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275647 Posts in 27717 Topics by 4285 Members Latest Member: - Jason DAngelo Most online today: 161 - most online ever: 429 (November 03, 2007, 04:35:43 AM)
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Author Topic: Poison Pages  (Read 27933 times)

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« Reply #45 on: October 10, 2007, 05:01:47 PM »

>>Boardgames I think are actually the place where the 3-T system works best. <<

Ah, on this we would have to disagree. I think the 3 tier system works just fine for top tier board games like Axis & Allies, Settlers, etc, but not so well for non top tier titles. From my own experience, the performance of board games and role playing games through the 3 tier system have mirrored themselves fairly closely, perhaps with a slightly larger number of stores willing to try out new board games as opposed to new RPGs.

>>Would you mind quantifying that?  Are we talking millions of dollars of revenue, with hundreds of thousands of dollars of profit, or hundreds of thousands of dollars of revenue and thousands of dollars of profit?<<

Sure, I can talk ball parks anyways. I don't have a detailed break down on our 2007 numbers thus far, but I can give fairly accurate estimates off the top of my head. I can give you three snap shots of our company at different stages of its distribution history.

1) Our absolute best year through the 3 tier system, with regards to gross revenues achieved, was the year 2001. That was largely achieved through a very aggressively new product release cycle, which we figured was essential to managing that system and getting the most promotion and access to stores. That year we gross around $60K and had, sometimes, a one time staff member (myself) during that period. Revenues minus COGS and an extremely part time salary allowed for an annual profit of about $5k. During that time period we were moving 90-95% of our product volume through the 3 tier system with the rest flowing through convention sales and mail order. Mail order was a tiny aspect of our sales at that time, but likely still comprised 25% or more of the actual profits.

2) By 2004 the distribution system had stopped working for us completely. The cost and hassle to get distributors to pay enough attention to actually publish pre order information and then place timely pre orders and orders for product upon release was tremendous. Additionally, a great deal of time was spent trying to hand hold retailers through the process of finding a distributor who actually hadn't gone out of stock on the titles they wanted. That drag on time, energy and expense to "manage" product flow through the 3 tier system simply did not justify the effort that was being placed into. That year we gross around $55,000, but a shift in those revenues had begun. For one, we had largely stopped presenting at conventions because we were finding more success in handling online marketing. Further, of the retailers that had continued to stock our product in spite of the spotty availability, almost all of them were kept "in the loop" from direct communications via us, largely over the internet, and not by any kind of information flow coming from their distributors. By 2004 our web presence had begun to mature a bit and due to major problems in getting product through the 3 tier system and available to consumers who were looking for it, by default many had come to buy it at the one place they could find it: our web site. Another major difference in our fiscal structure by 2005 was that we had purchase more equipment for production in house. The overall result was more than $15,000 of those revenues that year came from direct orders and because of our in house production capabilities, we had a much lower COGS to handle that volume. We had the same one part time employee, but overall profits had grown to over $12k. When you drill down and look at the costs, all distribution based sales had broken even for the year due to the extreme costs of working within that broken system and all the actual profit had come from the direct sales. A couple months prior to the end of 2004 we decided if we were going to continue doing business with the 3 tier system some things would have to change and we created a wholesale contract which none of them chose to sign. So by the end of that year we had moved out of the 3 tier system entirely.

3) From the end of 2004 to present we had focused on direct sales and diversification of our revenues. When we actually began to pay attention to direct sales efforts we found a receptive audience and began to get a more complete picture of exactly how badly the 3 tier system had failed to deliver product where we had created market demand. Sales more doubled in the course of just a few months and just kept on rising.

For 2007 if things continue on course, we are looking at hitting the middle 300's. We employ 6 people more or less full time. Now, all of that revenue isn't purely from games, as we've diversified to generate a number of other revenue streams, including advertising revenue, membership fees, local printing jobs and warehousing and order fulfillment and a couple others. But 2/3rds of that revenue is still coming from games. The difference now is that 90%+ of the games are sold direct online, none are sold via the 3 tier system, none are sold at conventions, a small portion is sold at wholesale pricing to preferred retail accounts, an approximate equal amount is sold via drop ship retailers and a tiny fraction is sold to non preferred retailers through our online ordering catalog. We also move a bit of older games and one off projects through PDF downloads, but those currently gross less money than every other sales channel excepting direct to retail sales done by our non preferred store ordering catalog. With some of the plans we have now, its unlikely that 2008 will see as much revenue from gaming as from other sources, but I see no reason why gaming revenues won't continue to increase.

A couple years ago we took a very detailed look at the cost of doing business through our various sales channels and what we arrived at was that a single game unit sold online generated a bit over 4 times the profit that the same unit did sold at wholesale.

Regarding unit volumes, back in 2001 at the peak of our 3 tier sales, our best sellers were moving between 800-1200 units in their first year. These days our top seller for 2007 might hit 700 units while the "good" sellers are clocking in around 400 to 500 units and the lower profile games around 150-200 with accessories at 100 or less. Its clear that we could not be running the company that we do with a catalog of just a few games.

A continued observation of the market tells me that game stores continue to close and I'm not really seeing any massive innovation in the present business model that suggests to me an ability to grow and thrive in the future. At best it seems the larger, more professional, best stocked stores can survive the market pressures being brought against them, barring anything like WOTC or a handful of other top tier publishers all collapsing at once and taking the distributors with them. With those numbers continuing the decline, the value proposition offered by utilizing the 3 tier system continues to decline as well.

Meanwhile, games, comics and their IPs continue to have broader access to other media and licensing opportunities, the ability reach consumers online continues to improve and opens up MUCH broader audiences to a company well positioned online. POD technology is expanding sales outlets and PDF product is still very much an emerging market with a lot of future opportunities. The broad appeal of fantasy like computer games like Everquest, the Final Fantasies and now WOW coupled with past major exposures to Pokemon and then Yugio has many non traditional markets more willing to snatch up game properties to sell. While this leave the major mass market outlets to the industry's top tier, its also opening up lots of smaller alternative sales channels for enterprising smaller publishers.

But yes, I can see your point about TCGs. The same could likely be said of any major license coupled with a collectible gaming product. Because the 3 tier system can be used to reach an awful lot of smaller retailers besides just traditional gaming retailers. They can reach general hobby retailers, comic stores, indie music stores, gas stations, etc. All this really says is that the business of the "game distributors" is primarily selling top tier brands to non game stores rather than committing resources to servicing the core market better. They themselves don't really feel there is enough fiscal reward in trying to cultivate and support the core market, so why should we?

My last observation is, when trying to chase retail based sales, it doesn't matter what terms you offer retailers. We've offered 60% discounts, free shipping, free catalogs, free POP displays, no cost product exchanges and now even currently offer minimum price terms to protect their profit margins. But If they don't personally "like" your product they won't sell it. That is with very, very rare exception. Heck, some of the games we sell "I" don't like, but I'm not in business to fondle my darling creations, I'm in business to create games that people will play and to make money.

Ryan S. Johnson
Guild of Blades Publishing Group

Ryan S. Johnson
Guild of Blades Publishing Group

Posts: 582

« Reply #46 on: October 11, 2007, 06:12:32 AM »

There are many kinds of stores in the US that concievably could carry games. Hobby stores, Comic book stores, game stores we know but there are also greeting card/gift stores, museum gift shops, candy stores, educational product stores, heck even children's toys stores (of the boutique variety not Toys R us). Obviously many of our games are not appropriate for these venues but they might be.

I heard the story of Tactics II years ago. The grand-daddy of all military board games. The publisher thought there would be interest in a board game for adult men. At that time games were largely directed at kids. They made the game and sold it through gift stores. Gift stores can range from Spencers Gifts (that might actually go for some high end RPGs) to Greeting card stores, to mail order companies that sell all those bizarre electronic gadgets and golf equipment (that I keep getting in the mail - odd since I never order anything from them.)

Each kind of store type has a distribution system behind it. I know that there are the Toy Fairs in New York and Chicago but there are also Gift fairs in every region of the country. My wife and I were considering going to one this December but probably wont because we won't have our shit together. I can't say that I know any more about these systems that anyone else - just that they exist and have worked for selling games in the past. I believe that they are healthy systems. They are not operating on fad boom and bust cycles like the game distributors are.

Sorry I don't know more. I'm still exploring the matter.

Chris Engle
Hamster Press

Chris Engle
Hamster Press = Engle Matrix Games

Posts: 125

« Reply #47 on: October 11, 2007, 06:32:56 AM »

One other distribution method I spotted at GenCon was a company called Simply Fun who are selling games using the Tupperware model.They have even hired an ex-Tupperware VP. I chatted with the owner. The idea is that they will bring games into peoples' homes, demo them and sell them. I think this is a really, really good idea. It could work for roleplaying games.

Posts: 803

Kitsune Trickster

« Reply #48 on: October 11, 2007, 09:29:01 PM »

I know a guy who tried to be a semi-professional GM via this type of route.

People would call him up for a game, and he'd charge them a nominal fee per player per hour. He was a university student during the day, but three nights a week he had regular fortnightly gaming groups, and if his study load wasn't too hectic he'd get regular players who would call on his services to introduce new groups of friends to the hobby.

After all, if your first experience is with someone who is good, then it gives you a better chance of continuing in the future. There were weeks when he'd pay his rent just with these "gaming funds", mind you those were weeks when he'd offer his services every weeknight and run two or three sessions each day on weekends.

I don't know how well this would work with actually selling the games, but selling the service of providing the games is definitely viable.

I lost contact with this guy a few years back, but I've heard that even though he now has a decent paying job he still hires his services out once every week or two to groups who are looking for a break from their regular games.

I guess that it's people like this who are looking at new avenues of distribution who will help the hobby evolve in the long run.


A.K.A. Michael Wenman
Vulpinoid Studios The Eighth Sea now available for as a pdf for $1.
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