Frosthaven: A Retailer Kickstarter Analysis

Frosthaven is the largest Kickstarter I've supported. It's also the most transparent. You can tell what retailers have paid for it, and thus it's an interesting public case study of my costs, both what I paid and the lost opportunity, related to retailers backing Kickstarters. 

I have a modest amount of Frosthaven on order compared to my peers, a shipping pallet worth. I have 30 games coming, along with a small number of add ons, which we will ignore for this exercise. The cost per game is $80, which is pretty good for a game I'm selling at the market price of $250 (market price is now more like $275). However, my shipping costs for this pallet is $480. I've never paid this much for shipping. I can divide that shipping by 30, the number of games coming, bringing it to $16 per game, or a total cost per Frosthaven copy of $96.

Selling a $96 game for $250 is the occasional win we get with Kickstarter. A 62% margin is very good and a definite outlier. You might be thinking, will I actually sell any games at that $250 price point? 13 copies of Frosthaven, or nearly half are pre sold with cash up front, which is a good strategy for mitigating the opportunity cost. It's also important in the calculations to come.

What is opportunity cost? This is where we see this game isn't so great for retailers, not that Cephalofair is to blame. Every inventory dollar I spend has to perform, measured by my turn rate. My overall turn rate is a strong 4.6 per year. It's generally agreed that healthy stores should be in the 3-5 range. An example of turn rate is if I have a $100 game, on average, that game will sell 4.6 times, providing me gross sales of $460 over a years. This is using the price of the game, not the cost, but we'll get to that later.

If I pay for a game up front, like with Frosthaven, I lock in my money for a period of time, and thus lose the opportunity to turn it with other inventory purchases. This loses me money with hopes of offsetting it with sales of that game when it eventually shows up. The goal then is to pay for the project as close to the shipping date as possible, AND to pre-sell as many copies as possible, to shift that opportunity cost to consumers. It's less of an opportunity cost to an end user, since they only lose out on the fun for that period of time, and not money.

My Frosthaven order was $2,880. I placed the order April 1st, 2021 and expect to receive it by the end of December, 2022. That's 21 months without having $2,880 to invest in my business with a pretty sure thing investment in inventory. However, I pre-sold 13 copies, reducing that amount by $1,248, leaving my an opportunity cost of $1,632. 

That $1,632, locked in for 21 months, would have grossed $13,138 at cost. To get the actual money lost, we can assume that $13,138 bought other averagely successful product at a 45% margin. We need to calculate this because I want to get a net profit amount, which I generally, back of the napkin know from gross sales, not gross costs. $13,138 would buy me, on average $23,888 in product over the life of Frosthaven production and shipping. The ghost of what coulda been.

From $23,888, I can calculate a net profit percentage. For retailers it's generally in the 5-11% range. Let's assume a normal period with an 8% net profit range. $23,888 x 8% = $1,911 in profit. The opportunity cost for backing Frosthaven is $1,911, more or less. How does that compare to the profit I'll make from Frosthaven? 

That's far easier, since we have actual numbers, assuming I don't have to clearance Frosthaven later at a discount. $250 minus $80 cost equals $170 per game x 30 copies = $5,100 gross sales, times 8% net profit percentage = $408 of net profit. As we can see, the $1,911 of lost opportunity cost is not offset by $408 of net profit from Frosthaven. We have a net loss, assuming opportunity costs, of $1,503. I will be really happy to see my $2,890 of (additional) gross sales in December, but if you missed out on Frosthaven, you're probably ahead as a retailer. You might have a lower turn rate, or lower profit margin, in which case you might actually make money? I'll let you do your own math.

Edit: Should I consider the pre sale of 13 copies of vapor ($2,210), and the 4.6 turns of that money, to offset this cost?  

This assumes you have opportunity costs. This assumes you have other product you could have bought instead that would have performed at an average rate. A lot of us are increasingly not able to identify average performing game trade inventory, as we have all the good stuff in our trade. This also assume money has value, which at the time of placing this order, it honestly didn't. Rolling in government money I didn't want to give back, locking in a sure thing for a 21 month return was like buying a game trade bond, when you're used to playing the stock market. 

I think the best way for a retailer to handle Kickstarters is first, try to back projects where you pay upon shipping, and second, consider this money to be separate from your purchasing budget, which removes it from thoughts of opportunity cost. Perhaps call it marketing, where good money goes to die. Backing Kickstarter projects makes my store stand out from competition. It's a flex, a power play, because who has $1,503 to lose on one game?

Hagiography

My first year in graduate school, a young, newly minted professor, fresh out of Stanford, pulled me aside. The conversation went something like this, "Look, you can clearly write well enough to weave your bullshit into a compelling narrative, but this isn't college anymore. Writing in academia requires more rigor. Let's work on that." 

I graduated a few years later. My bullshit now backed up with solid evidence and a deadpan, third person voice. It ended up an honors thesis after I applied marketing principles to Japanese concepts of enlightenment. I really couldn't come up with a fifth chapter, so I weaved one last spell of bullshit. I expected to be disciplined, but they totally dug it. The first chapter had been written in that young professors class, re-worked a million times, compared to my rushed final chapter. That first semester I also took a course on Saint Francis, and learned the term hagiography, the opposite of everything I was taught.

Hagiography is the acceptance of bullshit as a legitimate academic category. It's a biographical style in which we have an agenda of depicting the individual in a positive light. In the case of the saints, it's to show how amazingly saintly they are, of course. The purpose is to enhance the faith of worshippers, as the actual lives of saints are thought to be of little significance. 

Academics will still try to tease out truth from hagiography, but it's mostly because they need something to do. The question of truth or academic rigor wasn't questioned at the time of these writings. In fact, the idea of academic rigor, the value of truthful reporting, is so modern, there's often no evidence left in the past to tell a competing narrative. Why would you want to keep that around? The dude is a saint, let it go.

I bring this up because I find it interesting that we're in this period when our hobby founders are dying. This is a hobby that's perhaps 50 years old, give or take, and our founders are aging out. Their stories have been told at conventions, in game stores, around gaming tables. They are spoken of as gods among men. Their writings have been analyzed and scrutinized. Gary said this before he said that, obscuring himself behind a filing cabinet while he said it, or written in a Dragon magazine column. The hagiography is strong, especially when we have aggrieved parties and those around them attempting to cement their legacies. There's a tendency to exaggerate to make a point.

Lately we've had a series of books attempting to tell the true history, back and forth we go. Truth is relative. Hagiography is rampant. What we can see clearly is our heroes are flawed. Villains can sometimes save the town. I think we need to avoid making oversized heroes out of our founders. What they intended the game to be is less important than how you took it, synthesized new information, and made it your own. It's a bit like academia that way. What have you contributed? 

They gave us a gift, sold it to us really, over and over again, a product to do with as we please. It belongs to the world now. We owe them thanks, but I think that's enough. They weren't saints. Neither were they villains.

The Pilgrimage

It is Gencon week, the national game convention created by the venerable elder of our hobby, Gary Gygax himself. I was one year old when the Lake Geneva Wargames Convention was created, later to become Gencon. I have never been. It is a black mark on my gaming credibility. Gencon is a little like the Muslim hajj, a pilgrimage you should attempt to engage at least once in your life. In that respect, I can say I haven't been to Gencon yet.

We can look at the pilgrimage example and see why you might find something like Gencon relevant to you. A pilgrimage is necessarily foreign and a bit dangerous. You hope to grow by overcoming your fears. There is real danger, emotional and physical. Failure is on the table. When I was 16, after going to just one local game convention, I decided to run a series of public D&D game at a local convention, Strategicon. I needed to see if I could do it. I also needed to break out of the orbit of my local gaming group, where I was mostly just a player.

Did I have the rules mastery, the table charisma, to run a very subjective AD&D game for a bunch of strangers of all ages? It was a harrowing test in a foreign environment. I passed the test. I was a dungeon master, and I've played that role in my gaming groups since. It's odd, but that's an important part of my identity, since age 16. It was a pilgrimage, an initiation, and a kind of self ordination. I put that experience away until a friend found his Strategicon schedule while we were hanging out recently, 38 years later. Oh right, that's how I got here.

Gaming for you might be a touchstone, a life line, a reason for being. A comfort in a cruel world. I know that's how I felt at 16. A pilgrimage might be a communion with the hive mind. You might hope for personal transformation, confirmation of identity, even if it's just boosting the confidence of a teenager. I see people try to parse complex metaphysical topics, normally the purvue of religion, using the wisdom of Yoda and Gandalf.  For many, geek culture is their source of meaning and wisdom. Of course you'll consider a pilgrimage.

A pilgrimage is an inherently solitary activity, even when surrounded by thousands of people. Everyone attends for their own reasons. My friends did not join me in those Strategicon games. It was a thing I had to do by myself, as a budding master of dungeons. If you think you may never go, consider this: Because it is inherently solo, you can always plan to go next year. Those who wish to accompany you on this pilgrimage will appear in your life, once you've established the intention. Or not, the solo trip itself being an important part of your experience. I wish you a safe and fulfilling journey.