Saturday, August 18, 2012

Zero Sum or Expanding Pie

The keyword at Gencon this year is Kickstarter. I want to take a look at the general attitude of retailers towards crowd funding. Generally, you can look at it as the expanding pie or the zero sum game.

Retailers range from supportive to indifferent towards projects that expand the pie. These are the third of new publishers that likely wouldn't have gotten off the ground without Kickstarter. They would have gone through IPR or PDF only providers like Drive Thru RPG., if they ever got published at all. What's been so shocking about these projects is the support level, the sheer amount of cash that has poured in from origins unknown to bring these projects to light.

We talk regularly about the lapsed, closet and hidden gamers that our marketing seems impervious to reach. These are often projects that we couldn't fathom selling in our stores, and indeed, when I bring them in, they don't sell well at all. So this is expanding the pie, bringing in new people and expanding interests. Good for them. Good for the publisher and good for these mysterious people who support their project. Everybody have fun.

Zero sum is more serious, and I use it to refer to the the existing publishers going direct to consumers with their product and bypassing the game trades byzantine system. This is stuff we sell on a daily basis and know there's a market for it. For example, Steve Jackson Game's Ogre and Reaper Miniatures with their expanded Bones Kickstarter project. Zero sum refers to how this is likely to undermine the retail game trade by selling "conventional" games to "our" customers, direct to consumer. This is not a new phenomena, and there is no question programs like GMT Game's P500 can undermine a store's ability to sell games.

With P500, eventually products make it through distribution channels, but only after "alpha" customers receive their copy. With marginal product lines, that may not be enough for some retailers to continue carrying a line, or may, in the long term, reduce their store sales overall. We really don't support GMT because of this, not because of philosophical differences but because P500 eroded our ability to sell their product. Too many titles, especially expensive ones, were already being bought by our customers. It was Russian roulette to bring them in.

The counter to this argument, by the way, is whether this is truly "zero sum" or if established publishers who use crowd sourcing are seeing their pie grow, which would be a win for everyone. I think it's too soon to tell, both because there aren't enough established publishers doing it and Kickstarter still has a shiny allure that I don't think will last. The company will continue, but customers are likely to tire of it for various reasons. A company like GMT might know though.

But what about retailer opportunities? The business consultant, Seth Godin, will tell you the wrong question to ask is how disruptive technology can be leveraged by your business. The right question to ask is how this disruptive technology has the potential to completely destroy your business. Destruction leads to more opportunity and change, so it's not all bad, but pretending to leverage Kickstarter for retailers, the "me too" strategy, is like hoping to make it big selling Geiger counters during a nuclear war.

Nobody knows where this is going, but I can envision a doomsday scenario of undermining. I believe collectible card games buoy the game trade right now. They are hot, on fire. Sure, good game stores and distributors are diversified, but many aren't, and many segments are somewhat marginal during these times. RPGs, miniature games, and even board games aren't producing much light. There's nothing terribly shiny or revolutionary going on out there. Perhaps the shiny this year is Kickstarter itself.

Perhaps the doldrums are caused by the sucking noise that CCGs make as they pull in players from other games. Perhaps it's because publishers and manufacturers are in retreat, which begs the question economists like to ponder, is this cyclical or structural?

So my scenario is this: As the CCG boom continues, probably for another year or two, various segments of the game trade are undermined by crowd funding direct to consumers and atrophy, as they focus on back shelf projects in favor of creativity. When that boom period ends and cards lose their luster, will the rest of the game trade be stronger, weaker, or about the same because of crowd sourcing? Discounting the game trade entirely, do publishers need stores to support their games? Many say they do, but their actions seem counter to this or at least recklessly indifferent, just as distributors act as arms dealers, selling to Amazon with one hand and game retailers to others.

We don't know what will happen, but it's something to watch. Volume remains relatively low with Kickstarter, but it does seem to be growing at a fast pace. We watch not so we can sell gas masks and Geiger counters, but so we can grasp the next opportunity.

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