Tuesday, July 16, 2024

The Event Problem

There are two problems hitting game stores: rising costs and failing events. Costs are easy to understand. I'm keeping my store open longer hours, dedicating space to events, paying staff to supervise and hopefully sell product, and and running precious air conditioning to make the space habitable. These costs have skyrocketed. Failing events include a few issues, such as Magic standard (FNM), the cash cow of weeknight events, losing its mojo, Pokemon flailing, the long tail of Dungeons & Dragons reducing interest in new product, and the shortage of alternative options. Finally, we have social change, in which young people are reluctant to get together in person. These are just my observations and some stores are able to overcome these headwinds better than others (I'm thinking out loud, not looking for advice).

Let's take a look at costs, my costs in particular. I will be your model today. Despite the ever present predictions of the death of retail, and rising inflation, retail rental rates since COVID have only gone up 3-4% annually.  Rent for our 1,000 foot game space costs $3,000 a month, 8% higher than 2021. It doesn't include our second floor mezzanine, another 1,000 square feet of game space, which we don't pay rent on (why we built it).

Labor rates have increased an average of 17% across the US since 2021, but the bottom of the labor market has seen the largest rise. We tend to pay towards the bottom, which in California is 45% higher than most of the US. We've seen a 40% increase in labor since 2021, partly because no events during this period meant fewer employees. In the case of evening events, I am paying two staff members $20/hour, including all the businesses labor costs, to maintain the store while events are in session, for four hours. That's $160 in labor. We'll only look at weeknight events, since our weekends are clearly profitable. I want to say we make money on weekends and lose money on weekdays, but it's more complicated than that.

I won't include all the utilities in calculating that four hours of week night events, but it's pretty easy to figure electricity. Electricity has skyrocketed in cost. We have a unique situation in that 2021 was the only year we had no evening events since 2007. We can easily compare 2024 electricity costs to an event free 2021. Our electricity is up 58% from no event 2021, costing an additional $366/month.

Overall for event space, each month we spend $3,000 on rent, $3,200 on weeknight labor, and $366 on electricity, which we'll round up to $400/month when you consider additional supplies like toilet paper and the like. The toilet paper and other bathroom expenses, when we resumed events, caught us by surprise. Week night events therefore cost a total of $6,600/month, or $220/night. This is not news to me, and I've often considered our events space similar to a (once luxury, now standard) hotel room. It needs to be rented out every evening in some way that makes up for that $220. That's $220 of profit, not gross sales or store credit.

What's going on with events? The event "anchor" each week, for as long as I've owned a store, was Friday Night Magic. FNM is a "standard" card event involving purchasing and opening product to play in the event. Product is built into the event fee, so it's a forced purchase. Stores will move boxes of booster packs throughout the month, if they can get reasonable attendance. 

Unfortunately, standard events like FNM have become unpopular because of WOTC changes. Attempts by WOTC to fix standard have not been successful. We went from packing the house during FNM to getting perhaps a dozen people on a Friday night. Our event calendar is blocked off for FNM, but it shouldn't be. Instead we've needed to shift events to make room for an overflowing Commander night, a pre-constructed format in which we don't sell product (not even Commander decks, ironically). Therefore, Commander makes us little money and it cannibalized a profitable FNM.

The other event, which draws so many people we've had to limit it, is Dungeons & Dragons. D&D is an event where, without monetization, you expect players (mostly DMs) to buy game books from you. D&D has been flagging in its tenth year, with plans to only refresh the edition over the coming two years. The idea here is the IP is more valuable as a potential digital placeholder than an actual role playing game in book form. Corporations be like that.

This leads to very little incentive for most players to buy more, although the refreshed core books should sell very well.  The hope that D&D players will somehow maybe, possibly, buy a book from you after those core book sales is pretty slim. Plus we've established in other posts DMs buy most of the books and players don't cover their ratio. D&D groups are generally 4:1 players to DM, but sales tend to be 2:1; for every book a DM buys, four players buy two books. Oof. If you want to talk about freeloading and event space, start with that ratio. If we could have a D&D event that only included DMs, that would be a great thing. You could charge them to sit around and argue about what they wanted to run.

There is a lot of flailing when it comes to other games. We've gone full line on Warhammer 40K this year, but energetically, that game does not bring in a lot of new players. You can debate why 40K doesn't innovate with rules, but generally see WOTC: the product is the models, not the game play. Pokemon has struggled this year with lackluster releases, the community we built during COVID has dwindled, and the income statement warping, stratospheric, high margin sales, have slowed tremendously (but not back to pre COVID levels). My CCG concerns as we pivoted to One Piece and Star Wars was we would be overstocked and potentially sunk by debt, but instead we saw enough shortages this summer to see our fledgling indie CCG community dry up and blow away in the wind. It's Grapes of Wrath over here in CCG land.

We struggle to get young people re-engaged in society. This was a problem pre COVID and now it's a bit of a known crisis. It's not some kids, it's most kids. A lot of people have returned to in store play, but growing that is much harder. My own kid (and some friends) don't see the value of going out with people, when you can hang out virtually. I don't think it's healthy, and from the owner of a Third Place, it may one day re-define how we allocate resources. 

These are all headwinds and known problems, and it has to be said, there are stores overcoming all these challenges, innovating, finding other products and interests to engage people, and of course, better monetizing events and de-linking events with product sales. My store is profitable. It is struggling financially, due to higher costs and lower sales, but we will grow through this tedious problem. Part of growing through this is event monetization.

Event monetization is a topic I've touched on before. But look at it this way, how do I net $220 each week night through events? I if can't incentive people to spend thousands of dollars on product, which is what it takes with such a nut to crack, how do I instead monetize that space to earn back my costs? Assuming a 10% net margin, I need to sell $2,200 of product during an event to break even. Our plan to charge a small $5 fee to use the 100 seat space will cover costs, even if we only manage to fill our space half way.  Also worth noting to those who ask what more do they get in return, $10 would be the cost to actually "professionalize" events with paid coordinators. We're far from that.

Sunday, July 7, 2024

But Did You Die?

I know I'm not supposed to, but I want to talk about Gen X Club. There was a muscle car forum discussing zero to sixty times (stay with me here), a common way to measure car performance. Seven seconds was pretty good back when we had muscle cars, but nowadays it's just a minimum reasonable speed to merge onto a highway. I no longer have a muscle car, but I have a sports sedan and a heavy duty truck that both do it in seven seconds. No big deal. The difference with a muscle car, as I explained to the younger group, is while doing your zero to sixty, you might die.

Muscle cars nowadays are expensive collectors items costing upwards of $270,000 for rare specimens, but back then it was what we could afford. As a teen, a 25-30 year old car was what I could buy for $900, what I paid for my first car, about $2,500 today. That age and price of car happened to be a bunch of tired muscle cars, which back then were pretty well shot at 100K miles. My friends had them too. As cars go, they are pretty awful.

These muscle cars were fast, that seven second time, but they had poor brakes, they didn't turn well and they had no safety features other than a seat belt. Most didn't even have head rests. It wasn't uncommon to find yourself facing the wrong direction in traffic after spinning out, even when you were taking it easy. This was just a Generation X feature. We spent our childhood nearly getting killed on our bikes, which we rode endlessly, and easily transitioned to dangerous cars. It was not uncommon to have school announcements that some kid had died; it was just life. That we had no money to keep these tired cars in good mechanical condition was a big part of the danger.

You might complain about nearly losing your life on the highway, but the common refrain from friends was "But Did You Die?" I now use it all the time when my players complain about the difficulty of my D&D adventures. It turns out they want to nearly die; that's their play style and you better not fudge it. All rolls out front. Generation X is the self raising, "come back when the streetlights are on" group of kids who had adventures all the time. We did it because we were bored. Later in life, with a kid of my own, I've been telling my shocked parents about some of those adventures.

We're the generation that keeps their head down, works hard, and strives towards internal authenticity, with the catch phrase "purchased experiences don't count," direct from Douglas Coupland and the book Generation X. We are Cold War kids who look for the mushroom cloud when we hear an explosion, accept we're a shadow of our Boomer parents, and worry our struggles aren't authentic, versus trying not to struggle. 

We keep our identities secret, having grown up in a time when we would be beaten senseless for our Dungeons & Dragons books. Teachers let kids handle their own disputes and bullies ruled the school. Whatever made us different was kept in the closet, for safety and later, to avoid marketers. We did pretty well, despite wars and recessions and living in the shadows. I think our shadow natures make us more receptive to the problems of younger generations.

As adult employers and managers, we are bemused by the various requirements and hand holding younger generations demand. However, we are absolutely on board. We are about it, as the kids say. As a generation that lived without guard rails, that played on concrete playgrounds without foam padding, with high expectations in a resource poor market, that risked death to drive to a minimum wage, part time job, we are absolutely on board with people chasing their authentic selves and holding others accountable. We would never ask them, "But Did You Die?" That's an attitude our parents might have had, or inflicted on our peers so they'll accept the next "adventure." 

We will absolutely encourage a younger generation to not struggle like we did, not risk life and limb for $3.35 an hour, to enjoy their Disneyland versus risking death exploring abandoned houses, or making home made explosives from the Anarchist's Cookbook because they're bored. We value our near death experiences, our adventures, but we are also a bit jealous of younger folks insistence on full authenticity and truth, and their expectation of a work-life balance. If we have a problem, it's not that they might not come back when the street lights are on, it's that they may never leave their bedrooms.

Monday, June 3, 2024

Business Ethics

I took a business ethics course in grad school. I didn't want to. I didn't care about business, and ethics was something informed by personal morality or whatever path you're on. I needed a cross-denominational course, being in a Buddhist studies program at Graduate Theological Union. The "Union" part of that meant I needed to take a handful of courses from the Judaism program or various Christian schools. After bailing on Dominican philosophy, feminist theology, and struggling through Christianity in film, I figured the Lutheran business ethics would be a breeze. I heard they had good coffee.

At one point in class, we were given a scenario. You are the CEO of a drug company. A drug your company has developed saves lives, but causes severe birth defects. The drug has been banned in the US. However, there has been an outbreak of a deadly disease in a developing country. You have the opportunity to save millions of lives by exporting your life saving drug to this country, but it will cause severe birth defects in thousands of children. Do you export it?

Everyone in the room agreed they would sell the flawed drug in this developing country... except me. As the CEO, I figured my job was to protect the company, and thousands of children with birth defects is what people would see, not the millions of saved lives. Of course, this is a moral dilemma, and the rest of the class time was spent discussing this very issue. 

By the end of the class, my mind was changed, the needs of the many outweighing the needs of the few and all that, and I agreed I would sell the drug. What's more surprising though is I weigh this decision in my mind about once a year, for the past 30 years. This decision changed me and forever after I have been open to scrutiny on my decisions, and more than willing to change my mind. How many classes could have accomplished that?

In religious literature, merchants are scum. Money changers in temples, greedy merchants selling bad food, you name it, the business community was predatory. Today I still see predatory merchants. My opinion on this is it's a form of confirmation bias. Business is brutal, margins are thin, and if you were an asshole to survive early in your business, you believe you need to continue being an asshole as a form of core competency. If you stop being an asshole, you will be trampled by all the customers and employees waiting to take advantage of you. 

If this sounds like you, believing you need to be an asshole to survive, let me attempt to change your mind. You need to be firm. However, you'll do much better with a flip side of compassion rather than venom. It's an illusion that you have to be underhanded and nasty to make it in business. It's true you will likely be taken advantage of, if you open yourself up to the world in this way. There is some pain embracing the world, but it will make you stronger, if you can avoid cynicism. In the long run, you will be far more successful, metaphorically touching millions of lives, even if there's some relatively minor suffering along the way. I try to get through it with a good cup of coffee, as the Lutherans taught me.

Tuesday, May 21, 2024

The Water Frog

One day a customer came in and bought a water frog. This was a rubber toy frog, filled with water and glitter. You could shake the frog and it would make an odd, warbling noise. Some people found the sound of the water frog disturbing, which meant everyone needed to hear the sound of the water frog. Warble, warble. 

The water frog was part of a collection of toys I had recently brought in. That customer came back later and bought all the water frogs. This guy sold toner. That was his gig. It wasn't a glamorous business, and he was always looking for ways to stand out. He decided to buy water frogs, tape his business card to the bottom of the frog, and put them on all the chairs at various business breakfasts and get togethers. This got him attention, because who doesn't like the water frog?

My order for water frogs grew as his business grew. I was ordering water frogs by the case. When the regional warehouse was empty, I would empty other warehouses. I was always on the hunt for water frogs. How many water frogs do I want? All the water frogs! My sales rep called me:

"I don't want to know what you do with those water frogs, but I'm sending you all the cases."

"Well, actually, we're using them for..."

"No! I don't want to know."

We went through cases and cases of water frogs. At first I was cautious, not knowing when the gravy train of water frogs would end, but eventually I had water frog cases stacked in the office. My POS records show I bought them for 50 cents and sold them for $2.50. 

Eventually the entire toy line was discontinued, along with my water frogs. It turned out nobody else was ordering water frogs. I snagged the last couple of cases, but when that was over, the reign of the water frog had ended. My toner guy stopped coming in and eventually all the other toys went away. But I'll never forget the water frog. 

Warble, warble.

Thursday, February 1, 2024

Anatomy of a Pre Order

Wyrmspan by Stonemaier Games has gone up for pre-order for both retailers and hobbyists. How do I go about figuring out how many copies to buy? This one is a bit of a head scratcher, but let's get started.

Wyrmspan is a Wingspan spinoff. My peers have described it as a love child between Flamecraft and Wingspan, two of our hottest games ever. The love child part was mine, but you get the idea. 

The first step is to determine if I want any. Visiting the House of Horrors, also known as Board Game Geek, I see a couple things: 

1. An overall low score. Looking at individual reviews, there seems to be a concerted effort to tank this game. I am told this is typical of BGG for unreleased games. So many experts on something that doesn't exist! Maybe it's too simple, too similar, or the fantasy theme rubs the high brows the wrong way. This is curious, but a low overall score will likely mean many customers will pan this game. If this were an unknown game, from an unknown designer, as a buyer, I would pan Wyrmspan. Another note: If enough people see this and pan the game, and it takes off as expected, there will be a shortage.

2. Very good reviews. A watched two reviews in a row that ranked Wingspan as a 7.5 out of 10 and Wyrmspan as an 8. The overwhelming consensus is the game mechanics are improved upon in Wyrmspan. I won't get into the details, because I honestly don't care about the details, but this is generally a good sign. So we have a concerted effort to tank this game by the BGG nerds and very strong reviews by the reviewers. This does make Wyrmspan slightly less than a sure thing, which was probably the intention of the bad peanut gallery reviews.

The second step is to look at past performance. As anyone in the stock market can tell you, past performance is an excellent gauge of future results. Err. Something like that. Let's ignore the love child aspect for a moment, ignoring Flamecraft (50 copies sold in the last year without a significant outage, I guess we're not ignoring it!) and look squarely at Wingspan's past performance.

Here I have a big problem, in that Wingspan was a COVID baby. I was selling it swimmingly for a couple months when it went out of stock and disappeared for six months. I admit I under ordered it a bit. This extended outage occurred right before we shut down. When we finally restocked, the game soared. Past performance on Wingspan is a bit of a mystery, so future performance of Wyrmspan is a bit unknown. This is an example of how in the dark you can be, if you didn't order the first thing properly. It's also a warning to learn how to properly parse your data. Under ordered plus COVID, means you don't know as much as you think you do.

Despite all this, I can crunch numbers and generally take Wild Ass Guesses. Now that I have a general feel for the likely sales numbers, the next step is budget.

How Much Can I Afford? Part of that question is how much can I afford right now, because a pre order with Stonemaier is a credit card charge for the full amount upon placing the pre order. If I order at a lower margin from GTS, I can pay for it on my terms, with the bill due a month after its release. The normal method for a game that's unlikely to go out of stock is to order the quantity I think I'll sell in that 30 day terms period. Wyrmspan is not normal and a 30 day supply will not be enough, as we think we know from Wingspan.

If I'm sitting on a pot of gold from the holidays, which I am not, I might risk up to a years supply of this game, considering how Wingspan disappeared for six months after release. At this stage I would like a six month supply of Wyrmspan, but I don't know what that is, because of Wingspan performance, and I can't afford it, regardless of how well it does. Instead I figure on something approaching a three month supply, which is really not enough, but it's what I can afford, even if this game tanks. This is an example of where having a strong cash reserve results in opportunities.

What can tank a game? So many things. Stonemaier might make everyone an offer they can't refuse next week. We compete with our partners and this kind of pump and dump betrayal is common. Do I trust Stonemaier not to do that? Today, yes. The components might be defective or low quality. It might be dumped online by low margin sellers. The boardgamegeek wankers who low ball the reviews, might turn out to have been right. 

Basically, see Magic the Gathering on how a product can be screwed up by the publisher on a near quarterly basis. Also see Magic the Gathering on how everyone having a cash reserve and betting on the sure thing can screw up supply and demand and tank a game. Here we have to look at Stonemaier's past performance and how much you trust them to get it right. My trust level is moderate.

Triangulation and a Final Count. I set this game up in my online store for my customers, matching Stonemaier pricing. I announced it and... nobody has pre ordered yet. Maybe they will, maybe they won't. I have increased my Heat expansion pre order four times now, as my customers got on board. They were burned by the Heat outage, so they get that. It might be that my regulars, who are probably not the target for this game, send me the message that Wyrmspan is not for them. Maybe they'll all order direct. 

My semi final numbers: 12 from Stonemaier with a few accessories. 36 from GTS. If Stonemaier didn't charge for everything in advance, I would order just from them.

I have sold 240 copies of Wingspan since late 2019. Let's hope past performance is an indicator of future results.