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275647 Posts in 27717 Topics by 4283 Members Latest Member: - otto Most online today: 63 - most online ever: 429 (November 03, 2007, 04:35:43 AM)
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TwoCrows
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« on: September 03, 2007, 06:55:12 PM »

Forgites,

Concerning Traditional vs. Indie Publishing Models, and/or ethics, and in reference to this thread<traditional publishing poison
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Ron Edwards
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« Reply #1 on: September 03, 2007, 07:58:32 PM »

Hi Brad,

The good news is that I'd love to provide my thoughts about all the stuff you're asking about in this thread.

The bad news is that the new school year is now upon me and my wife is about to deliver twins. My capability to answer completely and well is very limited.

Since the thread topic arises out of specific values and statements of mine, I'd prefer to address it myself first. I know that dozens and dozens of others can add insights and experiences and nuances. But with everyone's permission (that is not a figure of speech, I mean it) I ask that everyone let me get to it first. My time limits will make it difficult to do quickly.

That's not a moderator point! It's a request with only peer-ness backing it up, not Forge-authority power. I do mean to get to the thread, as helpfully as I can. It may drop a ways down the page before I can really do it.

Best, Ron
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Eero Tuovinen
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« Reply #2 on: September 03, 2007, 08:30:26 PM »

Darn, Ron got to it one minute before I posted. Of course my perspective can wait for later just as well as any other, even if the topic is interesting.

Also: Ron, congratulations for the impending family. Usually I get young-guy snide about it, but I can see how fecundity should work just fine for you two. I'd hardly characterize that as bad news.
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TwoCrows
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« Reply #3 on: September 03, 2007, 11:23:00 PM »

i]Teaching Evolutionary Principles Effectively To Evangelistic-Christian Students<
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Ron Edwards
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« Reply #4 on: September 04, 2007, 04:25:35 AM »

Thanks guys! The kiddies are certainly good news for me, but not for this thread.

I'll see if I can get at least an outline-ish answer up by the end of the week. Also, despite all this build-up, please don't expect the heavens to open or anything.

Best, Ron
« Last Edit: September 04, 2007, 04:28:01 AM by Ron Edwards » Logged
Ron Edwards
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« Reply #5 on: September 07, 2007, 08:00:28 AM »

A little bit of economics

What is a distributor? It is a person/company which buys the books from the publishing companies. This is a true purchase; at that point, the objects are gone from the publisher, who has received all the funds they will ever receive from them. Stores place their orders to the distributor, who supplies catalogues and acts in all ways as the marketer and policy-maker regarding sales to the stores. Then, the store-owners own the books and people buy them there. In other words, when Joe buys your game in a store, he is the fourth owner, and his money is specifically going to recover and add to the cost of purchase by the store owner from the distributor.

This is called the "three-tier" system for distribution. Details vary, but the breakdown of cost is usually in this ballpark: 40% for distribution, 60% for retailer. Let's use my game Sorcerer as an example.

The game's Manufacturer Suggested Retail Price (MSRP) is $20. The distributor buys some amount of them from me, paying me $8 per copy. That's all the money I make on those books; it must be enough to offset my printing, promotional, and shipping costs, or I go out of business. The distributor then receives orders from retailers, for however many copies per unit time, and the retailer pays him $12 per book. So the distributor makes $4 per book, and the equivalent from many companies. The retailer now sells the books at $20 apiece to Joe the customer, making $8 per book. (If he can't move it at cover price, he can put it "on sale" to sell for $10, at least recouping his cost and making a little money. Remember, MSRP has no real meaning; the retailer is free to charge anything he wants for something he owns.)

The terminology for all this is bizarre: the distributor is said to be "giving a 60% discount," which in literal terms makes absolutely no sense. He's buying it at 40%.

The reason for distribution is simple and non-problematic: stores simply cannot deal directly, independently, with every publisher. Invoicing, shipping, ordering, timing, and everything make that impossible. My criticisms of the three-tier distribution system don't stem from its central nature, but from the transfer of ownership and with certain scale issues, which I'll explain a bit later.

Various issues that have often shifted about within the three-tier system include returnability up the chain, responsibility for shipping costs, and the time scale of ordering and figuring profits. All of these are worth whole chapters of history and discussion, and if you're interested, visit the appropriate panels and bar-discussions at the GAMA Trade Show for serious ear-fuls. I'll talk about the time scale in a little bit.

For comparison and clarity's sake, consider consignment sales, in which the retailer sells the book and sends part of the profits to the publisher. Also consider fulfillment, which is the physical act of invoicing orders and shipping the books. Fulfillment should not be confused with distribution. I'll post more about that later too.

There is no point to anyone posting "what [term X] means to me." It's a futile exercise. What I've listed above is how it is, for game publishing. I don't mind being corrected or adjusted as long as we're talking about real economics, but please, leave "gee when I think 'distribution' it means ..." posting for some other website."

A little bit of history

The original role-playing games didn't have a fixed venue. The mall store didn't exist; hell, malls hardly existed. The game materials first began to be available in classic hobby stores, which were small crowded shops in secondary locations (ours, in Monterey, was continuous with a gas station). They typically carried a full selection of train gear, military-colored paints for models and miniatures, trading cards, and everything one might want for building models, as well as novelty items like toy gliders and sundry small objects. They'd recently incorporated a wide range of Star Trek and monster-movie products, mostly rubber novelty stuff and glow-in-the-dark models. The main promotional device for the new hobby was a banner reading "Dungeons & Dragons Headquarters." The trouble for them was a lack of product: the 1,000 copy print run that debuted at GenCon didn't really have much of a follow-up, so exactly what you bought at the D&D HQ was a bit vague: a kid tended to walk away with a staple-bound Judge's Guild supplement, a box of lead miniatures, and a meetup date with local gamers, usually including one or more guys from the local military base.

The first important economic shift included the advent of Lou Zocchi, one of gaming's more interesting personalities, as the first distributor for D&D and soon, other games. I don't really know which is chicken and which is egg, but at this time, whole racks of D&D modules, RuneQuest stuff, T&T stuff, Metagaming (later SJG stuff), Dragon Magazines, and the higher-end boxed-set wargames started to appear at game stores in more upscale mainstream venues, the kind of place specializing in cool chess sets, Fimo clay kits, those semi-abstract wooden dinosaur skeleton models, and "thinky" games based on intricate structures. When the hard-cover AD&D books first appeared ('77-80), they went into Waldenbooks, although I have no idea how that does or doesn't relate to Zocchi's distribution.

Moving into the middle 1980s, more games-specific U.S. distributors appeared, both regional (i.e. several states, like Blackhawk) and national (Alliance; a companion company to Diamond Comics, a comics distributor). Also, games themselves moved into new commercial outlet: RPG-centered games stores, modeled on and often combined with the new mall/strip-mall version of comics stores. This is more-or-less the same commercial situation we see now, which was already stumbling in the early 1990s, to be revived by Magic and the successive wave of similar games, only to stumble again badly in the last few years. However, back in 1990 (a key approximate date for this thread), these shiny new stores were a sure sign to the hobbyist that at least, we had "made it," and they became both sales and social venues for the hobby.

A little bit more economics

Three-tier distribution creates three distinct markets in action: the profitability relative to effort/cost for the retailer (signficantly, taxes and rent), the profitability relative to effort/cost for the distributor, and the profitability relative to effort/cost for the publisher (significantly, printing). The first and the third have literally no contact with one another, and traditionally, distributors will not inform publishers about which stores are ordering how many copies. (Interestingly, the publisher sets the MSRP, which superficially appears to be a link/unifier among the tiers, but remember - that price means literally nothing in the U.S.; the retailer can sell it for whatever he wants.)

The assumption, or myth as I think of it, is that all the tiers are minor modifications of a fundamental market process occurring between publishers and end-use customers. According to the assumption, consumer demand drives store orders, and store orders drive distributors' demand from the publishers. I do not think that any of this is, or has been true for role-playing games.

The reason why not lies in several factors. One of them is each submarket in the tiers system acts as a filter for the diversity available for the next step. However, that filter's "holes" do not operate in any way that is relevant to, say, a customer's needs or interests in the games. That is, what makes a game a successful venture-capital investment for a distributor is not what makes it a successful purchase for a customer. Another factor is the difference between long-term, repeat sales strategy vs. short-term, immediate-debt driven sales strategy. The latter has typically prevailed in hobby game retail.

Therefore, the distributor has no interest in whether the consumer actually buys or doesn't buy a given game in the stores. Repeat sales are of no interest - it's all one to the distributor, because he has a warehouse of more recent orders. What works for him are (a) orders for big-ticket, high-MSRP items, and (b) orders for the next installment of a given sequence of publications.

Here's another wrinkle: the game retailer has no window into the availability of games - what they are, how good they might be - except through the distributor's catalogue. He is, effectively, a captive market: he needs games to sell, and the ones he must buy are the ones that the distributor has to give. The distributor will even tell him which ones are Hot Hot Hot, which is to say, the ones the distributor would be most happy to unload. The retailer is basically the distributor's bitch.

This problem is compounded when one considers the time-unit of decision-making on a retailer's part. It's short: somewhere around six weeks, varying slightly. It's barely adequate for comics; it is 100% inadequate for assessing how well a given role-playing product actually does what it purports to do, per play-group and per customer. Therefore product performance (whether the game is any damn good) plays no role at all in the retailer's decisions about what to order. The retailer paid no attention, whatsoever, to how a customer liked a given game or how much fun it was to play. What matters is the unsold stock - all of it, raw debt, his latest deep-order - sitting on his shelf, and which one this gamer is likely to buy today.

So, effectively, the retailer is screwed from the get-go. He's a debt-bunny, frantically representing the distributor's interests, believing deeply in the existence of the New Hot Thing, and seeking to blame customers and publishers when things don't go well, as they typically do not. I'll have to hold off from discussing (i) desperation measures like deep-ordering based on the ceaseless cauldron of "industry" rumors, (ii) unbelievably poor tracking of actual sales in the stores in both short and long term, (iii) the role of light-fingered fanboy staff in the stockrooms of both distributors and retail stores, and more.

To shift to the other end of the chain, the publisher now confronts this set of doors or hoops even to have his game appear in stores at all. None of the priorities of those "doors" has anything to do with a customer actually playing, liking, and promoting the game itself, among the gaming community. The publisher must accepted, or "picked up" as they say, by a distributor, or his games are just a bunch of paper in a basement. In just a few years following the mid-1980s, publishers either realized they needed to conform to the distributor's economic needs (including the features of dominating retailers) or vanish. Whether this was a deliberate decision or based on imitation of what they saw apparently working, is not important. The realization is apparent in the physical nature of the games. Staple-bound booklets, ziplock bags, and boxes became replaced by perfect-bound paperbacks in the form most gamers now know well, with the AD&D hardbacks essentially setting the standard as the "real men" version of RPG format. SJG, The Chaosium, Hero Games, and Iron Crown Enterprises all illustrate the transition during the late 1980s.

Effectively, a strange kind of supply-side economics came into action. Not the classical form, but a stepwise form operating in both directions from the center. A publisher's success relied solely upon his ability to convinced distributors to carry his books, and therefore, upon his ability to pump out new, periodical product. A new publisher in the 1990s encountered advice cobbled together out of survival tactics, all based on pleasing distributors, but none of which were working anyway. In the stores, customers could only buy what they saw, and they could be easily fooled into thinking a company is "successful" because its books are all over the shelves. They could easily be trained by a retailer to accept him as the voice of the hobby, informing them about what is good and what is popular, not knowing that he was desperate to recoup whatever funds he'd sunk into ordering whatever Hot Item he was effectively told to order.

(more)
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Ron Edwards
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« Reply #6 on: September 07, 2007, 08:02:02 AM »

More history

By the middle 1980s, a certain power/status structure had appeared among the companies, with AD&D (mistakenly) perceived as a mainstream class of its own, with wargaming companies like Iron Crown and Avalon Hill perceived as the hobby-specific power-hitters (when Hero Games was bought by Iron Crown and when RuneQuest was bought by Avalon Hill, these events were perceived as "success! success at last!"), and with SJG as the innovative, edgy move-us-forward company. Looking back, I think that by around 1986, most RPG publishers had bought their own marketing hype: that role-playing was the Big New Hobby Sweeping the Nation! Hitting it big, or getting into some kind of venue that was supposed to accomplish that, was the brass ring. D&D had "done it!" with Waldenbooks, short-lived as that was; everyone else was still in hobby-land, but if you could get picked up by a real (i.e. wargaming) company, then you'd "done it!" in that more limited way. None of these perceptions were to last past 1990, but they were the cultural foundation for the transition at that time, and that's where the hobby's "old dons" come from.

Given the change in the economic framework and the couple of years it took to sink in, a new context was created in which these older companies were ill-prepared. That context (the three-tier system) is the environment in which our current crop of self-described mainstream publishers came into existence. It informed their values regarding procedural game design and physical game presentation. The leading publishers that I described before - the ones that survived and adjusted the first few years of distributor-driven shifts - all hit the skids by the early 1990s, in various ways, some surviving and some not. Discussion of the very few mavericks (BTRC, Phage Press, a couple others) will have to wait. Discussion of the new companies that arose, including Wizards of the Coast, and these companies unquestioned belief that FASA offered the core model of success, will also have to wait. The fascinating story of R. Talsorian should be reviewed in full.

Other thing that have to wait include (i) the supplement treadmill tactic, which killed many companies and nigh-killed many others; (ii) the scorched-earth tactic, which saved a few companies but also destroyed what shreds remained of any functional hobby based on store culture, and (iii) the few retailers which managed to change their habits and values entirely, and who, not surprisingly, are the most successful stores today.

The content, or actual in-play procedures, of RPGs - what we call "game design" - also tracks nicely to the economic history and the context for publication, up until the advent of "post my game on the internet" as a common and mutually supportive practice. The late 1970s and early 1980s were a time of proliferation of techniques, diversity of goals, and expansion of scope and topic. From then until the early 1990s, several game lines settled into three distinct foundations of design: the AD&D approach, the GURPS/Hero approach, and the BRP approach. Just about all role-playing games built afterwards represent modifications of one of these chassis, and sometimes a little mix-and-matching among them. By the early 1990s, certain syncretic combinations were established, primarily using Cyberpunk, late-stage Champions, and Shadowrun as templates: this is where the so-called Storyteller system comes from. These combinations were now, for all intents and purposes, "role-playing" - a feeble, mismatched, and limited bag of techniques, especially compared to the spunky renaissance 15 years previously. Look over the 1990s game titles, especially those which were released as Hot New Things with promised lines of supplements stretching into eternity.

It's testament to gamer culture's wonderful imagination and drive that a certain spark of novel design did continue to show up here and there in the early 1990s. I can talk more about what that was and why it often failed during 1992-1996. I can also talk about why and how LARPing seemed like an obvious alternative, and why Magic boomed the way it did.

Oh, there is so much more to discuss, which I have to hold off from. The history of GAMA, the Trade Show (not the same things! did you know that?), and Origins; the debates and role of returnability up the chain; the hidden use of outside funds to start up companies and to keep them "alive," and more. I haven't even mentioned the economics of various forms of D&D, which left so many publishers' bodies floating in its wake while being perceived as the flagship of the hobby. My core point, in any of those discussions to come, is to identify the distributor-driven three-tier system, and its features I described earlier, as the unspoken, perceived-as-natural environment in which all these events went through their contortions.

A little bit of recent context

I won't be able to talk in detail about any of the following in this post. Maybe later.

1. The millenium ushered in the general failure of distribution and of many stores (see the retailer booths at GenCon: "Buy 1, get 3 free!"). The first step was when Alliance became the sole national distributor in the U.S., which effectively put all of the inherent flaws of the three-tier system into fast-forward. Another part of the change concerned the interesting beast called the internet, but not in the way that retailers howled about ("stealing our sales!") - instead, it was because gamers could actually communicate about what they played and what they liked. Such dialogue had been silent since the early 1980s. The all-important control over information about the hobby was no longer confined to the retailer environment.

2. D20 represents a whole case study of its own regarding late-stage tactics in a dwindling, dying economic infrastructure. The shift in retailer culture from "why isn't it D20," to "it better not be that fuckin' D20," took only three years. Those three years, though, allowed the next item to occur.

3. The illusory success of D&D was finally outed when its owners, $36+ million in debt, sold TSR to WotC; this was then made more interesting when Hasbro bought WotC, acquiring Magic, Pokemon, and TSR with it; it became even more interesting when Peter Adkison left WotC, bought GenCon from Hasbro, and formed GenCon LLC.

4. A few novel ventures appeared that provided different angles to the system, seeking to work with new publishers in groups. Sphinx Group, Wizards Attic, and Tundra Sales Organization were among the first, and others have appeared since. As I see it, they may be categorized along three independent axes: (a) helpful vs. exploitative, (b) clear-sighted vs. confused, and (c) successful vs. failed. There's lots to talk about. Some of these ventures are incredible, and others are no better than abusive chickenhawks.

5. Annnnnnd, so many other things. (i) New technological formats, like PDF and then POD; (ii) a new meaning for "direct sales," via the internet, ushered into full form with Paypal; (iii) independent publishing modeled on the 'green revolution' in comics a few years previously; (iv) new venues for dialogues among gamers, particularly about game design; and (v) new common ground among customers, publishers, and some retailers.

In conclusion, the three-tier was an artifact of current standards, venues, historical features, and a single legitimate need. That need can now be met in other ways, rendering all the rest completely obsolete. No matter that, as an economic system, it generated a value system which was internalized and still keenly felt. It's done.

In addition to the links I provided earlier, here are some examples of clashes and debates when people who'd internalized the three-tier values system encountered the Forge (please note the dates):
State of the Industry editorial
"the supplement treadmill
D&D specifically (split from Supplement Treadmill)

Best, Ron

P.S. Special note to Eero: none of this has anything to do with you. When you see the word "distribution," please don't hop into the discussion as if you were implicated. You're not. This is a U.S., three-tier, deeply embedded issue, specific to U.S. geography and to the marginal status of hobby game stores here.
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Ron Edwards
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« Reply #7 on: September 07, 2007, 08:46:40 AM »

I just realized I'd provided the first set of links in the Site Discussion thread, not this one, so here they are:

Phase One, Successful RPG line and Channel conflict with distribution-retailers-manufacturers; Phase Two, Distributor questions, There *is* a problem: POD into retail, and The Truth is Out There.

Again, please note the dates.

Best, Ron
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Eero Tuovinen
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« Reply #8 on: September 07, 2007, 10:19:24 AM »

Oh, I don't cognate myself with American distribution, what a weird idea. I've never even met a distributor. (For those who don't know: I have a hobby of buying American indie games and retailing them here in Finland, all in the interests of developing our local roleplaying culture.) Your outlay here is really interesting, there're angles there that I haven't seen in previous outlines of this kind. All of this is really alien for us here in Finland in practice because there's not much of a retailer presence in the hobby here, as compared to the amount of hobby culture. The single rpg store in each city is far from a defining cultural nexus, and has been to my understanding as long as roleplaying's been practiced here. Things like hobby magazines, conventions and roleplaying clubs are much more important for Finnish rpg history.

I was going to participate here as a publisher (you know, to answer the original questions about the dangers and practice of publishing), but I think I'll hold off for a bit and see what others have to say. Ron's overview of the history of distribution is such a massive lump of material that getting from it to the issues of creator control and the hazards of traditional publishing requires a bit of chewing.
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TwoCrows
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« Reply #9 on: September 07, 2007, 12:02:29 PM »

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Ron Edwards
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« Reply #10 on: September 07, 2007, 01:16:59 PM »

Hi Brad,

Here's an older thread about fulfillment companies that you'll find interesting: What the industry needs (by me!) Some of what I was hoping for, then, has come true, although not with any of the players at the time. To be clear for folks who may not be picking up the distinction, neither Indie Press Revolution nor Key 20 are distributors. They warehouse games and fulfill orders for them, but are paid on commission. Both will sell to customers, and both will sell to retailers or distributors. As a very general statement, Key 20 tends to move more books to retail, whereas IPR tends to yield more money through direct sales. So I and a number of other publishers use both. (See the thread The merits of fulfillment houses; I initially thought I was the only publisher using both, but was wrong.)

I'll answer the questions that I know anything about.

Quote
Where is the bulk of the volume in Indie Game sales being generated, eRetailers, Direct Sales, both, or something else?

As far as I can tell, the majority of income is due to direct sales via the internet, whether direct payments to the publisher through his website (or Lulu), or mediated through a service like Key 20 or IPR . That may not be the case for every publisher, though. However, terminology is tricky here. I'm not sure what you mean by eRetailers vs. Direct Sales, and it may not match to what I'm calling direct sales.

Quote
Are Retailers of Indie Games, and as I see it that includes Indie Game Designer/Publishers, making a significant dent in the 3T model mentality within the RPG industry?

I think the question's not stated right. The three-tier system for role-playing games has no structural integrity and no potential to survive, at least not in the form/power it had fifteen years ago. It's just a feeble shadow of what it was even four years ago. There's nothing to make a dent in.

Any number of its players, notably people who'd like to preserve their power-games in the so-called industry, have been sniffing around the Forge for a while. To me, that illustrates their desperation and their confused glimmering realization that something has actually happened in the independent scene, off their radar. I forgot to mention this illuminating thread: Challenges and solutions for the RPG market; also, see my arty response, [A PUBLISHING STORY] The emissary.

I should also clarify that a number of retailers have changed their ways in the last five or six years. I think I brought some new angles to some people's thinking when I was attending GTS, and Luke followed up on that very well a couple of years later. Even if those retailers continue to use Alliance or whoever, their direct contact with us (the publishers) and their fostering a more consumer-oriented, play-centered culture in their store has basically overcome the three-tier flaws. I absolutely do not want to demonize retailers, partly because they were always stuck in an impossible position, and partly because of the ones whose modern stores are a boon to all of us.

Quote
Do lots of folks have mountains of product in their garages, and basements?

For all I know, some do - but the technology is so different now, that I think many fewer publishers are uncritically paying for thousands of books to be delivered to their front door. There's Lulu, there're lots of POD companies, and many people are getting better advice about how to get their game physically published. The whole thing's changed now. I think a few people still get told "print 5,000 books and have three supplements in the pipeline," but it's rarer and rarer. Such advice typically came through retailers, and GAMA panels; now a lot of those retailers are out of business (or so scruffy that their advice seems less valid), and many of the folks on those panels have finally had second thoughts.

Quote
What do you, Ron, and others, suggest as the method(s) of getting your product to the consumers that want it that best exemplifies the Indie Ethic as stated at the Forge?

However you bloody well want. That, and no other, is the raison d'etre of the Forge itself. There is no single "Forge way," and anyone who says there is, I'll stick'em into the horse trough myself. Even if a publisher wants to make the worst imaginable choice, in someone else's (say, my) view, that's up to them. It's their own choice, which makes it Forge-y.

Quote
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« Reply #11 on: September 07, 2007, 09:59:59 PM »

Game distribution today is a VERY different animal than it used to be.

Back in the day...way back, there was Avalon Hill, a number of war game manufacturers and a hodge podge of hobbyist historical minis producers. By in large these companies distributed products through general hobby stores and catalog mail orders. Conventions eventually, though I have to admit back then I have no knowledge of what sorts of conventions even existed. The novelty of the hex and counter war games sort of caught on a bit and through the late sixties and early seventies some of those games sort of edged their war into the mass market via JC Penny, Toys R Us and an assortment of other places. They did "ok" in those venues but were never HOT. A few high profile titles made some good money in the mass market, but the bread and butter was made through the hobby markets. Hobby stores would stock historical minis and war game (bookshelf) games in a tiny beginnings of a games section back then.

When D&D was introduced the same venues that sold the historical stuff picked up on the fantasy stuff and it had a ready market...D&D being new caught on like wild fire got into the same mass market venues that some of this historical games had opened up and the more. D&D's rapid rise also gave rise to a whole new field of RPG publishers and such outfits like Meta Gaming, etc. This was happening at the time when the hex and counter war games had already peaked, but the number of titles and number of publishers putting them out was at high water mark. That couple with the new micro games and RPGs as a field made it possible for a decent hobby store to have an entire gaming section within its store. A very large number of hobby stores did so.

At this stage there were few to none dedicated purely hobby game distributors. Games operated as just a category of items distributed through the hobby distributors and game publishers selling direct to retailers was not uncommon. The hobby market in general and games as a category all worked with evergreen type products, with a focus on maintaining stock and selling to a broad base of people. During this time period distribution actually worked. It worked for the hobby distributors, worked for the manufacturers that sold through them and worked for the retailers buying from them. Thats because the distributors could carry a decent portion of what was available, stock it well and thus provide both manufacturers and retailers a good and reliable service.

As the breadth of games grew as a product category under the wing of stable distribution and TSR revenues of the early 80's injected a fair bit of revenue into the system, you began to see a handful of dedicated game stores and then a few small regional games only distributors intend on servicing them. None of these became strong in numbers because games were still fairly niche and RPG players still only needed so many core books and modules before they had what they needed. War game buyers bought products even less frequently, though they had higher ticket prices. Throughout the 80s the number of games only retailers or game/comic hybred stores would grow and the games only distributors would gain a bit of market share, but predominantly the market was still run through hobby distributors and hobby stores. Under this environment the middle tier game manufacturers went through some serious ups and downs depending on forays at trying to put game books and twist a plot novels and other junk through the mass. Small press remained small press, but a number of outfits could maintain sustainability through distribution and con sales, even if not pull in enough revenues to actually support staff...even the mid tier companies at that time largely struggled to accomplish that with any sort of stability. The market got a surge in the mid 80s with Battle Tech, there to pick up some of the slack when D&D began to come off its fad peak.

Things pretty much remains that way until Magic hit. Once Magic began to really become popular a large number of Magic the Gathering shops opened up, more than doubling or even tripling the total number of games only stores. Some of these stores for a while were actually just collectible card game stores only, though those that survived Fallen Empires likely did so because they had taken their Magic profits and actually invested in other stock such as like board games, war games, RPGs and some miniatures. Now, with Magic and the big money flowing through the system from the more than 100 collectible card games released between 94-95 the dynamics of how cash flow affected both distributor and store operations began to change. They both began the need to hold large sums of cash back to "save up" for the next Magic release or other big collectible card game being released. And with the number volumes involved here, distributors had to compete hard for the pre orders on Magic and these other games, thus creating the start of the industry front list focus it has now. Back stock and evergreen products on which the industry had sustained itself on prior to Magic was frequently being forgotten under the new pre order focussed collectible craze. This began the real start of the RPG product treadmill...if an RPG company didn't have a new release to promote every month or two, their entire product line would get forgotten by both distributor and retailer.

The collapse of the "old system" began near the end of 1995, when a very large number of those 100 collectible card game releases had washed out as duds and sudden both retailers and distributors found they had massively huge inventories in dead card products and that they still owed huge sums on those invoices. Both the dedicated game distributors and hobby distributors had been suckered into that position in chasing the CCG fad money. The frenzie of Magic began to slow down so Magic profits alone could no longer help carry that debt burden. As a consequence, fill rates on everything that wasn't the next big Magic release and core D&D products began to falter and the purely CCG card shops began to fold and the distributor had to absorb the loss of mass unpaid invoices and huge inventories of dead product. From late 1995 through the middle of 1998 the existing distributors labored under that debt and struggled to overcome it. Service to most gaming products during that time really waned. GW was a growing revenue stream for the dedicated game stores, so that helped those stores to some degree so you will still find plenty of pre 1995 game stores among the retailers that run well stocker stores today. That diversity allowed them to survive. But even while GW grew leaps and bounds through the massive introduction of large numbers of young players to the industry through Magic, it too was not immune to the distribution difficulties from the massive debt at the distribution level and the faulting service as a result of that and the shift to front list marketing they had migrated to. So it is no surprise that 1995 was the year GW opted to remove itself from distribution and went direct distribution to retailers for a number of years (and remains that way for the bulk of its sales to independent stores). The Armory, Wargames West and Chessex knew they needed that money, so they got together and actually attempted to sue GW for chosing to bypass them.

When the Guild of Blades first got serious about game publishing in 1996-97, we found that some of our best business with sales through the hobby distributors. By then a few had existed the market, but the better hobby distributors were still working their way through that debt. Game distributors were more spotting. Now, through 96-98, another major problem had arisen. Chessex Distribution was attempting to dominate game distribution altogether by dropping its discounts to its strongest retail accounts down to 54% and darn near any retailer could get 49-50% on most products. Of course, to accomplish this Chessex was also going hip deep in debt. I wasn't privy to the logic behind the move nor where they thought they would see profit at the end of that tunnel, but prior to their near collapse and buy out by the Armory (and thus the creation of Alliance Distribution that is the 800 pounder in game distribution today), they had gone a long way towards winning many accounts. However, they had also put the last nail in the coffin to the majority of game distributors and hobby distributors that had been trying to work their way our of the CCG debt load. 1998 was the year 90% of the distribution tier collapsed. It was also the last year that hobby distributors in any meaningful way attempted to distribute game products beyond the hot handful of collectible games of the moment.

The loss of all those distributors cause many games stores on the brink to collapse and many manufacturers went belly up from 98-2000 as well. It put Alliance onto the road to domination in games distribution and effected lost most of us manufacturers any real access to distribution through the hobby markets....a good 50-70% of our pre collectible card games retail market. Additionally, all those hobby stores that previously had a game selection either had to open all new accounts with game distributors to keep their games department or drop that department. Most chose to drop that department rather than deal with the hassle. I suspect the loss of that department has been a contributing factor in why hobby stores have also been struggling greatly since then.

The last real hope of the distribution tier ever becoming viable again pretty much ended when Diamond bought Alliance. Prior to that point, after the formation of Alliance (via Armory buying Chessex), Alliance had been working its way through its back load of debt. Service to non top tier games suffered greatly during that time period and that is when Alliance had essentially moved to a shoddy JIT/Back order practice on most titles and fill rates plummeted to all time lows. Alliance began to dramatically decrease the diversity of games that it offered. Chessex back in the day stocked and sold some 22,000 game titles. Alliance stocks and sells well less than half of that today and maybe even more like a quarter (and maybe even less than that if you got a chance to walk through its warehouse and see what they have zero actual stock on compared to what they supposedly distribute). The hope back then was as their debt load shrank, service to the core of the hobby industry would be restored. After the Diamond buy out, it became clear that Alliance was merely to become a clearing house for the hot collectible games and a handful of top tier RPGs and board games...and their fill rates and stock outs on even much of that is much worse than it once was.

In essence, there is no hobby game distribution system any more. Its a myth. There are a handful of game distribution companies that have little to no interest in servicing the game "hobby" but are there to simply collect the easy cash on the movements of the hot collectibles and front list sales on titles such as D&D. Literally everything else they move through the system they move through with the intent to JIT and back order all inventory and they do that as only as much as they feel retailers will demand short of taking their accounts to another distributor who might. But since no distributors compete on service of core hobby gaming product anymore, there really has been no pressure on them there. The collectible products sell to some 3,000 stores that are a mix of game stores, comic stores, hobby stores and a smattering of other types of retail outlets. And of course, they are just biding time to another collectible like Pokemon comes along when some 5-10K other retail accounts will come out of the woodwork to try and buy said product from them. Meanwhile, dedicated game stores now number less than 750, and stores that stock much diversity behind the minimum "hot stuff" Alliance or ACD try to present to them is more like 250 stores. None of them seem to be taking measures to attempt to revive the lost 50%+ portion of the market and expand game sales back into hobby stores.

So as a independent game manufacturers, you can try and use the existing distribution system, but understand that it is broken. You might derive some short term value out of it, but count on it to sustain any meaningful portion of your business is just asking to be put out of business. Use them if you want, but focus your core distribution efforts on things you can control and which will provide you a stable base to grow your distribution efforts on year after year. Because let me tell you, treading over the same ground you tread over last year and the year before it just to maintain existing volumes through a broken system...done that, its not something I recommend.

So did game distribution ever work? Sure. Largely from the from say 84-94, but the bulk of that functionality actually came from hobby distributors during that time. Service to the core hobby game market has been going downhill ever since and is barely at the point of even being able to lie about it being functional anymore.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com
http://www.thermopylae-online.com
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Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
Ron Edwards
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« Reply #12 on: September 08, 2007, 04:19:47 AM »

Hi Ryan,

Fantastic! Many thanks for contributing this.

It also clarifies for me, and corrects me, about the origins of Alliance. I'd thought it was older, and that Diamond had been associated with it from the beginning. I think I'd confused it with Chessex, backdating my understanding into the Chessex era.

For folks who aren't familiar with these names, if it looks like game companies have nothing good to say about Alliance, then you should check out what comics pros have to say about Diamond. Yikes! During the 1990s, executives at Diamond exercised moral judgments to dictate what did or didn't get through their filter, and thus into the stores.

Best, Ron
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guildofblades
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« Reply #13 on: September 08, 2007, 08:51:25 AM »

Hi Ron,

No problem. I had to deal with the changes in the later half of that directly. Otherwise I've spent a fair bit of time gathering data and old school stories from as many industry old school vets as possible, not so that I could emulate them, but rather so I could attempt to construct an accurate picture of the history of the industry and from that figure out where it was headed. I've always considered clearly understanding the economic forces that affect our market to be critical to my business so I can make the right decisions on where to put our limited resources towards building sustainable growth.

I'm still a little fuzzy on the actual distribution of game products pre D&D. As in I don't know the names of the major hobby distributors from that time period nor do I know even half of the places some of the hex and counter bookshelf games were sold into the mass market department stores. Still trying to ferret out that info but its difficult since most of the industry players from that time are either no longer with us or no longer involved in the industry.

For what's its worth, the Armory's reputation even before its acquisition of Chessex, the formation of Alliance, and later acquisition by Diamond was never a good one either. The folks running that fiasco have always made decision on what to sell and what to promote  based on fast cash and industry politics more than what is good and healthy for the long term healthy of the hobby or the actual interest of the consumers.

Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
http://www.1483online.com
http://www.thermopylae-online.com
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Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofblades.com
TwoCrows
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« Reply #14 on: September 08, 2007, 09:32:50 AM »

Wow, thanx guys. It seems to me that some of the same issues were facing distribution in the tech mail order retail industry in the '90s. In the late '90s I started having to deal with JIT, and "Virtual Warehouse" our pet name for drop shipping. Our inventory went from 156 million to 28 million in a matter of months. We were left bidding thrid party fulfillment ink cartridge contracts with Dell. They declined. No mystery what happened to our staffing.

The company (MicroWarehouse, MacWarehouse, DataComm, etc.) sold twice during that timeframe, and went belly up in 2002 leaving its staff without their last paychecks. Good thing I moved on before then.

I tried looking up our last few large distributors online yesterday. Not a one of them are there anymore.

How do big box Booksellers (Amazon, Barnes & Noble) figure into the mix for the history of gaming?

Ron, by direct sales I meant directly to the consumer from the publisher. Evidently you have another definition. What does it mean in your usage/experience?

Regards, Brad
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