Accounting sales of digitally downloaded games

With the listing of LittleBigPlanet, the simExchange community has been a flurry on how the stock should account for the game's sales. So far, operators of online gaming stores, Microsoft and its Xbox Live Arcade (XBLA), Nintendo and its Virtual Console (VC), and Sony and its PlayStation Network (PSN), have not publicly released unit sales data for game titles purchased on their online stores.

In the past, some amateur third-party studies have attempted to estimate such sales by intentionally scoring very low while playing the game and then submitting their scores to the rankings to see how low they go. This approximated the number of purchases based on those players who submit their scores. However, it is uncertain what portion of total customers actually submit their scores to the rankings.

LittleBigPlanet was listed on the simExchange on May 9, 2007. Current understanding of the game's distribution is that it will be released in retail packaging along with direct sales through PSN. No downloaded game has been listed on the simExchange in the past. This has resulted in questions on how to price LittleBigPlanet’s stock on the simExchange. Should the stock count only the sales through retail (like other game stocks) or include the sales delivered through online distribution (which appear to be difficult to estimate).

Such a hybrid distribution is relatively new and it is uncertain how the industry will account for all this in the future. However, hybrid distribution has been done before with Valve’s retail and Steam release of Half-Life 2. Would anyone argue that sales of Half-Life 2 over Steam were any less relevant than sales at Best Buy?

One goal of stock trading on the simExchange is to provide relevant forecasts for the gaming industry. Sales of LittleBigPlanet conducted over an online store are no less relevant than retail sales to Media Molecule (the developer of the game), Sony Corp (one benefactor of a successful game on the PS3 platform), and watchers of the industry (who are evaluating if such a product is worth developing).

But aren't online sales difficult to estimate for outsiders if Sony doesn’t break out numbers? The very structure of simExchange game stocks has always assumed the difficulty of ascertaining exact sales information and has always relied on analysis and extrapolation.

What is the point of having a prediction market track something that Sony Corp would already know with certainty? Although Sony likely would not need a third-party source to track its digital sales, trading on the simExchange is a forecast of what is to come, and not simply for tracking the past. Of course, having more reliable past sales data is advantageous for running forecasting models, a prediction market can still be applied to provide another perspective of the future.

Given this, it would make most sense for the LittleBigPlanet stock, and any similar stock, to represent the total sales of the underlying game, regardless of physical or digital distribution. The information problem is a similar one while the goal is the same.