Tariff Impacts

 Tariff Impact:  It isn’t Pretty

Given the recent announcement of two  10% tariffs on imports to the US from China, the game industry is looking at 20% minimum price increases on the items we import from China, which is a whole lot of products. The idea, as the administration has said multiple times, is that foreign governments pay the tariff, billions of dollars flow into the US treasury and, to avoid tariffs, companies flock to move their operations to the United States. None of which is going to happen. Remember the tariffs put into place during the first Trump administration? They resulted in fewer jobs in the US, reduced GDP by a full 1%, cost taxpayers about $900,000 per job saved, cost the average household just over $1200 per year,  cost the American workforce about 245,000 jobs, and did nothing to reduce the national debt.

Here is what the game industry can expect to see in terms of price changes this year as a result of the tariffs.  Publisher manufactures a game in China.  Why? Because it takes 2-4 years to create a new supply chain. Companies cannot shift their channels of distribution within a month or so. Ergo, publisher bringing the product into the US has to pay a tax of 20% on the imported product. A game that cost $10 to manufacture and ship will now cost $12, with $2 of that going to the US government. Distributor margins are about 10-15%, at least they were when I worked in distribution decades ago. If anyone in distribution wants to share more recent margins my email is at the end.  Distributors will have to sell the game to retailers for about $18. If retailers want to keystone the game’s price to make a 50% margin, the price goes to about $36 when sold to the consumer, about $6 more than the game would sell for without any tariffs. 

Another problem is the general uncertainty regarding the imposition of the tariffs. The Trump administration has said it will impose tariffs on Canada, the European Union and Mexico than changed its mind almost the next day, pushing back the start day. Although we probably won’t see any roll back, absent negotiations, of tariffs on Chinese imports, it could happen What do manufacturers do, absorb the cost of the tariff in the hope/expectation that the Trump administration will roll them back or figuring them into the cost of good sold as a fact of doing business, keeping higher prices which could reduce the number of price sensitive customers buying? If the tariffs get negotiated away and manufacturers increased prices, do they roll back the price and leave other members of the channel holding products with tariff inflated prices?

From what I have read, expecting increased tariffs after Trump won the presidency, a significant number of manufacturers chose to ramp up production runs during the last quarter, opting to warehouse product brought into the US under the previous tariff structure and have enough inventory on hand to avoid tariff fueled price increases through the end of Q2 or beginning of Q3, with the hope that the Chinese tariffs get negotiated away and the 25% tariffs on steel and aluminum imports never get imposed but it does not look promising.

Hasbro Layoffs

 

In case you missed it, Hasbro gave about 1100 of its employees an early Christmas present by announcing their layoff off last Monday.  (See “Hasbro to Lay Off Another 1100 Employees”). From the lists of those laid off I have seen, it looks like a lot of design staff from the Dungeons and Dragons and Magic the Gathering development and promotional area, which seems silly to me since those departments are where Hasbro is currently making its profits.  Should you want to read it, here is the email announcing the layoffs from Hasbro CEO Chris Cox (copied from the Wall Street Journal):

“Team,  

A year ago, we laid out our strategy to focus on building fewer, bigger, better brands and began the process of transforming Hasbro. Since then, we’ve had some important wins, like retooling our supply chain, improving our inventory position, lowering costs, and reinvesting over $200M back into the business while growing share across many of our categories. But the market headwinds we anticipated have proven to be stronger and more persistent than planned. While we’re confident in the future of Hasbro, the current environment demands that we do more, even if these choices are some of the hardest we have to make.

Today we’re announcing additional headcount reductions as part of our previously communicated strategic transformation, affecting approximately 1,100 colleagues globally in addition to the roughly 800 reductions already taken.

Our leadership team came to this difficult decision after much deliberation. We recognize this is heavy news that affects the livelihoods of our friends and colleagues. Our focus is communicating with each of you transparently and supporting you through this period of change. I want to start by addressing why we are doing this now, and what’s next.

Why now?

We entered 2023 expecting a year of change including significant updates to our leadership team, structure, and scope of operations. We anticipated the first three quarters to be challenging, particularly in Toys, where the market is coming off historic, pandemic-driven highs. While we have made some important progress across our organization, the headwinds we saw through the first nine months of the year have continued into Holiday and are likely to persist into 2024.

To position Hasbro for growth, we must first make sure our foundation is solid and profitable. To do that, we need to modernize our organization and get even leaner. While we see workforce reductions as a last resort, given the state of our business, it’s a lever we must pull to keep Hasbro healthy.

What happens next?

While we’re making changes across the entire organization, some functional areas will be affected more than others. Many of those whose roles are affected have been or will be informed in the next 24 hours, although the timings will vary by country, in line with local rules and subject to employee consultations where required. This includes team members who have raised their hands to step down from their roles at the end of the year as part of our Voluntary Early Retirement Program (VRP) in the U.S. We’re immensely grateful to these colleagues for their many years of dedication, and we wish them all the best.

 

The majority of the notifications will happen over the next six months, with the balance occurring over the next year as we tackle the remaining work on our organizational model. This includes standardizing processes within Finance, HR, IT and Consumer Care as part of our Global Business Enablement project, but it also means doing more work across the entire business to minimize management layers and create a nimbler organization.

What else are we doing?

I know this news is especially difficult during the holiday season. We value each of our team members – they aren’t just employees, they’re friends and colleagues. We decided to communicate now so people have time to plan and process the changes. For those employees affected we are offering comprehensive packages including job placement support to assist in their transition.

We’ve also done what we can to minimize the scale of impact, like launching the VRP and exploring options to reduce our global real estate footprint. On that note, our Providence, Rhode Island office is currently not being used to its full capacity and we’ve decided to exit the space at the end of the lease term in January 2025. Over the next year, we’ll welcome teams from our Providence office to our headquarters down the road in Pawtucket, Rhode Island. It’s an opportunity to reshape how we work and ensure our workspace is vibrant and productive, while reflecting our more flexible in-person cadence since the pandemic.

Looking ahead

As Gina often says, cost-cutting is not a strategy. We know this, and that’s why we’ll continue to grow and invest in several areas in 2024.

As we uncover more cost savings, we’ll invest in new systems, insights and analytics, product development and digital – all while strengthening our leading franchises and ensuring our brands have the essential marketing they need to thrive well into the future.

We’ll also tap into unlocked potential across our business, like our new supply chain efficiency, our direct-to-consumer capabilities, and key partnerships to maximize licensing opportunities, scale entertainment, and free up our own content dollars to drive new brand development.

I know there is no sugar-coating how hard this is, particularly for the employees directly affected. We’re grateful to them for their contributions, and we wish them all the best. In the coming weeks, let’s support each other, and lean in to drive through these necessary changes, so we can return our business to growth and carry out Hasbro’s mission.

 

Thanks,

Chris”

A couple of thoughts:

1.       While Cox does mention increased supply chain efficiencies (which I bet still rely heavily upon southeast Asia) and increased direct to consumer capabilities (i.e. promotion and sales) there is no mention of any increase in focus on the retail part of the channel. We have already see increase focus on B2C, with an increase in monthly Secret Lair releases and Hasbro Pulse, so it will be interesting to see what else Hasbro moves into the direct channel

2.       No use of the term firing anywhere in the letter, just reductions and transitions.

3.       If a business needs to cut costs, letting staff go is almost always the first option as payroll is always “low hanging fruit” in an organization. The supply chain modifications mentioned by Cox usually take years to make, hence why we saw no rapid shifts in distribution during epidemic (“See JIT, ROE and the Pretty Overblown Trucker Shortage”)

How to Make a Profit Running a Game (or any other type of) Store

 “Buy Low, Sell High.”

There you go, that, in the proverbial nutshell, is how you make a profit in the game business, actually in any business.  Or, paraphrasing something a friend of mine, Marcus King (late of Titan Games and Entertainment, more recently with Troll and Toad) repeats from a mentor of his years ago: “You make your profit when you buy and your cash when you sell.”  The lower for which you can produce or buy a product, the more money you make when you eventually sell it.  Simple, right?

Not completely.  The above is indeed the basic of pricing but there are a number of different strategies and tactics a  business can take with its pricing, depending on what sort of image it wishes to project.

First, and most basic, is cost pricing.  You take the cost of the product you purchase or make (hopefully low, see above), increase it by an amount sufficient to generate enough money to cover the business overhead and provide a profit that you consider sufficient and sell it for that price.  Fairly straightforward, though not necessary simple, as this method does require you to know your overhead costs and how to break them down in order to assign them to items for sale.  This also highlights a recurring problem game stores have with a price for their products set by the manufacturer (manufacturer’s suggested retail price or MSRP).  Since customers are notoriously reluctant (with good reason) to pay more than the marked MSRP for items, having a price pre-set by the manufacturer constrains the amount of gross profit the store can earn from the item,  ergo the only way for a retailer to increase profits is to cut costs.  This is why game stores really dislike short discounted items from manufacturers, as a shorter discount on a product that much less money available to cover the costs associated with running the store.

Demand based pricing and competitive pricing are the two other major strategies a game store can choose to adopt when setting prices.  Demand based pricing derives from economic laws of supply and demand:  As supply decreases, price increases.  As demand increases, price increases.  A perfect example of this is collectable card games such as Magic and Yu Gi Oh.  Within any new release of either, there are always 1 or 2 cards highly desired by players.  The price for these cards quickly rises, due to demand, with the prices for the foil versions of the same cards priced even higher, this however, due to scarcity/lack of supply.  If players find these cards not as playable as hoped for or they cycle out of the preferred tournament environment, supply remains the same but demand drops, causing a reduction in the price a retailer will find customers willing to pay for cards, Magic’s Jace the Mind Sculptor card a perfect example.

When a store opts for competitive pricing, it is a good thing from the consumer’s point of view, not so much from the retailer’s as this means you reduce price in order to either grow market share or meet prices offered by competition on the same products.  Typically a retailer will cut prices in order to attract customers drawn to a lower price.  Magic packs are a classic example in game stores.  Hoping to attract more customers, mainly the price conscious kinds, a retailer cuts the price on Magic boosters to $3.50, 12.5%.  Other stores in the area have three choices:  ignore the price cut and either sacrifice those price conscious customers or determine some other way to retain them, meet the price cut and sacrifice some profits to keep customers, or exceed the price cut to keep those customers and attempt to draw in price conscious customers from the competing store.  If you choose option three, expect the other store(s) to cut their prices to meet or beat yours and, next thing you know, you have a full-fledged price war on your hands.  Great for the consumer, really bad for the store as that money you are giving up from profits is money that would otherwise go into running your store.  Price wars are usually won by the store with the deepest pockets as lesser capitalized give up, though really, no store ever wins a price war (though it is rather good for manufacturers as long as it lasts and as long as no store goes out of business).

So, returning back to the beginning, stores make profits by buying a product as cheaply as possible, selling it for what the market will bear and competing as much as possible on things other than price.  Do that and you have a really good chance of staying in business

How To Get Rich In the Game Industry

 SO you want to open a game store? Much like real estate, the joke goes that the easiest way to make a million in the game industry is to start with $2 million. Very few people get rich in the game industry. The only ones of which I know for sure are Richard Garfield and Peter Adkinson. One of them created Magic: The Gathering and the other one published the same game. Catching lightning like that has happened ones in about 30 years. A goodly number of people in the industry do well enough to have a solidly middle class lifestyle and even more do it because they love it, working very long hours for a lower middle class/upper lower class income. If you want to get into the industry, make sure you have enough capital on hand to cover ALL of your expenses for the first 6 months and do not expect to draw an income from the store for at least 3 years.

Card Supply problems

Wondering why you cannot find toploaders except at 4 to 6 times the regular price online and virtually nothing here in the store? According to the manufacturer, it is primarily due to the demand for PPE. Seems toploaders and much personal protective equipment are made of the same type of plastic so the plastic that would normally go into card supplies instead winds up  in PPE, causing the shortage.

Hasbro Sales for 2020

 This look at Hasbro sales for the third quarter is pretty interesting. https://icv2.com/articles/news/view/46853/big-gains-hasbro-gaming-q3. Total sales for the company are up 11% for the year, including a 19% drop in April , May and June https://icv2.com/articles/news/view/46203/hasbros-total-gaming-sales-down-19-q2 and a 40% increase in WOTC sales in the first quarter https://icv2.com/articles/news/view/45666/hasbros-total-gaming-business-up-40-q1. D&D sales for the third quarter are up about 20% and Magic sales are up  “double digits” , although the company did not specify what percentage of those revenues  came from digital sales of the product line. So looking pretty impressive so far for the year and, based on the interest showing in Tasha’s Cauldron of Everything and Commander Legends, not to mention Commander Legends Green, I expect to see Hasbro/WOTC closing out the year up by double digits. 

How To Make A Profit

“Buy Low, Sell High.”

There you go, that, in the proverbial nutshell, is how you make a profit in the game business, actually in any business.  Or, paraphrasing something a friend of mine, Marcus King (late of Titan Games and Entertainment, more recently with Troll and Toad) repeats from a mentor of his years ago: “You make your profit when you buy and your cash when you sell.”  The lower for which you can produce or buy a product, the more money you make when you eventually sell it.  Simple, right?

Not completely.  The above is indeed the basic of pricing but there are a number of different strategies and tactics a  business can take with its pricing, depending on what sort of image it wishes to project.

First, and most basic, is cost pricing.  You take the cost of the product you purchase or make (hopefully low, see above), increase it by an amount sufficient to generate enough money to cover the business overhead and provide a profit that you consider sufficient and sell it for that price.  Fairly straightforward, though not necessary simple, as this method does require you to know your overhead costs and how to break them down in order to assign them to items for sale.  This also highlights a recurring problem game stores have with a price for their products set by the manufacturer (manufacturer’s suggested retail price or MSRP).  Since customers are notoriously reluctant (with good reason) to pay more than the marked MSRP for items, having a price pre-set by the manufacturer constrains the amount of gross profit the store can earn from the item,  ergo the only way for a retailer to increase profits is to cut costs.  This is why game stores really dislike short discounted items from manufacturers, as a shorter discount on a product that much less money available to cover the costs associated with running the store.

Demand based pricing and competitive pricing are the two other major strategies a game store can choose to adopt when setting prices.  Demand based pricing derives from economic laws of supply and demand:  As supply decreases, price increases.  As demand increases, price increases.  A perfect example of this is collectable card games such as Magic and Yu Gi Oh.  Within any new release of either, there are always 1 or 2 cards highly desired by players.  The price for these cards quickly rises, due to demand, with the prices for the foil versions of the same cards priced even higher, this however, due to scarcity/lack of supply.  If players find these cards not as playable as hoped for or they cycle out of the preferred tournament environment, supply remains the same but demand drops, causing a reduction in the price a retailer will find customers willing to pay for cards, Magic’s Jace the Mind Sculptor card a perfect example.

When a store opts for competitive pricing, it is a good thing from the consumer’s point of view, not so much from the retailer’s as this means you reduce price in order to either grow market share or meet prices offered by competition on the same products.  Typically a retailer will cut prices in order to attract customers drawn to a lower price.  Magic packs are a classic example in game stores.  Hoping to attract more customers, mainly the price conscious kinds, a retailer cuts the price on Magic boosters to $3.50, 12.5%.  Other stores in the area have three choices:  ignore the price cut and either sacrifice those price conscious customers or determine some other way to retain them, meet the price cut and sacrifice some profits to keep customers, or exceed the price cut to keep those customers and attempt to draw in price conscious customers from the competing store.  If you choose option three, expect the other store(s) to cut their prices to meet or beat yours and, next thing you know, you have a full-fledged price war on your hands.  Great for the consumer, really bad for the store as that money you are giving up from profits is money that would otherwise go into running your store.  Price wars are usually won by the store with the deepest pockets as lesser capitalized give up, though really, no store ever wins a price war (though it is rather good for manufacturers as long as it lasts and as long as no store goes out of business).

So, returning back to the beginning, stores make profits by buying a product as cheaply as possible, selling it for what the market will bear and competing as much as possible on things other than price.  Do that and you have a really good chance of staying in business.

3 Predictions for the next Decade

Although there is some debate as to whether the current decade ends last year or 52 more weeks from now, it still seems appropriate this week to make a few predictions over  the next 10 years.

1.       More disruption in trade and imports.  This will prove to affect a lot of boardgame publishers, especially those launching new games via the Kickstarter channel. Since most of them use China for sourcing the manufacture of their launched games, disruptions in the channel will greatly affect their logistics and pricing. The industry dodged a pricing bullet with the delay by the administration of a tariff on boardgaming (and other related products) imported from China but neither nation has signed off on even the touted Phase One of an agreement. The president has said he is in no rush to sign off on an agreement and we could see a delay in one until after the 2020 election. More concerning than that though, at least to a lot of experts, is the neutering of the WTO trade courts by America’s decision to block the appointment of judges to the court, not only under the Trump administration but also the Obama and Bush ones. This deprives the court of a quorum, forstalling it from making rulings on trade disputes. Thanks to the court serving as an impartial referee (although the US argues otherwise and has made its displeasure known by blocking judge appointments), the last 50+ years have seen tremendous growth in international trade, aided by the arbitration of the court, reducing instances of trade wars and allowing multilateral agreements to flourish. With the projected demise of the court in the next few years, I would expect to see a return to greater reliance on bilateral agreements and more instances of stronger economies imposing agreements on weaker ones.

2.       WOTC Cancels the Transformers TCG (and Launches Another One). This won’t have a major imparct on the industry and , although the Transformers TCG proved very popular  on launch in the latter part of 2018 (Google Trends shows a huge spike in searches for the topic in September 2018), like all of WOTC’s TCG releases, Pokemon excepted, interest in the game slacked (remember C-23 and Hecatomb?) within a year and while the game still has collectors and players (the Highlander and Warlord TCGs both have active online communities, for example), I doubt we will see more than one additional release through distribution.  However, given WOTC’s track record, I would expect its development arm to launch another very well designed TCG with 3-5 years after the demise of the Transformers game.

3.       Continued Growth of Internet Sales and Brick and Mortar Response.  When I questioned my marketing students this past semester as to what percentage of retail sales currently occurred online, their guesses ranged from 25% to 70%. The actual figure, as of 2018, was 11% but it ticked up sharply this year, reaching 14%, with online holiday sales seeing an increase of some 58% on the Saturday before Christmas over the same day 2018. Concurrent with, or in response to, this I expect to see even more stores moving to the retailtainment model, not only selling games but offering more events beyond the card tournaments that are a fixture now. More stores will incorporate parties and food service into their model, even offering alcohol sales and consumption when local laws allow.

Game Designer Pay

If you are interested in working in the game industry, this blog post looks at how much a board game designed can expect to earl. Frankly, the numbers are a whole lot higher than I expected to see, although that pay also comes with 7+ years of successful designing. Also, most game designers are free-lance, meaning no employment benefits. 

Working in the Game Industry

If you have an interest in working in the game industry, here is a stream of comments from Glass Door regarding working for Fantasy Flight Games, part of what is arguably the largest game publisher in the industry after WOTC, Asmodee NA (Incidentally, online rumor has it that Asmodee just laid off a load of people so may not want to hit them up for a job right now).

Based on the comments
Pros for working in the game industry:
1. you get to work in the game industry
2. you get to work with some of the smartest and most enthusiastic people you will ever meet
3. You will get lot of free or deeply discounted games
4. High acceptance of LGBTQ individuals

Cons: 
1.Pay is not great. Expect to get paid less than you would at a comparable job in another industry.
2. Lack of advancement potential. Since most game companies are small, there is not much room for advancement.
3. Favoritism by upper managment
4. Long hours
5. Uncompensated work, such as at game conventions.

A Brief History of Kickstarter

Since Kickstarter has become such an important source of new games, here is a brief look at the history of the company

Kickstarter launched in 2009 out of frustration co-founder Perry Chen faced when he ran into difficulties promoting a concert and turned to the Internet for funding.  Finding lots of interest among internet users wanting to support creative types, Kickstarter started as a way for those interested in art and music to provide support to the artists creating it.  Kickstarter supports the company by taking 5% of the proceeds of projects that successfully fund.  For those of you that don’t like Amazon, grit your teeth when you fund a Kickstarter project as Kickstarter uses Amazon to process pledge payments, with Amazon taking another 3 to 5% of the contributions for the handling.  Since launching, Kickstarter has had about 61,000 projects posted to the site and processed over 215 million dollars in pledges   but didn’t hit its first million dollar funding until this past February, when a proposed solid aluminum iPod dock , originally looking for $75,000, raised $1.4 million.  The most successful Kickstarter campaign so far has been for  the Pebble, a watch with programmable faces.   Pebble Technologies originally sought $100,000 to produce 1,000 of the watches and would up collected about $10.3 million, selling about 85,000 watches, enabling the company to add 6 people to its staff within two weeks, tripling the company’s size.

The attention garnered by successful Kickstarter projects such as these, and the Reaper and Giant In the Playground projects, obscures  the fact that posting a project to Kickstarter is nowise a guarantee of success.  In fact, according to Kickstarter, roughly 9% of all projects posted to the site receive zero pledges.  Less than 35% of game projects and 32% of publishing projects successfully fund (the most successful category:  theater.  Over 60% of theater projects launched on the site have successfully hit their funding levels).  Very few Kickstarter projects reach levels that attract the attention of the media, with only seven so far breaking the $1 million mark, as far as I can find.  The most successful Kickstarter projects fall into two categories, 1) they come from companies that already have a base of support for the project and are able to drive support for the project by pushing it relentlessly to that fan base or 2) technology blogs or other media sources find about the project, view it as novel or innovative, and start talking about it, creating awareness of it among potential funders.

There is also the problem of, what happens if a project funds but never gets produced.  In the early days of Kickstarter,  projects were typically musicians seeking funding from fans so they could produce another album.  Today,  aKickstarter project is much more likely a developer  seeking funding by preselling a product before producing it.   According to the terms of service on Kickstarter, if this happens , the creator is supposed to refund all money fund to the backers but the company provides no method for doing so on the website.  Since  Kickstarter never has the funds for a project, operating solely as a facilitator between creator and funder,  the company’s position is that it does not  give refunds and all negotiations must take place between creator and backer. 

According to a recent story on NPR 

A Glut of Games

We really have a glut of gaming products hitting the market and really have had for the past few years. It is to the point, though, that only a web based store can offer every thing that comes out on a monthly basis and even then, stocking them all would tie up a whole lot of warehouse space, meaning that they likely receive an order, forward it on to the publisher, and then take possession of it to ship onto the customer. What brings me to this conclusion? The current issues of Meeple Monthly and Game Trade Magazine.

I did a quick count of the number of games and expansions offered in each, not counting novels and non-fiction books or miniatures figures, and came out with over 120 different items. Of course, publishers want to produce new products for their customer base and there are some customers, not many, unfortunately, who will buy everything that releases new for a game.  If we count in miniatures and books, we are looking at somewhere in the neighborhood of  over 150 new items each month. That works out to about 1800 to 2000 new gaming products every year. That is a lot of products for the market to absorb. Online stores have infinite shelf and display space to display products but for the brick and mortar store, carrying that many new products on top of perennial selling products like D&D, Catan, Betray at House on the Hill, Fluxx, Dead of Winter, Munchkin, Gloom,  etc. (though some companies are considerately making the FLGS job easier by offering exclusives to chain stores such as Target, Barnes and Noble and Walgreens, meaning we don’t have to worry about stocking them, but that is a subject for another post).

So we have a lot of games that already sell on a regular basis AND we have about 1500 or so new products releasing every year, more than the market can reasonably absorb. A rule of thumb is that approximately 10% of the products released during a year will still sell 5 years for the date of release, meaning that of those 1500 products releasing this year, only roughly 150 will still be sought by customers 5 years from now.

The trick, and the job of the retailer, is to figure out what customers will want. If word of mouth starts trending on a product and we start seeing mentions of it in the mass media, such as what happened with Catan (popular among gamers in the know since the 1990s) and Cards Against Humanity, customer will come in asking for the game. The other thing really driving game sales is the TableTop effect, expanded to other media. A game appearing on TableTop or Watch It Played or getting lots of attention at GenCon creates awareness among other customers, creating positive word of mouth and driving sales.

The problem occurs when neither of these situations happens. A publisher sells a game through the channel and the distributor and retailer have to decide whether to stock it or not.   If they do and it doesn’t sell, it winds up on a distributor’s sale list or the retailer’s clearance table, which unfortunately happens way too often.

Scarcity

We are seeing more examples of out of stocks of new release games in recent years. Point Salad and Wingspan especially come to mind. Demand for them is so heavy at release that quantities are seriously allocated and then by the time restocks come in, interest has waned and players move onto the next hot thing. Gloomhaven is a perfect example of this. At release, copies were selling for in excess of $200. Now that interest has waned, you can find copies readily on the secondary market for $75 to $100.

The point is, if you want a game that you think is going to be hot, the thing to do is to put a pre-order in with us ahead of time. If we get pre-orders, like with comics, we know to adjust our orders upwards in order to get a sufficient quantity in to handle demand. Otherwise, like with Wingspan, we will be out of stock for months.

Deities and Demigods No Thank You Cthulhu

For D&D aficionados, the holy grail of 1st edition books at one time was the Deities and Demigods book which  included the statistics for the Cthulhu and Elric mythos. There are three different versions of this book, known as the "No Thank You Cthulhu", "Thank You Cthulhu" and "No Thank You, No Cthulhu" editions.

The "No Thank You" version came first and contains the write ups detailing the 2 mythos.  The "Thank You Cthulhu" edition was second and contained the two mythos and a note acknowledging that Chaosium had the rights to use characters and concepts from Lovecraft and Michael Morecock's work and thanking Chaosium for allowing TSR to use them. The "No Thank You" edition removed both the write ups of the mythos and the acknowledgement of Chaosium's rights and is the most commonly found.

How to Handle Publisher Out of Stocks

However, before I get into that, I want to call your attention to an interesting column I ran across demonstrating the importance of names to a successful product, in this case Campbell’s Chicken Noodle Soup. Introduced in 1934 the soup, then called Noodle with Chicken Soup,  sold comparatively poorly. However, in 1938, Campbell’s started sponsoring the Amos and Andy Show. During that era, and well up until the 1960s, actors in a show would often speak in character extolling the sponsor’s products (Check out this Winston cigarette commercial featuring Fred Flintstone and Barney Rubble shilling for the cigarette, which sponsored the show during its first season.) During a show in 1938, actor Freeman Gosden’s script called for him to speak highly of Campbell’s Noodle with Chicken soup. However, he flubbed the line, calling it “Chicken Noodle Soup”. In the middle of the Great Depression, millions of customers thought the idea of a can of Chicken Noodle Soup sounded pretty good and started besieging grocers looking for the product. For a few weeks, Campbell’s tried explaining that the soup did not exist but eventually gave in to demand, printed new labels and renamed the product which sold like wildfire and still does today. Chicken Noodle remains Campbell’s best selling soup, with over a half million cans sold per day last month.

Anyhow, back to reshoring and flooring. Reshoring is simply the concept of moving production that a company offshored due to cheaper production costs, back home. The trade off between offshoring and producing products overseas and in the publisher’s home country is that of lower production costs versus the loss of sales due to the extended supply chain. Overseas production runs save costs in terms of lower materials costs, lower labor costs and greater flexibility but add costs in terms of additional shipping costs, wait time and managerial and oversight costs. A survey of manufacturers in 2015 found that 17% had already reshored production to the US while another 37% had plans in the works to do so. A number of US game publishers, including Kobold Press, Troll Lord Games, Looney Labs and Catan Studios, have never off shored production, finding that the speed with which they can print and restock product outweighs the cost savings of offshoring.

Flooring is the concept of a publisher or manufacturer which uses a distributor storing additional product on site at the distributor but retaining ownership of the product. When the distributor gets low on product, it simply moves product from the publisher’s stock to the distributor’s , taking ownership and paying the publisher. This allows the publisher to make more product than it could easily warehouse and drastically reduces out of stocks. Steve Jackson Games had a successful flooring arrangement with Alliance for several years and, when Chessex Manufacturing was located in the same building with Alliance Fort Wayne, a out of stock on dice could be rectified with a walk next door.

Adopting either of these practices, or some others, would certainly help in reducing out of stocks, especially during the crucial 4^th quarter.

RIP Bill Jaffee and James Mathe

The gaming industry lost a couple of long time mainstays with the unexpected passings of Bill Jaffee and James Mathe.  Jaffe, who passed away in his sleep on June 8^th ,  had been part of a number of companies in the gaming industry working  with Lou Zocchi during the nascent days of the development of distribution in the industry, before  moving with Zocchi Distribution when it was purchased and, and over the past 20 years, working with companies such as 1A and  most recently, as far as I know,  Mr. B’s Games.  Besides having a warm and welcoming personality and a love of boardgames and historic wargames, Jaffe notably had an encyclopedic memory for stock numbers and could upon request, during his time with Zocchi, give the stock number for any TSR item, whether in stock or nor. I last saw Bill at an Alliance Open House a year or so ago and he was, as enthusiastic as ever, talking about the new games coming out from Mr. Bs Games.  Farewell Bill, I, and many others, will miss you.

I never met James Mathe until later in his career in the industry, only encountering him in his position as the owner of Minion Games and an articulate spokesman for the benefits (and difficulties) of using Kickstarter to fund boardgame production, as well as game design, publishing and running a game store. Mathe could speak with expertise on all of these topics as he had founded the Game Universe game store, RPGShop.com, Minion Games and sat on the board of directors of OneBookShelf.com (now part of Drive Thru RPG. He also created and continued to run the Tabletop Game Kickstarter Advice and comments in numerous other industry related Facebook groups. Mathe’s website has dozens of posts offering advice on various aspects of the game industry such this By the Numbers post looking at the terms used in business and a quick look at the numbers the average new game publisher could expect to encounter:

·         1% = the number of packages/games you should expect to get damaged. lost, or have flaws for reshipping

·         1% = the number of backers you can expect from a large broad mailing list

·         5-6% = the royalty of Gross Revenue a game designer can be expected to receive (2-3% MSRP)

·         5x = the minimum multiplier of your production cost (plus shipping to your warehouse) you use to figure out MSRP

People who knew Mathe much better than and who worked with him in one or another of his various since as Jamey Phillip , Michael Webb and Chuck Weldon all posted lengthy reminiscences   of working with him at various times during his career as retailer, publisher and consultant .

Much like Bill Jaffe, I primarily ran into James at trade shows, and remember sitting down with him and a few other publishers and retailer at a trade show a few  years ago (do not remember if it was Alliance or the GAMA Trade Show) and discussing the state of the industry for 2-3 hours.  I remember being impressed at how wide and deep his knowledge of the industry was.  His passing is a great loss to his family, friends and the gaming industry.

A Glut of Games

We really have a glut of gaming products hitting the market and really have had for the past few years. It is to the point, though, that only a web based store can offer every thing that comes out on a monthly basis and even then, stocking them all would tie up a whole lot of warehouse space, meaning that they likely receive an order, forward it on to the publisher, and then take possession of it to ship onto the customer. What brings me to this conclusion? The current issues of Meeple Monthly and Game Trade Magazine.

I did a quick count of the number of games and expansions offered in each, not counting novels and non-fiction books or miniatures figures, and came out with over 120 different items. Of course, publishers want to produce new products for their customer base and there are some customers, not many, unfortunately, who will buy everything that releases new for a game.  If we count in miniatures and books, we are looking at somewhere in the neighborhood of  over 150 new items each month. That works out to about 1800 to 2000 new gaming products every year. That is a lot of products for the market to absorb. Online stores have infinite shelf and display space to display products but for the brick and mortar store, carrying that many new products on top of perennial selling products like D&D, Catan, Betray at House on the Hill, Fluxx, Dead of Winter, Munchkin, Gloom,  etc. (though some companies are considerately making the FLGS job easier by offering exclusives to chain stores such as Target, Barnes and Noble and Walgreens, meaning we don’t have to worry about stocking them, but that is a subject for another column).

So we have a lot of games that already sell on a regular basis AND we have about 1500 or so new products releasing every year, more than the market can reasonably absorb. A rule of thumb is that approximately 10% of the products released during a year will still sell 5 years for the date of release, meaning that of those 1500 products releasing this year, only roughly 150 will still be sought by customers 5 years from now.

The trick, and the job of the retailer, is to figure out what customers will want. If word of mouth starts trending on a product and we start seeing mentions of it in the mass media, such as what happened with Catan (popular among gamers in the know since the 1990s) and Cards Against Humanity, customer will come in asking for the game. The other thing really driving game sales is the TableTop effect, expanded to other media. A game appearing on TableTop or Watch It Played or getting lots of attention at GenCon creates awareness among other customers, creating positive word of mouth and driving sales.

The problem occurs when neither of these situations happens. A publisher sells a game through the channel and the distributor and retailer have to decide whether to stock it or not.   If they do and it doesn’t sell, it winds up on a distributor’s sale list or the retailer’s clearance table, which unfortunately happens way too often.

Evil Hat Cuts Back

Evil Hat Productions announced this week that it is cutting back on both its production schedule and staff. Citing the publication of too many games that have not performed as expected, the company will postpone or take off the schedule a dozen or so upcoming projects. Also the company will let go of its Heads of Marketing and Business Development and Senior Art Director.

There are wayyyyy too many game releases coming out, both through regular channels of distribution, ie. us, and through direct to consumer platforms like Kickstarter for the current market to absorb. Monthly, we see something on the order of 200 plus solicitations for new games and supplements , not to mention all of the current releases. The market, as it is, cannot absorb so much product in such a short period of time. There is a vast market out there but the tabletop gaming industry needs to work to get into it.

Love Letter Moving

Z Man Games announced it has acquired the rights to the Love Letter line of games, including Love Letter Premium and Lovecraft Letter, from AEG. What does this mean to you? If you are a consumer, not much as Z Man plans no changes to the game. Actually, you may see one problem. Z-man is notorious for lengthy out of stocks of its product (The On The Brink expansion for Pandemic has been out of stock since last summer and we don't expect to see it arrive before June) so I can foresee lengthy out of stocks for the game in the future.

Mayfair Games Sells to Asmodee NA

Just got the following press release from Mayfair Games. What does it mean to customers? Nothing really. The games will still be available, just with the Asmodee brand on them. I have expected something like this ever since Catan separated from Mayfair a year or so ago, although from what I understand, Mayfair is still doing well financially:

As of today, the management team at Mayfair Games, Inc. announces we will wind down game publishing. After 36 years, this was not an easy decision or one we took lightly, but it was necessary. Once we had come to this conclusion, we knew we had to find a good home for our games which is when we reached out to Asmodee.

We are pleased to announce that we have sold our games to Asmodee North America, who have acquired all the assets of Mayfair Games, Inc. This acquisition includes the product line for both Mayfair Games, Inc and Lookout Games, GmbH.

Moving forward, Mayfair product will continue to be available through previously established distribution channels including Alliance Game Distributors for all sales in the USA to the hobby market and with Esdevium Games now Asmodee UK for the UK market.