Building a solid research foundation
An article I read this morning in one of the many CE and DTV trade journals that pop into my inbox daily contained some data points regarding pay-TV operator subscriber rates that I found intriguing. The trade journal reporter believed that one of the data points was inaccurate.
Accuracy is the lodestone for the market research industry. Without a solid factual foundation, how can one build forecast models that stretch 3-5 years into the future? The importance of up-front legwork, open communication, primary research and secondary research all lead an analyst to concrete, realistic forecasts that can stand up to scrutiny. How can we achieve accuracy? We do so through transparency: definitions, presentation, and important distinctions made in reporting must be transparent to the reader.
Definitions are of the utmost importance. Without them, one cannot categorize and analyze data. In the most recent report I finished, IPTV: A Global Market Analysis – 2011 Edition, I established a rather firm definition in the first sentence of Chapter 2: “IMS Research defines IPTV as the delivery of multimedia services over a managed IP network for a subscription fee.” It seems that many people define and count Verizon’s FiOS subscribers as IPTV. IMS Research does not. Their use of QAM modulation and the delivery of linear video over coaxial cable rules them out as IPTV, despite the fact that they utilize IP for VOD and other application functionality. If one were to count Verizon because of this, then what about DirecTV’s IP VOD service? No one would make the argument that they are IPTV. This can lead to a wide variance in reporting from research firm to research firm, as subtracting 3.4 million some-odd subscribers out of the world IPTV market is a significant potential percentage. The key is to be clear and up-front with the definition.
Presentation and distinction are other interesting aspects that are often overlooked. The way data is presented can have a large effect on how it is received and interpreted. If someone references DirecTV as a leading global operator, but does not include DirecTV’s Latin American business unit, one must do so with the distinction made, and the logic behind that distinction. Put together, DirecTV would clearly be the world’s largest operator, but to present only North American numbers moves them a few ticks down the list.
If one wants to list France Telecom’s Orange as having x subscribers, it is important to distinguish whether or not you are speaking of France-only numbers, whether or not IPTV and DTH are both included, if they are considered separate subscriber bases, and so on. Distinctions must also be clear and consistent. Putting together a table of the world’s top 10 pay-TV operators loses meaning if the UPC Broadband (Liberty Global) subscriber base is presented in aggregate across all countries in Western Europe, while the DirecTV number does not include LATAM subscribers. It loses even more if UPC’s Eastern European business unit is ignored.
Operators frequently make analysts’ lives difficult, as they have various agendas behind the way they choose to present subscriber data, if they choose to disclose at all. Frequently, operators will present subscriber numbers as RGUs, or they might count the number of set-tops deployed, or they might do any number of things with their data. That’s what makes us market analyst’s jobs important.
One way of making our lives more sane is to ensure the foundation our forecasts are built upon is rock solid. For if it is at all sandy, within a year or two, the forecasts will wither away, and a consistent accuracy is lost.