Tuesday, August 8, 2017

The Arizona Gamer Story, Part 3: Pokemon

I've been telling the story of the years I spent with Arizona Gamer in Tempe, from 1999 to 2001 in the wake of the collapse of my 1998 game store, Wizard's Tower.

Over the course of 1997 (as a judge and player) and 1998, I ordered product from the likes of non-mainline suppliers like West Coast Cards and Potomac Distribution.  The latter is still around today, ruining every anime TCG by selling boxes at a nickel over wholesale to the public and making sure it's not worth it for stores to carry the game.  Anyway, in their fliers I was seeing solicitations for Japanese trading card games as well as English.  How little I realized what the future held for three titles, only one of which I recognized from importing Super Famicom games: Dragonball Z, something called Yu-Gi-Oh, and a game the sales reps kept telling me I should bring in, and I wish I had: Pocket Monsters.

Pocket Monsters had been a runaway hit game series on the Nintendo Gameboy in Japan.  Nintendo had already localized it with the shortened name Pok√©mon, with the accent aigu presumably telling us to pronounce it "Poh-kay-mawn."  The Gameboy games were just as successful in North America, and soon spread all over the world.  Wizards of the Coast licensed the Pokemon IP to release English, Spanish, French, German, and Italian versions of the Pocket Monsters trading card game.

The English-language Pokemon TCG debuted in the hobby channel and limited mass market outlets in January 1999, and you aren't going to believe this, but nobody cared!  The 1st Edition Base Set was printed in small numbers and sold through those, but the market clamor did not heat up until a month or two after the Unlimited printing landed.  This is why true 1st Edition Base Set cards are so hard to come by, and why the Charizard from that set is among the most valuable Pokemon cards circulating.  Paradoxically, Charizard was a popular card because he is powerful in the video game, but his Base Set card is garbage.  The Haymaker deck or mono-Blastoise deck would make quick work of it in virtually all cases, despite his "fighting" resistance.
In the early going, I was offered a few boxes of Pokemon by West Coast and Potomac and actually turned them down!  I had not yet heard any demand.  It didn't take long for me to regret that decision.  The phone calls, oh Lord, the phone calls.  Imagine the Playstation 2, the NES Classic, and Cabbage Patch Kids all put together, and then forget about it because the demand for Pokemon eclipsed all three combined.  The fad turned white-hot so quickly I was scouring Target stores and buying up every starter deck and booster pack I could find, which were not many.

By around March or April, we had standing orders with every source for any boxes to ship right away and go ahead and charge my debit card.  (Unwise, but it's what I had.  My credit was shot.)  Around this time I actually got an account with Wizards of the Coast Direct and was able to get somewhat more Pokemon product allocated that way as well.  This supply was more than I was bringing in of Magic in a very short time -- believe it or not, Urza's Legacy was not popular on release -- and it all sold right away.

And I left so much money on the table I want to be sick.

So let me set the scene for you.  Every single day there would be calls several times an hour.
CALLER: Do you have any Pokemon cards?
ME: We have singles...
CALLER: No, I mean brand new.
ME: We have starter decks (sometimes)...
CALLER: No, I mean booster packs.
ME: No, sorry.  Sold out.
CALLER: When will you have any Pokemon packs?
ME: I have them on standing order but the trucks come when the trucks come.
CALLER: Is there a truck tomorrow?
ME: It's always possible.
CALLER: Thank you!  (or something less polite.)

Thus it was that there was a line of people at the store every single weekday morning from March Nth until around the end of June, by which time the Jungle expansion had arrived and supply was getting a bit more reasonable.  If we did get a truck that day, and there was any Pokemon order on it, I counted who was in line, ratio'd the packs out evenly, sold it all, and well, made the money.  God bless capitalism.

In the early going, I tried to be the good guy and abide by the $3.29 MSRP on packs.  This was stupid.  I did not win any loyalty.  None of those soccer moms were ever coming back for anything else, and to the extent that their kids did come back, that would have happened regardless of our pack pricing.  The going rate for a booster was truly around five or six dollars, and that's what I should have charged.  All told, given my burn rate on product and how long it took before supply normalized around the end of the year, I calculate my total forfeit at just under $30k in gross revenue, and because we're talking about a margin increment above and beyond most of the part that pays for overhead, I forfeited probably around $11k or $12k take-home.  Much of that would have come back if I had simply sold the boosters for the price the market would bear from the beginning.  Fortunately, the impetus to make that correct move fell into my lap and I couldn't help but do it.

See, In late April, Wizards of the Coast took over the Game Keeper store at Fiesta Mall in Mesa.  I was temporarily without a car, so I had to have a discussion with Jason Barnes that I ended up winning, to our mutual benefit and my great relief.  Our plan was this.  Drive to Game Keeper every day.  Get in line, a line that was always there.  Buy the daily limit of Pokemon per person, usually a box per human.  Take it back to the store.  My cost after tax, around $3.50 per pack.  Mark it to $4.99 plus tax per pack, and still sell out.  If anyone is available, like Anthony or the other part-timer Jason Farmer, or even my ex-wife, we'd get into a car and head back to the Game Keeper and do it again.  We did this every day for as long as packs kept selling out, which, again, was until late June.

The crush flared up again later that fall for the Fossil expansion.  We knew the bubble had popped when the spring of 2000 brought us Base Set 2 and the Team Rocket expansion, and supply was abundant and the lines were gone.  We even had a choking-on-stock experience then, which was unpleasant, and the avoidance of which is one of the most difficult aspects of this industry to master.

Other interesting product consequences from this insane Pokemon crush:

  • The entire industry ran out of Ultra-Pro 9-pocket pages.  Distributors were importing the lowest quality pages they could find from anywhere, which is why every millennial's identical Ash binder has about a 50/50 chance of containing utter garbage page inserts.  
  • Wizards of the Coast also released special deck boxes with key art from the Base, Jungle, Fossil, and Team Rocket sets.  These boxes sucked, but they were what was available and thus to this very day I buy collections still stored in those exact boxes.
  • As you know if you run a store and buy Pokemon cards, most Pokemon players did not use sleeves.  Therefore, only Magic and Decipher players bought sleeves, and Decipher players wouldn't buy Ultra-Pro because the foil brandmark in the corner was in the way of card text on both of the Star games, so they needed those weird off-brand sleeves with the triangle foil brandmark in the middle.  Ultra-Pro moved the blister years later to the "safe" spot on the sleeve face.  And Pokemon cards the world over got shuffle-worn, stored with rubber bands around them, and so forth.
  • Wizards quietly did a Last Call on the MTG Urza's sets late in 1999, and for the first time in memory we had boosters legal in Standard unavailable in distribution.  Boxes were already approaching $200 by mid-2000 and were getting downright silly by 2003-2004, the way boxes of the 2005-2008 expansions are today.  I bought a case of each MTG set as it went to last call, and I really wish I had thought to buy more, but I didn't want to dip into the Pokemon buying budget.

I had to monetize organized play for Pokemon as well, so every Saturday at noon it was Pokemon Constructed time.  This was not my shining moment as a tournament administrator, but from what I understand, I was less bad at it than a lot of other venues that had never staged a tournament before the Pokemon fad appeared.  Despite all that went wrong, it was quite profitable and we all survived.

Five dollars was the entry, and the top finishers got a few boosters if I had any, and store credit if I didn't.  It was not even nearly a 50% value payout.  We would routinely have 25 to 35 kids playing, so my gross margin would be over $100 for the event itself.  The room was dominated by the teenaged players like Chad Mills, David O'Connor, Harry Shipley, and Shawn O'Rourke, who finished in the top few every time.  They weren't the problem, though.  They played to win but played fair and forced their opponents to play by the rules.  These are guys who were within the top 100 nationally ranked.

The younger players were absolute Lord of the Flies despots.  They cheated rampantly, that much was more than any single judge could prevent, but that wasn't the biggest issue either.  See, because the video game has Pokemon trainers winning creatures from their opponent when they "battle," the younger kids naturally assumed the same was true of the card game, and any time a larger tween-ish kid won a game against a smaller or younger kid or a girl, the larger kid would snatch up the loser's deck, flip through it until he found a Charizard, and keep it for himself, and the smaller kid thought they had to allow it.  Like Magic's old ante rule, but much worse.  It took a while and several crying children and angry parents for me to get to the bottom of this and very loudly and publicly ban the culprits, a process that took weeks.  What's more, these larger kids knew that wasn't the rule, because every time the much-older-and-much-larger Chad or David ape-smashed them with a deck full of Hitmonchans and Pluspowers and Bills, they did not lose a card.  It was naked opportunism at its purest, invoking the video game as a pretext to steal cards from other kids in the broad light of day, and it was disgusting to see.  I'm glad I caught it as soon as I did, but it was too late to avoid a lot of bad feelings and lost business.

The tournaments tapered off in the spring of 2000, as the red-hot Pokemon fad diminished and it returned to being merely a solid-selling TCG.  During that time period, Magic was terrible, in the middle of the Mercadian Masques block, and the Star Wars CCG was at its apex, hitting the Death Star II, Enhanced Jabba's Palace, and Reflections releases.  Ever so briefly, Magic was the third-place TCG in the market.  This never happened again, in the hobby trade at least.  In the mass market, Magic has frequently been third behind Pokemon and Yu-Gi-Oh.

Pokemon was what got me into the company at Arizona Gamer, though this didn't happen until later in the summer of 1999.  After getting back from Games Workshop's Game Day, Jason had found us another investor: Golden-Demon-winning miniatures painting master Bryan Shaw.  Bryan and Jason had aims to reopen a mall kiosk at Arizona Mills and expand into a small branch location in north Gilbert at Greenfield and Baseline roads.  That led to a rather gut-checking discussion:

JASON: So we're going to move ahead with these other locations.  If you want to handle Magic at them under our current deal, we can do that.
ME: What about Pokemon?
JASON: ...We're not going to give up any other revenue lines.
ME: So you want to take over Pokemon.
JASON: It doesn't make sense for us not to.

I considered the scenario.  Immediately I could envision a future in which I got shouldered out entirely.  Jason was my friend, but he had a CEO's fiduciary duty to his investors and I knew it.  He could not be expected to relinquish wildly popular Pokemon to a subtenant.  In time, he would be expected to take over Magic and cut ties with the subtenant altogether.  It was inevitable.

Moreover, I had just spent about six months largely erasing the day-to-day life effects of my Chapter 7 bankruptcy from Wizard's Tower.  I had money now, real walking-around money, enough that I wasn't sweating the bills every month.  I had a Capital One card with a massive $500 limit.  My ex Melissa and I had bought a modest car, I had purchased my first two arcade games (Gauntlet and Street Fighter II), and maybe it was time I cashed out my chips ahead and moved on to video-game related pursuits and perhaps found some way to return to ASU.

But even then... business possibilities... There were a bunch of variables bouncing around in my head.  It was one of those moments where you get really dizzy and your field of vision narrows.  There was nausea.  I knew I could land on my feet but there was risk in either direction and a really decent gig was potentially being brought to a premature end.

I tapped out and gave up, and Jason brought me back.

ME: You know, I've had a good run here.  I'm just going to pack it in, "resign," whatever you want to call it.  It's probably time I went back to school anyway.
JASON: Well, wait, though.  We didn't say we wanted you out.  If you still want a piece of all the action, you're going to need real skin in the game.
ME: Well, I'm still rebuilding my cash bankroll.  I don't see how I can buy in.  You know my asset base, all my inventory.  It amounts to maybe twenty grand if we're counting supplies and cash in the till.
JASON: How would you like to own a quarter of the company with your inventory and your sweat equity up until now as your buy-in?

Tough to refuse such a great offer.  I had to hammer out some terms by which I would actually work and get paid, but the end of the conversation was, you've got yourself a deal.  And I became the fifth stockholder-at-large of the Arizona Gamer, Incorporated, after Jason and Jennifer Barnes and Bryan Shaw, and the exited original business partner from Part 1 of this story.  A few other partners came in much later.  To my knowledge, I am one of only two who exited while the company remained active, the first being Jason's original business partner.  That was part luck as my departure was arguably a poor move at the time, and that will be for a later article.

Being a partner in the overall business meant some strong efficiencies would come into play.  Arizona Gamer immediately went to an inventory asset hold of 140% to 150% of what it was.  I was responsible for card procurement and left the Games Workshop to Jason.  The entire business's success was my success and vice versa.  I could coordinate into the part-timers and have meaningful time off, not that I ever really wanted to use it, since there was always another project worth doing.  I got to know everyone on the minis side much better, from the customers on down.  Tenancy has its benefits and sometimes it can be a good arrangement, but when you're vested into the central business, now you're committed.  Duties also attach, and I believe a failure to understand the nature of those duties is at the core of every hobby industry partner split or partnership failure that has ever come about by means other than family or other life emergency.

My entry also came with an immediate requirement: Arizona Gamer needed to get into the video game trade, because that was money we were passing up.  That will be for another article.  It would be the first of my four sojourns in the video game business, and the least successful.  I am still in the fourth today.

Customers had to catch 'em all, and that forced Arizona Gamer to grow up fast and abandon our subsistence farming for a higher-ceiling outlook at greater scale.  This was a tremendous challenge and there was a lot of feeling our way forward.  I wish I had remembered this years later, when we had part of the Desert Sky Games partnership disintegrate largely because there were partners who could not reconcile emotionally with the need to scale up, and the warning signs were there and I missed them.  Had I recognized the source of the apprehension among the partners, I could have addressed it.

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