunities exist, how big the opportunity is, who the potential customers are, what they want, and who is already in the space. Many times that involves market research, including forecasting trends or consumer studies. The relevance to gaming is that I have two clients for whom I prepare forecasts on shipments of gaming hardware and software. And I have another client who I am assisting with launching a gaming product.

I was formerly Director of Industry Analysis at the Consumer Electronics Association (for 6 years) where I ran their data program and served as spokesperson for industry trends in CE. Gaming was one of the many categories I covered there. Before that I worked for PC Data, Inc doing statistical analysis on retail sales data in the PC hardware/software, and gaming markets. I was Sr. Analyst there for 3 years, including some time working for NPD once they bought out PC Data. My work there was essentially the building blocks for getting into CEA and ultimately for forming my own company. It allowed me to brand myself as a noted industry analyst and to hone my market research/forecasting/statistical skills. I also developed a ton of contacts in both roles.

My eductation: I have an MBA from George Mason University (2004) and a B.A. in Sociology/Research Methodology from the University of Vermont (1993)

TheSource (2:53:32 PM): You have said you worked at NPD previously. When was that tenure? What did you do for NPD that prepared you for what you do now?

TheMarketSage (2:59:16 PM): I worked for PC Data/ NPD from 1998-2001. NPD bought out PC Data in 2000. I currently do much of the same forecasting and analysis of sales data that I did then. I also continue to write and speak about industry trends using a combination of survey and sales data.

TheSource (2:59:48 PM): Might I ask why you left NPD/PC Data?

TheMarketSage (3:01:29 PM): I could see that my previous role as senior analyst at PC Data was going to morph more into a sales role. I was definitely not interested in going that route. Plus, the much more lucrative opportunity at CEA doing what I ultimately wanted to do (analysis) opened up. The CEA job essentially allowed me to create an industry analysis department from the ground up.

TheSource (3:03:18 PM): Sounds reasonable. Can you speak about NPD's procedures then and now? Have they changed? I'm aware that NPD adds and subtracts retailers on occasion, but I'm curious as to the market share changes in NPD coverage over the years.

TheMarketSage (3:06:57 PM): Sure. Essentially the core methodology hasn't really changed. NPD recruits retailers to provide them with SKU level data on a monthly or weekly basis. NPD then maps that data to the appropriate products and aggregates the sales totals up so that customers can see sales and the product and brand level.

NPD also applies an adjustment to the figures based on their estimate of the coverage of their retail panel. The panel was better (i.e. more representative) than it is now because it used to include Walmart. Plus, the Internet, and its fragmented distribution of sales, has made it tough to accurately assess the true size of the market. Thus, while NPD once had perhaps 85% of the market represented in its panel, that figure is now closer to 60-65% depending on the category. The videogames category is probably around there.

By the way -- NPD doesn't really subtract retailers by its own decision. That happens because retailers leave their panel. It is not usually in NPD's interest to cut someone out of the panel. That just lowers their coverage.

TheSource (3:09:28 PM): Well, I was thinking of the recent report of Toys R US leaving. What you said makes me think of a couple things... First of all, why does some data come in weekly, while some data comes in monthly? Second, how much is data really worth if Walmart and others occasionally opt out?

TheMarketSage (3:12:04 PM): Good questions. NPD would prefer all data to come in weekly. However, some retailers just aren't equipped or simply flat out refuse to provide it that way. Ultimately it is the retailers’ decision though.

As to the question of the NPD data without Walmart? Many would argue that it just isn't that valid, but when left with no alternative (until you guys came along), it is better than nothing. The validity is a hard pill to swallow for many though; particularly given the steep pricing customers are forced to accept.

TheSource (3:13:44 PM): How steep is this pricing? Who are the main customers? It would seem if there are only a few customers, then the pricing has to be steep to make it worthwhile to gather the data in the first place.

TheMarketSage (3:17:22 PM): It's a real balancing act. Certainly they need to charge enough to attract the perfect amount of customers to more than cover the costs of producing the data. Charge too much and the customers leave and you are short. Charge too little and you can leave money on the table. That said - I'm not exactly sure what they charge for their data (though I could find out easily). I know that some big clients like Sony were paying $1.5 million each year, but that was for a bunch of categories. My guess is that a yearly subscription to their monthly gaming data would be in the $50k range. However, they do have quite a few customers. MS, Sony, and Nintendo are all at the top of that list. It is likely that EA, Activision, THQ and the other big publishers also subscribe. Many of them just don't see an alternative. That is why you guys are so important. However, I guarantee you they won't ditch NPD in favor of you until they are comfortable with your methods.

TheSource (3:19:04 PM): Well, then let me ask you what brought you to Vgchartz in the first place? How do you use it? Currently, we have about 2-3% hardware coverage from a number of small retail samples that arrive weekly.

TheMarketSage (3:25:19 PM): I heard about it from a fellow analyst who was using it to do some statistical modeling. I was curious and so started poking around for use as another source in my own forecast models. The data looked consistent with NPD and provided a lot for free so it made sense to use it. My questions about the data all along though were why it looked so much like NPD, since mirroring them really isn't the goal. In fact, with their data being way too low to my mind, you should probably be higher. However, it's tough to argue with free. That alone makes me keep going back to see how your data is comparing to others that I'm seeing. Ultimately it is another input. To become the standard would require some positive PR, such as getting your data quoted by one of the console manufacturers or publishers.

TheSource (3:27:14 PM): Well frankly given NPD probably has 20x the current coverage that we do; we believe we're doing a pretty good job. Do you use it for Japan or Others data as well?

TheMarketSage (3:28:05 PM): Definitely. I'd agree there, particularly with the level of detail you are going down to. Boy if you could say that you have Walmart data that would be HUGE to the industry. I do use the worldwide figures since some of my forecasting is global. However I'm much less familiar with the relative sizes of the other markets. My info suggests North America is 32%, Europe 32%, and Asia 32%. The rest of the world is perhaps 3%.

TheSource (3:30:49 PM): Pretty close I'd say. By the end of the generation, China will change that dramatically I think. Two last areas then and I'll let you go. 1) What do you make of the prospects of the big three? Which third parties are set to benefit, which will be in trouble? 2) Anything you'd like to say to Vgchartz readers, me, or ioi specifically?

TheMarketSage (3:35:01 PM): Hmm. The way things look I'd have to say that Nintendo would win this generation with about 35-40% of the installed base worldwide. Sony and MS should split the remainder pretty evenly, so perhaps 30% each. It's possible that Sony will eke ahead of MS, due to the sheer installed base of the PS2, but pricing is really going to hurt them through 2008. I don't think they will really reach stride until 2009. My guess would be that MS will then respond with a whole new console in 2010, in order to pull the momentum back in their direction. Nintendo will wait, riding its own wave until 2011 or 2012, maybe even later.

Not sure about third parties. Clearly EA is going to continue as market leader for awhile. But I am intrigued by the prospect of the XBox Live Marketplace, where game developers could go direct to the customer, thereby bypassing the publisher. In fact, Valve is already proving that can be done through its Steam engine. That could really hurt the publishers.

On the VGChartz front, I'm hoping the gaming industry will start to rally around your figures and begin contributing more inputs. I'd love to see a grass roots/open source movement emerge for accurate and reliable data on the gaming market.

TheSource (3:40:37 PM): Works for me. Thanks for your time. Have a Happy New Year.

38 Comments

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ding001 (on 05 March 2009)

princess (on 20 February 2009)

mmjuju (on 23 December 2008)

cxb88 (on 12 August 2008)

Kai Master (on 03 January 2008)

"Currently, we have about 2-3% hardware coverage from a number of small retail samples that arrive weekly."
Compared to the 60 % of NPD that's still quite a big difference!

The_vagabond7 (on 03 January 2008)

Very interesting stuff, thanks for taking the time swargo, and great job as always source.

Swargo (on 02 January 2008)

Hey guys,
Great to be part of the community. It was my pleasure doing the interview, and yes, I'd be happy to do one again.
On Walmart -- the challenge is that they feel they were burned by a data company in the past. Apparently the company allegedly shared Walmart's data. Hence the company has shut down all data sharing. Getting them in will be a pretty big challenge and will take some trust building. There is great stuff here though, so perhaps we can convince them yet.
Sean Wargo
The Market Sage
swargo@tmsage.com

PS. I have no confidentiality agreement with NPD.

Mark2008 (on 02 January 2008)

hmm, in case my comment wasn't clear... wal-mart data won't just show, how many PS3 were sold in USA..it also shows how many PS3's wal-mart was able to sell.... so from the perspective of leaking out relative competitive weakness...they decided to go secret.

Mark2008 (on 02 January 2008)

I suspect wal-mart doesn't want to advertise that gamestop is picking their pocket.

wal-mart wants to appear to be invincible...when in fact, they aren't.

I like wal-mart...sometimes they do the right thing, but I cannot see it happening here...at least in the short term.

Chadius (on 01 January 2008)

Nice interview. If only we could get Walmart coverage. We'd bury NPD.

OriGin (on 01 January 2008)

I wonder if NPD is going to be happy about their internal processes, workings and prices being discussed openly by an ex-employee? I always thought that most companies own that intellectual property and once you are no longer an employee you have no right to discuss things about their intellectual property openly. I predict this interview will get pulled (or modified).

TheBigFatJ (on 01 January 2008)

This is amazing. No wonder why the NPD is fearful of VGChartz -- they're already on fairly thin ice with the industry and a relatively small organization like VGChartz could pull more weight than NPD if they had walmart coverage.

Punisher (on 01 January 2008)

Nice job to get somebody like him in interview for this site.
Keep 'em coming. :p

BornFirst. (on 01 January 2008)

That was Fanastic, VGcharts should pat them selves on the back for all the hardwaork, and a great community.

Neos (on 01 January 2008)

Awesome interview TheSource!

Sqrl (on 01 January 2008)

Obtaining Walmart data is hard because walmart says "No". Or at least that is how I understand it.

I do know their Supply Chain is top notch and that tracking sales is beyond effortless for them. Their supply chain does things that make most retailers weep with envy, it is one of the ways they keep prices so damn low. They are the epitome of efficiency.

shams (on 01 January 2008)

Great interview, possibly the most important and insightful done on VGChartz to date :)

GhaudePhaede010 (on 01 January 2008)

Why is it so hard to obtain Wal Mart data? Other than that, great read, as usual. I am always interested in getting other industry minded opinions of the work you guys put in.

And great questions were asked.

Sqrl (on 01 January 2008)

Oh and also, I was wondering how much of a difference for NPD there is in monthly and weekly data? Is that an issue of accuracy or is it just a frequency issue with releasing their data to their customers? Or both?

If you're not sure add it to a list of questions for next time (hey, I can hope, right?).

Sqrl (on 01 January 2008)

Wow, simply fantastic.

I'm sure he is a busy guy but I would definitely love to see this become a yearly thing if he is willing. Perhaps if enough of my fellow members would agree we could persuade him?

Great interview, and I always love to hear a new perspective on everything.

hunter_alien (on 01 January 2008)

Cool interview , how the hell did you managed to get it ?

ssj12 (on 01 January 2008)

A+ job Source.

Rath (on 31 December 2007)

Extremely good read, thanks Source and Sean.

TWRoO (on 31 December 2007)

Excellent, although hasn't NPD just added Amazon as a source? or was that lost it as a source?

Avinash_Tyagi (on 31 December 2007)

Glad to see that VGC is making an impact on the industry

fkusumot (on 31 December 2007)

Interesting comments about weekly vs. monthly data. Also good news to hear that the numbers here are starting to be used as method for real world business decisions. Good work!

daactualfact (on 31 December 2007)

Activision's new games like gh4, cod5, and maybe the next tony hawk's pro skater will help the problems it will have against the rich beast that is Electronic Arts!!!!!!

BenKenobi88 (on 31 December 2007)

An interesting read, he was pretty positive.

Dolla Dolla (on 31 December 2007)

Excellent interview, TheSource!

StarcraftManiac (on 31 December 2007)

Nice, those professional interviews with insiders!... Lots of interesting tidbits of info here and there and also nice to see their thoughts about this site and it's goal... :-)...

Happy new year btw!