Here are the changes in full, effective FRIDAY, February 13th:
1. Store credit is accepted for tournament admission at the same price as payment by cash or credit card.
2. Pre-release tournament entry is reduced to $24.99 plus tax, less than the MSRP of $25.99, with prize payouts of two booster packs per player.
3. Constructed events are now $4.99 for regular and $9.99 for Win-a-Box, plus tax. For these events, $5.00 per player or $10.00 per player, respectively, in store credit is added to the prize pool. Importantly, when credit is prized out, it will go out with sales tax tacked on, so that it cancels out the charged sales tax when you redeem that credit on a purchase or event entry.
4. Booster draft events and constructed Preliminary Pro-Tour Qualifiers are $14.99 plus tax. For booster drafts, $6.00 per player in store credit is added to the prize pool. PPTQ prizing will be determined on an event-by-event basis but in any case will not be less than $10.00 in store credit per participant.
5. Supplemental prizing such as drawings, door prizes, giveaways, FNM foils, and so forth, when offered, are in addition to the standard prizing for each event. This seems obvious but I get asked about it a lot so I must not be communicating it very well.
So, there are four or five changes there, depending whether you consider #5 a change or a clarification. However, there are really only two significant things happening: Admission is being normalized for events and tied to a 100% store-credit payout, and because of this change we feel comfortable allowing store credit to be used 1:1 for admissions rather than imposing a surcharge.
Attendance has been strong lately. Why make these changes? An explanation is in order.
Four factors forced our hand:
First, our 2014 year-end numbers indicated that we were losing too much money on Organized Play. The objective is to run OP at break-even, not as a profit source. DSG can absorb small cost overruns, but a combination of costs (discussed below) and our clumsy method of obscuring the impact of sales tax by subsuming it into the total price, caused DSG to lose almost $1,000.00 per month on OP in 2014. No store can withstand that, not even for "promotional purposes."
Second, effective December 29, 2014, Wizards of the Coast increased the wholesale price of Magic: the Gathering product by 4%. (They spun it as a "2% discount reduction.") MSRP remained the same. Distributors raised prices. This move was intended to squeeze Magic-only stores, especially those that sell boxes online at a deep discount. Full-spectrum game stores like DSG were hurt somewhat less. However, DSG's OP math was based on the wholesale price. This change made the loss we were already taking become even worse. A game store's bottom line is 5% to 9%. You can see that a 4% loss on a major product line is severe.
Third, other costs increased. Arizona raised its minimum wage, which I will discuss here on The Backstage Pass next week. Our rent went up an increment. SRP was granted a utility rate increase. And, Arizona made a bunch of sales tax changes in September and December, eliminating certain credits and deductions and changing rates. Since our tournament pricing included tax, that disrupted our math just like the increase in the cost of booster packs did. Too many pieces of our cost model turned negative at the same time.
Fourth, our existing system was too complicated and caused needless problems on both the store side and the customer side. We had problems with booster pack inventory tracking due to pack prizing and draft consumption. Our web pre-registration system that worked gorgeously for our Fantasy Flight store championships wouldn't work at all with our needlessly cumbersome existing event payment structure. Players couldn't be sure exactly what the prizing implications were for any event, and thus couldn't decide whether the Expected Value was worth their attendance. And so on.
Those were the factors that forced a change. However, we really wanted to preserve things we knew players cared about. The ability to pay for events in store credit, which most stores don't offer, is a core part of DSG, a key place where we add value. I always disliked that we were charging more for admissions on store credit. I knew why we had to, because otherwise store credit increased infinitely under our old model. But it bothered me. So I looked for a way to eliminate the surcharge. I wanted to preserve the ~100% payout purely for competitive reasons. It's not a common thing in other regions, but in the Phoenix area, full payout is the name of the game. (In the case of booster drafting, this meant 100% payout after accounting for the packs consumed by the draft itself.) Event start time enforcement was a focus point for my staff this month. Inventory is a focus point. All these things needed addressing.
We polled the Facebook group for Arizona Magic Players, a community tended by Jeff and Jason Abong, coordinators for the prestigious Arizona Legacy Tournament Series. We asked which aspects of organized play were the most important to players. The winner running away was comfortable play space -- adequate climate control, elbow room, amenities, and so forth. I am confident that DSG delivers in that department. But the next most important items on the poll results were the exact same issues we identified that we wanted to preserve and/or solve. Essentially, upholding the value of store credit and maintaining the strong payout.
We finally realized the only lasting solution open to us was to separate the tournament economy from specific products (in this case, booster packs) and from the sales tax implications. Once you detach and separate those two things, everything becomes clear. You can do a 100% payout, and the 5% to 9% bottom line built into your normal margin cancels out our losses. After paying overhead and COGS and all that, we can pay the judges, pay staff overtime for events that run long, periodically replace furniture, pay for extra A/C in the summer, and cover the other extra marginal costs that organized play imposes on a store. Organized play at break-even becomes sustainable.
Notice that an 8-player booster draft outcome is exactly the same. The top four finishers will receive $20, $12, $8, and $8 in store credit. If they wish, they can purchase five, three, two, and two booster packs, respectively, and enjoy precisely the same payout offered in most places. In most cases we fully expect players to buy singles with their store credit payouts, which most players have been doing all along anyway.
The sales tax thing. Yes, I know that being charged $4.99 and having the total be $5.38 is lousy. It's lame and it's stupid and we hate it too. And... it has to happen. It has to happen sooner or later, every store really needs to do it and has needed to do it for a long time, but nobody wanted to be the one who did it. Howie's Game Shack in Mesa deserves credit for having the courage to be first out of the gate on this, but since they're not primarily a TCG vendor, nobody counted that as spades having been broken. Well, DSG decided it was time to rip that band-aid. And honestly? After a month or so, nobody is going to care. Your earned credit will include sales tax from now on, so when you spend store credit, the sales tax just cancels out. And most of you pay admission on your credit card, so it's just digits on a ledger, not a bill out of your wallet anyway.
I want to thank all our player community for its tremendous patience these past two-and-a-half years while we worked all this out by trial and error. I am confident that these changes will stick and we won't have to keep tinkering with the engine unless significant tax or product changes happen. And I want to thank you in advance for being patient with us as we implement these changes now. We really will do our best to make the transition as painless as possible.