Sunday, April 24, 2016

So You Say (Tradecraft)

There was once a Zen master named Soryoki, or "empty box," as his name translated. He owned a hobby game store and would sit behind his counter, listening to the various game trade experts who would pontificate at great lengths, while he smiled and sold customers his enjoyable games. He brought small bits of happiness to people with difficult lives, and, he thought, that was as good a profession as any.

"Soryoki," the pontificators said, "The hobby game store is a failed business model from bygone days. The Internet has made you obsolete. Even retail itself will one day be handled by robots, rather than an old man like you, sitting behind a counter. Your boxes are full of empty promises and your business will run out of money and fail any day now."

Soryoki raised an eyebrow and responded, "So you say."

Many years went by, Soryoki modestly expanded his store, and the experts returned.

"Soyoki," the pontificators said, "You are successful because you cheat your customers. Nobody should pay your high prices. You require game publishers to change the rules to let you survive. Plus you live in a foolish community with idiots willing to patronize your establishment, unlike the wise people of other communities. You should quit now and stop victimizing the fools who don't know better. Cease amassing your great wealth through trickery and close your store now."

Soryoki raised an eyebrow and responded, "So you say."

Another couple of decades went by. Soryoki continued to slowly grow his business. He saved for retirement and one day handed his business over to his heirs. Before he left to spend his retirement meditating on the beaches of Mexico, the pontificators returned once more for their final farewell.

"Soyoki," the pontificators said, "It is a miracle you have made it as far as you have. I suppose the last 30 years might, possibly, vindicate your position. Maybe it is your relationship with your customers and not just the boxes that are important. Perhaps belonging to a community has some value we hadn't accounted for in our earlier arguments. It may just be, that we were mistaken about hobby game stores."

Soryoki raised an eyebrow, picked up his beach chair and walked towards the door, pausing only a moment at the threshold to respond, "So you say."


Thursday, April 21, 2016

Are Judges Employees? (Tradecraft)

BIG STEP BACK
I started this post saying "I am not a lawyer." This is a dead give away that I'm about to step into dangerous territory. That and "You people" are never good ways to start a sentence.

The premise of this post is that volunteers are clearly employees/independent contractors of some sort, according to the law. This clarity does not actually exist, legally, if you talk to attorneys, which I have, since posting this. It doesn't mean volunteers aren't one of these classifications, only that the legal advice is not to worry about it. The law is unclear, convoluted or it may just mean your likelihood of ending up in court with such a case is very low.

You people take that in mind if you're reading this article for the first time. I am not a lawyer.


AND BEGIN....

I am not a lawyer, but lets take a shot at the current controversy. Michael Bahr needs to write a blog piece, since he is a store owner with a law degree (but, he'll point out, is not your attorney and has no legal advice for you). 

There's a lawsuit against Wizards of the Coast (WOTC) from four Magic judges claiming Magic judges are employees. As WOTC does not properly compensate judges like employees, including not paying them wages and other benefits, the lawsuit asks for back pay and other damages. It's no surprise WOTC strongly disagrees with the claims in this suit. However, when you look at the legal definitions of volunteer, be it in strict California, where this suit was brought, or federal, it's clear Magic judges certainly don't fit the volunteer bill.

We don't need to go far to disqualify Magic judges as volunteers, all we need is the first requirement under the Department of Labor. Volunteers can't work for for-profit companies. Done. Oh, did you think calling your game store folks "volunteers" was somehow legal? Well, it's not, and I'll get back to that.

Now that we understand they're not volunteers, we then have two questions:


  • Are Magic judges independent contractors or employees?
  • Who do Magic judges contract or work for?


They certainly act more like independent contractors, rather than employees, at least when they work for game stores. However, Wizards of the Coast has a large number of requirements on hours worked, locations required for judging, judge certification, and work requirements. They exert strict discipline on judges, which some believe is why this lawsuit was brought in the first place. 

WOTC also compensates judges with thousands of dollars of promotional items and free product. Because of all these work requirements and tangible compensation, WOTC may have stepped into a de facto employer relationship. Again, just because I use terms like de facto, I am still not a lawyer. However, as a layman, it's clear the more control you have over a worker, the stronger you move away from independent contractor towards employee. Magic judges don't have much independence, when it comes to how they do their job. Again, they're not volunteers by DOL definition, so judges are one of the two employment definitions.

How much liability does this open up to hobby game stores? The answer is a tremendous amount, if you're relying on "volunteers," which I've used in quotes, written or in the air, for some time now.  If you're not paying and issuing 1099's or putting all your "volunteers" on staff as employees, you're breaking the law. There is no gray area. We don't need this lawsuit to know this. Now, the biggest judge issue for any store, by sheer volume, will be Magic judges, and WOTC impedes a stores ability to hire them.

Training an employee to be an L1 judge is easy, provided your L2 or higher judge anoints them. However, to get beyond that level, WOTC has a host of requirements, including working at other stores. That, and several other requirements are a problem for me, as my employee. So I personally see the structure of the judge program keeping stores from properly hiring any level of Magic judge. It's a separate issue, but I would argue, if this lawsuit came back my direction, that WOTC is the one you want to talk to first, as their de facto employee (that term again) and then we can talk 1099's for any judges willing to take one (many won't, due to hard and soft WOTC related requirements and compensations, which is why there's restraint). 

The fallout for game stores from this lawsuit could be a significant barrier to entry, once store owners realize the gray area is not actually gray at all, but quite black and white. This is the biggest of the dirty secrets about the game trade, the "volunteer" issue. I recall sitting in a Gama Trade Show seminar last month where the "volunteer" air quotes were flying so fast, they could have put an eye out. Please, spare me. The second dirty secret is the improper use of retail space for assembly purposes, and all that entails. Notice how I get more vocal on that as my assembly zoned construction project gets closer to completion.

Some stores already 1099 volunteers or employ them, so they're ahead of the curve. What we need is a wider understanding and, I hate to say it, wider enforcement. As we see higher minimum wages, higher workers comp costs, and the elimination of "volunteers," we're likely to see two tiers of stores. One store will toe the line, while the other, like we have now, will continue to skirt the law, pay their staff in peanut butter sandwiches and Magic packs, and skim their sales tax receipts. So if there's an upside to a game changing lawsuit, hopefully it's a more even playing field.

Saturday, April 16, 2016

The Year of Communication (Tradecraft)

What's trending right now in the game trade is good communication. It's gentle conversations between publishers and retailers, something uncharacteristic from the past, where it was about shouting past each other. Past retailer forums were echo chambers of the same people with the same complaints, amplified out of frustration. Nowadays, we've got behind the scenes communications and groups of professionals on both sides in more civil forums, both online and offline.

As a retailer, I often have to watch what and where I say what I say, since past tendencies were about fruitless gripes rather than crafting meaningful solutions. Sometimes you need to vent, but better is to find a solution with the right people. Professional brick and mortar game store retailers have a lot to offer publishers, if the two groups can sit down and discuss, and surprisingly, that has been happening.

For the last couple of years, demo programs have led the way to understanding the value brick and mortar provides. Demo games used to be something a retailer absorbed, a game that got opened and showed off at retailers expense, in hopes of better sales. Now that it's understood demo programs are sales force multipliers, there are hundreds of publisher sponsored demo games available at lower prices for this purpose. 332 demo games can be found on the Alliance website.

This year we're seeing the problem of product devaluation hit hard. Publishers understand that professional retailers won't provide their services, their sales force multipliers, if they can't compete in the marketplace due to sharp devaluation. It started with Asmodee North America (ANA) restricting access to product to shore up the sharp devaluation of their games (mostly because of bad brick and mortar retailers). ANA is a huge part of our sales, since they own not only Asmodee, but Fantasy Flight Games, Days of Wonder, and the Catan line.

Next came Privateer Press. We sold and ran events for Privateer Press since we opened in 2004, but we dropped it cold in January after it became so devalued online, it held the title of worst performing line in the store. To give you an idea of demand for this game, we blew out $40,000 worth of product at 40% off in 6 weeks. Super strong demand, plus super low sales at MSRP, equals a devaluation problem.

Privateer Press has announced a plan to support brick and mortar by removing "free riders" from the mix. The effect was immediate and with the announcement of a Mark III Warmachine/Hordes, we're back in. We'll be bringing in the biggest launch kit, complete with demo table. This does nothing to eliminate the second biggest problem with Privateer Press, the incessant SKU creep, but it does give us a chance to compete, which is enough for now.

This week Iello announced a plan to allow brick and mortar stores to receive games two weeks earlier than everyone else. Iello is one of those companies that deeply supports demo games (41 listings on Alliance) and they're listening. What we've found from early release games is they tend to spike hard for us during the early period, as their value is retained and access is limited. We've seen this with Asmodee early release experiments, as well as with Dungeons & Dragons books, which we also receive about two weeks early. This also works against blatant street date violations from companies like Target, who are ambivalent about the rules.

If you're a publisher and desire the kind of dialogue that leads to meaningful change within the game trade, or if you just want to be the main contact for such discussions, email me and I'll get you in touch with the right people.


Tuesday, April 12, 2016

Wizard's New CEO Do This One Thing (Tradecraft)

Wizards of the Coast has a new CEO, Chris Cocks from Microsoft. This falls into my tidy little paradigm of Dungeons & Dragons: Stable IP Edition, in which 5th Edition is basically a stable platform for a more lucrative, digital product line. Who else to direct such an endeavor than a Microsoft executive?

Here's the thing about this stable IP: It's not so stable anymore. The problem with Dungeons & Dragons is it's drastically devalued in the marketplace, mostly through Amazon. Mostly because Wizards of the Coast allows them to sell it at below retailer costs at distribution. It's actually cheaper for me to buy from Amazon than from my game distributors.

This of course, heavily effects sales, which means many retailers are abandoning Dungeons & Dragons. Can you imagine? I highly encourage retailers to do just that with any product line that doesn't work for them. Try to get it to work, especially with organized play, and if it doesn't? Dump it hard. Send a message.

Also, Dungeons & Dragons organized play is kind of garbage too. This needs to be shored up if you want Dungeons & Dragons: Stable IP Edition to be around long enough for a slew of profitable video games and movies. Retailers need original, exclusive content to run events that draw in customers who buy books. At least for retailers who haven't given up on D&D due to WOTC allowing it to be treated so shabbily.

So hey Chris Cocks, good luck over there! If you're hoping to leverage this fantastic IP, let me suggest you shore up some critical failings. Like you, retailers love Dungeons & Dragons too and want it to be around for years to come. Hopefully independent retailers can support that and not just be a launch pad for your digital future.

So maybe two things.


Saturday, April 9, 2016

Construction Q&A

Our long awaited expansion begins Monday morning. Please ask questions in the comments and I'll do my best to provide answers.  Here are some I've made up:

Right, what's all this then?
We ran a Kickstarter campaign over the Summer of 2014. It was successful, with 224 people pledging $28,493. The project has been ongoing since then, with architectural plans completed in 2014 and permits approved and ready to go. This has been a "shovel ready" project for a while now.

How long will construction take?
It's scheduled to take 6 weeks. It should be completed at the end of May. There are penalties for the project running late, so I don't expect much slippage.

What are the advantages to me?
We will be able to seat 121 people on two levels. We will be able to have larger events, and multiple events each night. For the most part, our existing events will have room to spread out and grow, but we're also interested in hosting new events.

Bathrooms, air conditioning and heating, and even a drinking fountain will bring our space up to the building codes and should provide a more pleasant experience.

Any Game Center policy changes?
No. We've got scheduled events that use this space and open play when nothing is scheduled. That policy won't change. One advantage is Paladin Club members (from our Kickstarter) will get special access during most periods for their personal games.

Can you tell me more about the financing?
Nobody actually asks that question, but, I'll answer it anyway. The total project cost, at this point, looks to be around $120,000. The Kickstarter covered a very small amount of this. We received a loan from Opportunity Fund to cover additional costs, which we've since paid off. Our new lease covers about $20K or so of expansion costs. We're soliciting loans from the world at large for the rest, and we've secured about half the money we need, despite the project starting now.

Will you be open during this time?
Absolutely! The retail space will be open continuously during construction. The Game Center is closed, but we will have room to play in the retail space during the construction period. Our goal is to maintain continuity with existing events, even if we're a bit tight on space. Some regular events may not fire, however, due to their space constraints.

What can I do to help?
Keep coming for one. Please keep shopping with us. The tendency is to wait out the mess and come back after. That could very well kill us. We ask you continue to shop with us as you have before, and, if possible, consider buying a little more than usual to help us through these difficult times. The biggest threat to this project is people avoid us during construction.

If you have any questions please ask them in the comments.








Thursday, March 31, 2016

Parasitic Business Models (Tradecraft)

There's a lot of talk about the devaluation of the game trade. Yesterday I was quoted in an article on ICV2 about how Privateer Press wishes to remove those using a parasitic business model to devalue their games. Pretty harsh words, but I agree.

The premise is when a game system becomes too devalued, it gets dropped by brick and mortar, which is the driver of new players of these games. When B&M drops the game, the line loses viability. You have to accept B&M is the driver for this to make any sense to you, and many don't (hint: they're wrong, according to those in the trade).

Here's a Q&A I recently did via email with Forrest from Two Bats Gaming. This applies to Asmodee specifically, but also works for a discussion of Privateer Press or anyone else trying to protect their IP.

Christian Petersen (CEO) and Anton Torres (Marketing Manager of FFG) recently discussed the desire to ward off a potential bubble in board gaming. Do you believe there is a potential bubble, and if so, do you feel that Asmodee's policies will help combat it?

It's interesting they describe the situation as a bubble, but I can see it from that perspective. The problem with board games is a problem with how the game trade operates in general. As retailers, we are rewarded when we order a LOT of product. We get better margins if we do this and by doing so, we're guaranteed the in-store sale while being able to dump product online if we over buy. All up side, no down side, right? When only a few retailers do this, it's not a problem, but when a bunch of retailers do this, usually new retailers, but not always, we have a devaluation problem.

Amazon's algorithms are set not to be outdone by these private sellers (AKA brick and mortar game stores). As retailers dump product, there is a digital race to the bottom, resulting in a lot of product selling for 30-40% off on Amazon, almost all the time. Nobody makes money in this situation, although the retailers who are doing this aren't really losing money either, so it's a win for them and a win for the consumer. The retailer gets rid of overstock. The consumer gets a deal. This works for a while and then the system crashes.

The market becomes saturated with product with retailers attempting to undercut each other. The Amazon pricing algorithm won't be undercut, so it reduces its price. Most brick and mortar stores can't compete against 30-40% off pricing, especially on higher priced items. Sales stall. Discussions are had. Product is moved to ghetto shelves and events are cancelled. That's where X-wing was with us for a while.

That's not even touching on the self inflicted harm many publishers do to themselves, which is a topic for another post.

When these deep discounts become the baseline price in the market, the entire system begins to break down. Those stores who bought too much, selling a bunch locally and dumping the rest online, can no longer sell locally anymore because the price has become too devalued to make the full MSRP sale. Even more stuff ends up being dumped at an even lower price. Eventually, all stores stop buying these products. Because they can't sell it in store, they stop promoting the game or running organized play. Nobody has a chance to make any money on it in-store, including retailers like myself who don't sell online.

You can't talk about online retailers as if they're a separate breed of retailer. Online retailers are mostly brick and mortar retailers who sell online, and they're basically crashing the market for everyone. Restricting who can sell online is stopping this bad behavior, forcing retailers to order appropriately, and allowing brick and mortar stores to once again drive the hobby game industry by introducing games to new consumers. Yes, you might not believe this, but it's acknowledged at all tiers of this industry that brick and mortar stores play a key role in bringing in new customers. So fixing this problem allows stores like mine to continue to run events, sell product, promote the hobby and generally work with Asmodee to achieve our joint goals.

Does this hurt the consumer? Those who buy online will continue to buy online and they'll continue to get a nice discount. But they should understand that this 30-40% off MSRP is not a sustainable model. This is the sign of an industry that is dying. You should instinctively smell blood in the water when you see this. Something is wrong.

A number of shop owners I've spoken to are against Asmodee's decision to force retailers to decide between being a online or a brick & mortar retailer. They state that it is removing their ability to sell slow-moving Asmodee/FFG/DOW product online if it's not leaving the shelves in their shop. Given that you are a supporter of Asmodee's policy changes (as inferred from your blog posts), how would you respond to those owners who are now having a distribution channel shut down? (I understand you're not speaking for Asmodee, just interested in the idea between shop owners).

How do I respond to brick and mortar stores complaining they can't dump slow moving Asmodee product? Retail better. You're doing it wrong. You're hurting the industry. Learn how to run a store properly. Order using forecasting. Stop chasing discount tiers. Use in-store sales to dump what you can't sell. That's how professional stores have operated for over a hundred years. I have no sympathy for these folks, who I consider clowns. There are some prominent retailer clowns who are angry about this. They need to stop being clowns. Step up.

Anton Torres also stated that (paraphrasing) he'd rather see consumers buy one or two games at a higher cost than purchasing a glut of games at a lower price point. Do you agree with his sentiment?

As for buying one or two at a higher cost versus lower, I don't have much of an opinion on this. I think the natural tendency is to maximize your budget to get as much value as possible. I think there's a middle ground where everyone can get what they want. It's not how it has been though. Understand that this is industry death as you see it now.

A large contingency of gamers state they do not have the availability of (or choose not to visit) local game stores. They say their preferred method of deciding what games to buy relies on online reviewers/media. Simply put, from my research I can conclude that a sizable group of gamers are not interacting with FLGS's, and yet the hobby continues to grow. Given that Asmodee's policies will restrict and/or raise the price of a large amount of games (specifically Asmodee/FFG/Days of Wonders products), do you believe that Asmodee's policies are in the best interest of expanding the hobby, with regards to the concept that many new gamers are not entering the hobby through the traditional game store events/promotions/etc?

There is no "raising the price," by attempting to stop gross devaluation of their product. The truth of this issue is those who buy their games online are a minority. They are not capable of sustaining the hobby or acting as gateways for a significant number of new players. Everyone in the industry believes this to be true. I know online only buyers don't like to hear that they're outliers in the community, but sorry, they are. I wish I could give you numbers on this, but what most online only consumers don't understand is they are often buying from brick and mortar stores when they buy online. The true online only stores are an insignificant slice of the pie in the game trade. However, when you add in the brick and mortar stores selling online, the data gets muddled.

Finally, I just want to make it clear that this is not about the end consumer getting things. This is about sustaining an industry that has gotten itself into a nasty mess based on perverse incentives to over consume. The end consumer needs to understand there is a baseline price point that needs to be maintained or the train comes off the rails. The system crashes and nobody gets what they want. The stores stop selling the product. The publisher stops making it and nobody gets cool games.

Sunday, March 27, 2016

Gotta Turn Somethin' (Tradecraft)

When we talk about an experience business there's this common (usually online) misperception that an experience game store will be an open venue of sorts, dependent on concessions. This is the gamer cafe model.

The idea is gamers come to the gamer cafe, have their concessions and uses the tables for the evening. Games in this theoretical model are purchased online,  because duh, while the brick and mortar business provides the venue and food. If there are games for sale, it's like the pro shop in a bowling alley. It's there. Some things are bought, but it's all about the lanes.

Unfortunately, this doesn't jive with reality. If we're going to eliminate the brick and mortar game product sales, something else has to give. If we can't turn inventory, we have to turn tables. You gotta turn somethin'. You're not going to turn tables with a bunch of gamers camping out playing Tikal for 90 minutes while drinking Americanos. There's no money there. You certainly don't have gamers stacked 3-4 deep to play, either, although we can hope the hobby continues to grow.

Most cafes need turns on tables per night like game stores need turns on games in a year, probably around 3-4. That means 3-4 customers per table come in, purchase concessions, eat them, and then get the hell out. And those tickets need to be a lot more than two bucks a person for a cup of coffee, preferably around $15-20. If you've got a fancy restaurant, you may turn your dinner service just once a night, but your ticket is going to be much higher than that $15-20 average. 

If a location appears to be breaking this rule, it's most likely because they're running a very good coffee shop by day, and a gamer cafe by night (like GameHaus Cafe in Burbank). Running a gamer cafe in the evening is kind of ingenious, since it's when most coffee shops are closed. I know locally of a coffee shop planning to open a coffee shop/bar combinations, since the coffee shop is empty at night. You pay rent 24 hours a day, so why not? This model really isn't a gamer cafe, it's a gamer themed cafe, and if you ask the baristas at GameHaus, they'll tell you flat out, this is a cafe, I know nothing about this board game nonsense (paraphrased).

You're now in the coffee shop business (gamer themed) which means you're going to have to run a very good coffee shop to make this work. Just like if you add a coffee kiosk to your game store, you are very much still running a retail game store with some coffee, and you'll have all the issues with retail. There are full fledged hybrid models out there, with Mox Boarding House and Cafe Mox being the most interesting, as they run both models quite robustly. 

However, in these models, you're essentially running two businesses side by side. You've got a great bar/restaurant in a great retail establishment. Although it's a clear win when we look at Third Place Theory, you have to wonder if each piece of this puzzle would be more profitable if you separated them. That's often the case with hybrids. Clearly you need top expertise in both business segments to be successful and if you lack in either, the impression of the entire business suffers. A bad waiter can ruin your game store and a poor game store manager can trash your bar. Could they be even more successful separate? 

Also don't underestimate what it costs to hybridize a game store. A coffee shop build out is easily $40,000-$60,000, while a restaurant could run you $150,000-$250,000 and up. That looks suspiciously like the cost to open another store, and if you've made it to this point in your business, opening and running game stores is your skill set, not making Americanos and serving customers four times your usual speed. 

Anyway, bottom line is there is no magic bullet. There is no pro shop model that works. You're either turning game product or tables, or ideally both. But not neither.