Aggregating game title digital sales to help predict public game company revenues

It's definitely possible... but there's tracking error

You can aggregate game title digital sales to help predict public game company revenues.

Theory goes something like this:

➡️ Investors are typically looking for inflection points, i.e, how quarterly revenue changes versus prior values, with some view to how that is above/below market consensus;
➡️ Digital sales data (e.g. newzoo games performance monitor) comes in with a 2-week lag, e.g. December data becomes available on the 14th January. That timeliness means you can get a view on sales AHEAD of reporting dates;
➡️ So, compile each title published by a publicly-listed equity and sum its digital sales (scope is US & European 5 major markets) into an “aggregated digital sales” figure for the quarter and compare it with its reported quarterly revenue

Obviously simplistic – the sum of each game title’s digital sales is not the bookings received by the publisher… that ignores platform fees / developer’s cut / game can have multiple publishers.

But you don’t have to be right in a level-sense (numbers don’t need to be the same) but instead is it right DIRECTIONALLY (does it go up or down vs last quarter / year alongside reported earnings)?

The answer to that is yes… sort of (see chart ⬇️):

There’s some obvious tracking error going on (e.g. in chart above you’d have got Q4 ’23 completely wrong), some early views on where this is coming from:

➡️ Complications in tagging digital sales – mentioned earlier
➡️ Missing southeast Asia can throw you off directionally for asia-skewed genres (e.g. MOBAs);

But for cases like Ubisoft, I suspect the biggest issue is

➡️ Matching principle – whereas digital sales is effectively a measure of bookings (i.e. it is registered when the money is sent), revenue is booked on delivery of the obligation. For different games / dlc / microtransactions, different %s of the inbound cash will be registered immediately vs over the following periods when the good/service is delivered.

To do this properly – we need to cross-reference which titles are driving the digital sales and what type of spending (e.g. microtransactions like battle pass vs premium sales) in said title to the companies’ publicly-stated revenue policy in the footnotes.

I.e. if company X recognises battle-pass revenue over 3 months and there's a surge in that live-service spending in March, you need to count that primarily towards the following quarter.

That’s tricky, but doable - the data can be sliced at the title/spending level.

As I’ve said in previous posts, there’s potentially a lot of material data in the gaming sphere not being processed by financial markets.

Please feel free to reach out if it’s of interest.