Thursday, October 22, 2020

Who Turned Out the Lights... Again?

Can this election just be over?  There is always a pronounced negative effect on retail sales during the U.S. Presidental election years, because consumers value certainty.  There will be a boost in sales no matter who wins.  (Joe Biden is going to win.)  Despite my incorrect prediction of the election outcome four years ago, I am confident enough in the underlying principle that this article is practically a reprint of the one I wrote at the time.

In 2012, Desert Sky Games was still newly opened and did not expect much in the way of sales.  In 2016, we were almost finished with our first lease and had a miserable month thanks to the combination of a contentious election between Clinton and Trump, the Crystal Commerce "Red October" outages, the new Magic set Kaladesh being poorly received on initial release, and a lurch in the ever-increasing shift of general merchandise shopping toward the mass market.

Now it's 2020, and in addition to a hellscape pandemic year with financial ruin upon many, we've somehow got an even more contentious election between Trump and Biden, a change-of-generation with new Playstation 5 and Xbox Series consoles already sold out on pre-order, the new Magic set Zendikar Rising underperforming at the gate thanks to a slate of Standard bans and supply chain chaos, and DSG isn't even in any other categories anymore besides TCGs and video games, which is just as well because I hear nothing but snafu stories coming from those as well.



The election will ultimately resolve out.  Like I said, regardless of who wins, people will turn the page and go back to buying things, when they can (go stimulus!).  The Nintendo Switch is having a banner year so I have no real worries there; retro is doing fine, the PS5 and XS* will both drive tremendous sales and trade-ins, and Zendikar Rising and the forthcoming Commander Legends have enough great cards in them to keep players interested.  The Expedition lands returned for their second installment since 2015's Battle for Zendikar, and this time the shocklands did not appear since they just rotated out from the Guilds year, but the fetchlands did appear, along with a great assortment of other most-wanteds, and players are loving it.  Magic in 2020, strictly as a product slate, is far and away the best it's ever been.  I wish it were possible for players to come to the store and play it.

Once the pandemic ends on November 4th (eyeroll) we can maybe even re-open the game tables before too much longer.  I don't mean that COVID wasn't real or any such nonsense; it is obviously both real and serious.  But once the election is over, the politicization of the pandemic can start tapering down and we can relegate it to the boring purview of medical professionals and state/local health agencies.  There are COVID vaccine trials already underway and I know personally some people participating in them.  The trials are being handled like the national security priority it is, and once a vaccine clears trials, it will be wise to go ahead and get it, rather than holding out or waiting for a better/revised option.

My divorce and the sale of my house are continuing to dominate my non-business time, so articles here on The Backstage Pass will likely continue to be sporadic.  Hang tight and we'll be back on track before you know it.  I have also been invited to do some article writing by one of our strategic partner companies here in the industry so I will be delighted to put a spotlight on that when it's time.

Have a great Halloween weekend, and whether the election goes your way or not, I hope you have a better end of 2020 than the middle was!


Monday, October 12, 2020

Your System May Reboot Multiple Times During This Update

I recently wrote here about my impending divorce from Stephanie, and that process has been consuming an outsized portion of my at-home time, particularly getting in extra reps with the kids.  I wanted to pay extra attention to them while they were still permanently living with me, since that era was about to end and even partial custody is never the same.  There was something of an emotional payload.  I don't discuss that sort of thing here on the weblog, but that kind of mental processing really does take all the punch right out of me in terms of mustering up enthusiasm for the business.  

As such, Desert Sky Games has mostly plodded along these last few months, and especially the last few weeks.  Thankfully, my teams can largely manage the movement of TCG merch quite competently without me standing over them, and TCGs and video games are now the only supercategories left.  I have relegated the remainder of our RPG stock to a perpetually-discounted rack just to serve our nearby regulars, and board game stock is already reduced to titles with video-game-related IP, such as Fallout and Boss Monster.  So that's a thing that got done.  The "hyperfocus" plan is well underway.  As I've alluded to in past articles here, it will become correct for business for me to split TCGs from video games and probably divide DSG into two separate stores.  There is no need for me to attempt to do that under what remains of our current lease, so I'm not going to, but the future writing is on the wall.

As I write this article, the divorce wheels are in motion and finally Stephanie has leased her own place and moved out of our house, where I remain.  The housing market is so insane right now that we can't help but sell; it's going to afford us a complete debt wipe plus living expenses for a long time to come, and that's the kind of thing that can really help combat the coping stress from a life change like this.



I will be living in the house while we sell it, and I couldn't help but be struck by the emptiness of it after the move-out.  Because of school logistics, we're primarily housing the children with Steph.  I will get plenty of custody time, but "main home" is with Mom, for them.  For the weekend of the move, my parents blessedly offered to take them up north to their cabin and let the kids spend the weekend playing in the forest and not watching all their stuff get hauled out of the only home they've ever known, and when they got back, their bedrooms and such were "ready" for them at Steph's apartment.  We hope that softened the blow a little bit for the kiddos, and I do get them next weekend already so they're going to be back with me five days after the drop-off, which is good.  Kids get used to routines and that's exactly what we plan to give them.

So over the weekend my girlfriend Hannah joined me and we went about the business of resetting the house for sale staging.  The market is so hot we barely have to do anything more than an as-is sale, but on the advice of our Realtor, we're putting in some targeted cleaning and polishing to emphasize open space and light and make the place desirable.  But it's so empty to me.  Moreover, it's going to be empty again, and my ultimate destination new home will be empty, so I get to do this all over anywhere between now and the end of the year or so, once the house sells.  Then, I figure to rent for a year or two and then re-buy into the house market.  I am gambling that house prices will have settled back down and it will make sense to buy.  If I'm wrong, oh well, that's the risk I take.

How do I take this experience and glean value from it for the business?

Well, as I mentioned above, the store lease is in the backswing now and we now get to start planning ahead to our next move.  After the difficulties from our 2017 move and spending the better part of 2018 paying for it, I need another move like I need a hole in my head, but the business reality is that I am personally risk-averse and I have a fiduciary duty to the DSG investors and we are going to make the play that reduces our vulnerability to future pandemics and other macroeconomic disasters as much as possible.  We realize that black swan events are bad as a basis for policy, but when you have tectonic plates shifting within the industry anyway (MTG Arena, crowdfunding's ascendancy in general tabletop, Amazon as a general rule, increasing minimum wages, comic distribution chaos, and so on), a black swan mitigation strategy can be something that dovetails into a general push toward ruggedness.

I've joked that I'm all-in on the 1000-square-foot shoebox now, but that really is too small, and a COVID vaccine will exist at some point and I'll still want to host meaningful numbers of players for nightly tournaments.  We assuredly do not need 6400 square feet of glory and the biggest independent game store location in the entire metro.  So the next facility will be somewhere in between.  I really wish the original Gilbert location landlords had played ball with us on our lease renewal rate, rather than holding to the higher price, because that location was a bit on the small side for the post-COVID world, but a lot closer to where we want to be than the current size, and it sits half-empty to this day.  Our current landlord is fairly accommodating about suite modifications, so for all we know we might be able to stay put and just reduce footage.  Or else that becomes the point at which we separate the TCG store from the video game store and move forward under two different banners with two different (smaller) doorways.  This whole scenario is not something to be solved now, but it's on the 2021-2022 itinerary.

If I can arrange that sweet-spot next lease, whichever of the above permutations occurs, I'll ink up and the team will get to reboot DSG once again into an empty building, and convert it by means of labor and materials from a vanilla shell into a Friendly Local Game Store that the community can enjoy and embrace as its own.  The great thing about a tabula rasa facility is that it can become so much more.

Between multiple home moves and store moves, by the time we get to around 2023, I will hope to be situated for at least half a decade in whatever buildings I've managed to occupy.  Let us hope that the hobby game industry is behaving favorably by then, so that I may.


Tuesday, September 15, 2020

Cash Cow Conundra

Every business has its meal ticket.  That is, every business does that thing that results in must-have revenue at sustainable margins.  There is typically some hedging or add-on business, but it's ancillary to the main event.  We're talking about the core offering, the goods or services that draw most customers to the business.
"Cows Cowing" - Photo (C)2020 Michael Bahr

For a small specialty business, the greatest success comes when the meal ticket is resilient.  When it's ready to withstand competition, technological change, variance in customer interest, and economic difficulties.  A product line or service offering that meets those criteria becomes a cash cow for that business.  It is the driver of profitability, the reinforcer of brand, and the guarantor of payroll.

The pop culture, comic, collectible, and hobby game business offers a choice of product and service categories to stores like Desert Sky Games, and many of them have the potential to be cash cows if properly developed.  There is a danger, however.  A store owner who misevaluates how the cash cow factors apply to their business risks losing big.  This can include changes of landscape, and a store could be in a poor position to adapt.  Imagine if you will a devoted indie wargaming store, featuring Warhammer and the next four or five most popular minis games, three or more paint racks, multiple tool and supply options, appropriate organized play, and matching ancillaries.  That seems pretty great until Games Workshop drops a Warhammer store right nearby.  That devoted wargaming store still has ways to make money, and the Warhammer store is supposed to demo the product and introduce new gamers to the hobby to the indie's theoretical benefit, but in practice what often ends up happening is that serious Warhammer players gravitate to the company store, the brand vertical, because of exclusives, stock assurance, brand recognition, any number of factors.  Warhammer is a higher-voltage minis wargame than every other minis wargame in print, combined, and the indie suddenly sees its product mix become far less viable.  It would be like a firearms store suddenly not being able to carry Glocks.

The galaxy-brain-meme version of understanding what makes a meal ticket into a cash cow is to understand when it's possible to harness that and then commoditize another category for competitive advantage.  The classic example of this, which I've cited before, is of course Microsoft's original deal with IBM to provide the Disk Operating System (DOS) for the original PC.  IBM did not insist on an exclusive deal because what other computer manufacturer of the time could outsell them?  But by seeing that software was the real platform, Microsoft got to make that their cash cow while commoditizing hardware to where any PC clone with a compatible BIOS could run Microsoft's DOS and thus run IBM PC software without having to purchase an IBM PC.  The cheapest clone available at the needed horsepower level would be enough to fire up WordPerfect or AutoCAD or the day's latest computer games, and IBM was left out in the cold earning nothing on that sale.

Amazon commoditized books (and commoditizes other consumer goods even now) in order to sell web infrastructure services, advertising services, marketplace platform services, data mining, and more.  Everyone thinks of Amazon as being in the business of selling things, but they don't give one whit about that.  Selling things isn't their meal ticket; selling things is the lure, the attraction, the catch.  Amazon makes their money by owning and operating the infrastructure that benefits from consumer goods being deliverable-on-demand commodities.  All they had to do was fulfill their own prophecy and the money firehose swung permanently to the "on" position for them.

There are many, many game stores now who have taken things about one layer of abstraction into the commoditization vs cash cow meal ticket concept, and their solution is this: Sealed TCG product is the commodity, to be sold at a nickel over cost, and singles are the cash cow.  This is only partly wrong and only partly stupid.

First, let's dispose of the singles question by observing that they are indeed a meal ticket cash cow if properly deployed at scale and transacted with expertise.  That is probably the most accessible cash cow from a newcomer vantage point in terms of reaching bare profitability.  It takes a while to ramp up from there, but it's doable.  If you are in town up against a Grand Prix dealer, God help you, but even then it can be done.  The wobbliest leg of the singles equation is competition; they stand up pretty well to technological change (so far), variance in customer interest, and economic difficulties.

Second, addressing the commoditization of sealed product.  Sealed TCG product when it's not Magic or Pokemon, and sometimes Yugimans, is a bad hold in virtually all cases.  There has been a resurgence lately in the price of some out-of-print product, such as the booster box prices for the old Decipher Star Wars CCG.  But in most cases, if you try to hold sealed TCG product that isn't Magic or Pokemon, you end up with hard-to-move chaff with little-to-no value, that depends for its consumer value on a robust tournament community that often does not exist.  Sealed product that is Magic and to a lesser extent Pokemon, is the opposite of this.  It is not only evergreen but perpetually gains value in almost all cases.  Every last booster pack of Magic on the shelf is going to sell.  One day, one way, to some player, it's gone.  Every last one.  You don't have to do anything special but have it after the other proximate options no longer do, and at a price that the player immediately in front of the counter finds palatable.  So there is no need to commoditize TCG sealed.  A store can allow the meat on that bone to nourish.

In the Before Times, when tournaments were a thing, many stores bemoaned the competitive need to run events at a loss or breakeven in order to drive sales of TCG product, both sealed and singles.  While using organized play in this manner can be frustrating for labor load reasons and others, it is actually a smart further step on the logical approach to the competitive formula described in this article.  TCG singles and sealed can both become cash cows when you commoditize events!

Without any doubt there exists some AHA! epiphany about what can be commoditized next so that the store can monetize events directly at the expense of a thing, and maybe that thing is something to do with streaming.  It's tough to say because streaming is, in essence, a commodity ab initio.  Virtually nobody who is doing it is making any real money except for a tippy-top niche few who have caught lightning in a bottle and successfully executed the conversion on that.  So I don't know if it's streaming, but I suspect it is not.  It's also not coffee, because if you can embrace the reality of being a restauranteur and bring adequate deployment capital to bear, coffee monetizes itself Outstandingly Well Thanks For Asking and becomes an even further buttress supporting the notion of relegating events to the altar of commoditization.  Food is an order of magnitude more involved than coffee alone, but is the same conceptual idea.  Kiddie camps?  Escape rooms?  There's a lot being tried right now, and some of it is working in some cases.  This is probably the leading edge of where the hobby game industry is right now, 2020, or well as of March 2020 anyway, on the question of where the money is earned in TCGs and tabletop.

This concept leads to further discussion and I think there are better people than me to expand upon it, so I am going to leave it with something of an open hook here and encourage anyone with insight on their commoditization vs cash cow meal ticket situation to weigh in on your social media platform of choice (the share button should be right below) or your blog or whatever.  Let's hear it.

What does DSG do?  Our cash cow is video games.  Our meal tickets that come up a bit short of cash cow status are TCG singles and to some extent TCG sealed.  We leave a lot of money on the table in the TCG category in order to compete in a crowded local market.  We commoditize board games, selling them at deep discounts purely as a marketing tool and an arrival-encourager.  We also commoditize used movies/music/media as well since it's a logistical appendage to our video game business.  In the words of the Portal turrets, we do what we must because we can.  Anyway, this combined approach is tailored to the combination of markets in which DSG does business and competes (Phoenix area, East Valley, our own website, TCGPlayer Marketplace, Amazon, and to a lesser extent eBay and Facebook), and may not necessarily be right or even profitable for all stores.

Thursday, August 20, 2020

Insert Coins Someday Soon

Our niche industry has been hard-hit by the COVID pandemic, particularly board game cafés and stores that heavily allocated focus and resources to organized play.  The cafés have already been massacred to some extent and the ones that are still open right now and haven't failed yet are either those who were able to raise some tide-over capital or those with a rugged backbone of orthogonal revenue of one kind or another, such as retail.  DSG has been fortunate to have a strong video game business and a strong Magic singles e-commerce business, because in-store sales of general tabletop have cratered deeply since March.

The sector that COVID has just utterly murdered, though, is the industry of coin-operated amusement machines and vending, or just "arcades" or "coin-op" for short.  As ABC 10 San Diego reports, coin-op routing in particular has been choked to zero, with no revenue and unavoidable layoffs, and hulks of equipment sitting inert in the back corners of restaurants, bars, and in storage.
It has been much the same for DSG's Vintage Arcade.  We recently added all kinds of amazing gear, including a bunch of modern Japanese candy fighter widescreen cabinets and a bunch more sit-down racers, and they've all been taking up square footage and earning nothing for six months.

If people can't (1) congregate and (2) touch things, well, it's difficult to see viability for the coin-op business.  We are fortunate somewhat in that the powers-that-be have determined that COVID's spread by surface contamination is not a serious vector, whereas aerosol and droplet transmission remains significant.  Moreover, we are fortunate in Arizona that the summer finally did its number on COVID, with an assist from more widespread mask usage, dropping our death rate to statistical insignificance and our spread rate to chalk.

That provides hope that perhaps the arcade can re-open soon.  Across the continent, COVID stats vary, so this may not be true for coin-op businesses everywhere.  But in Arizona, the numbers really do suggest that we've reached a point of relative safety for this.

Re-opening our entire game room is not going to happen until, at soonest, the expiration of Wizards of the Coast's sanctioned play suspension.  This currently is set to end in late September after the At-Home Prerelease Event for Zendikar Rising.  We can't 100% forecast what the COVID stats will look like overall by then, so it may transpire that Wizards extends the suspension, and we will be fine if that is the case.  Arizona's stats might also worsen sharply, which would have us hold off until a later date.  In any event, we are quietly preparing for a possible re-opening of the game room at the end of September or early October, at a deeply reduced capacity.

Taking what we know in the previous two paragraphs, we're about ready to turn the arcade back on, most probably to occur in time for Labor Day weekend.  There are some final upgrades and maintenance we want to take care of first, and we're going to move some of the equipment to take advantage of excess floor that won't be needed anymore for tabletop events.  We will be paying attention to control panel cleaning, there will be more space between and around machines than arcades typically provided in the Before Times, and we'll finally get to use the new ceiling lighting profile that keeps reflected panels out of the way of game screens.  I do not expect throngs of people to show up to play in the arcade initially.  But it will be nice to see it start up again and I'm sure there's some pent-up itch to throw down a few Street Fights, hit the shooters, get our retro on, and slam some silver-ball.

On that note, there is a subtopic that I don't want to overlook.

We've had six months to gather data and observe the landscape, and we've had to draw a conclusion.  Dungeons & Dragons at DSG is, alas, over.  The D&D player community has adapted to COVID splendidly, with software-enabled remote play, in-home play among people with a reduced exposure profile, and so on.  Reduced sales have tracked these changes, and D&D is in a gradual liquidation status right now at the store.

In essence, D&D as a game evolved in a way similar to comics, where the market compressed to where the only necessary independent brick/mortar retail presence is the tier-1 FLGS that utterly masters RPGs, and the majority of buyers will get what they need another way, either having it shipped to them or buying digital assets in the first place.  Now, I've loved D&D since literally the 1983 Basic Set red box and B2 Keep on the Borderlands, but I don't have the deep expertise in the RPG category that local stores like Imperial Outpost have, or that the late Gateway Games had.  As it was with Warhammer in late 2019, this is a situation where I cannot provide a best-in-class experience to the D&D player, so I need to get out of the way.

This is one of those categorical seismic shifts we knew would happen one day, and current events simply nudged it very hard such that it happened sooner.  A bit of an acid test of our decision on exiting RPGs as a category is, will players have a substantially worse experience in their games as a result of what we're doing?  It's difficult to argue that they would.

We have D&D product still inbound for a couple more months for sourcebooks, dice, accessories, and so forth, because of ordering lead times in distribution.  Because of this, our players will be able to enjoy some sweet deals and offers as we price those last few things to move.  Pending manufacturing timelines in China for various accessories, we think the last D&D item at DSG will be the Icewind Dale sourcebook and custom dice set.

We are also liquidating board games other than those that are tied to video-game licensed IP.  COVID really did nudge things, and what I think it did in the big picture is just skip us a few years ahead to where the market was going to be anyway.  Your FLGS that masters general tabletop is going to have to master just that, because it won't have mastery of Magic the way the specialist stores like DSG do, and vice versa.  I can imagine a further future convergence where general tabletop stores split off from wargaming even more than we've already seen; most major competitive metros now have independent FLGSes that are "Warhammer stores" and do little else.  Obviously in the rural areas, multi-classing fighter/mage/cleric will still be viable for independent game stores.

An inconvenient truth I have been staring down is that it will probably become correct within the next two years for DSG to split its Magic and video game categories into two separate businesses.  I'm probably going to be late to that decision as well, like I was to the separation of comics, wargames, RPGs, and board games.  But one thing I learned while working in government is that it is often best to let things play out a little longer or further beyond the point at which I would have preferred to make the call.  The clarity gained goes a long way toward galvanizing the decision and putting the business on firmer footing for its next steps.

Tuesday, August 11, 2020

Eight is More Than Enough

I'm not just talking about filling our lives with love, but also celebrating Desert Sky Games making it to the 8-year mark, having opened to the public officially on August 10, 2012.  Not bad for any small business, let alone one that sells nerd wizard poker cards for hundreds of dollars somehow.
The Backstage Pass has been mostly quiet this summer, and unlike last year, this is not an intentional vacation or hiatus.  This year, there are many things happening... backstage... both in the business and in my personal life, and they are significantly impacting my writing time.  I can't really talk about most of that yet, for reasons that will become crystal clear once I am at liberty to do so.

Last month's semi-annual Game Store Closures article was also quite a bit more work to compile this time, owing to the massacre of small specialty retail by some damned virus this year.  I am delighted to see that post already in the Top 5 all-time most read articles here on the blog.  If some more official source were tracking those closures in a more statistically rugged manner, it might be more useful to the industry and better for our position in the world of business overall, but until that happens, I'll keep offering up a favorable alternative to no documentation at all.

Documentation is underdone anywhere that there is not either a profit incentive or a legal requirement, and there's probably no real solution to that.  When I worked for AZDHS, a routine part of my job as a senior analyst was exhaustive documentation of enactments, changes, amendments, repeals, and so forth, of applicable statutes, and more often, content in Title 9 of the Arizona Administrative Code.  This documentation was crucial because I was also assigned to the review, drafting, development, and promulgation of code content outright.  Naturally, both statutory authority and Title 1 of the Code (maintained by the Department of Administration) required that these processes be followed.  It was essential that the work of literally governing the state be able to continue administering statutory and regulatory authority even if the executives, analysts, attorneys, or whoever worked on it at any point in time, became unavailable for any reason -- moving on to other work, retirement, even death.  Plenty of law stretches back a century or more in origin, even out here on the frontier where we were only a territory until 1912.

I have been a fan of the Canadian progressive rock band Rush all my life, and I spent many years collecting any recordings and memorabilia I could find.  By contrast to what I experienced at AZDHS, in Rush's fandom, documentation was mostly voluntary.  This is why, until Rush were years into their careers, almost nobody was documenting their performance history (sometimes referred to as a "tourography") and until the later years of their career when portable technology caught up, almost nobody was documenting most of the performances themselves by means of audio or video recording.  (The creation of "concert bootlegs" or "Recordings Of Indeterminate Origin" was a gray-market practice for a long time, but today in the YouTube and smartphone era, everyone just records whatever they want and no one cares.)  Rush's entire late-1975 "Down the Tubes Tour" in support of the album Caress of Steel is so scantily documented that a whopping one concert recording has ever been found, and it wasn't found until around ten years ago, and it sucks.  Eyewitness testimony regarding the setlist for the hometown and (presumed) best show on the tour is a subject of veritable archaeology, and provokes no small amount of disagreement (in a positive way, in mutual hope of getting it right).  For a point of comparison, despite the crude tech available in 1980, Led Zeppelin's entire final tour is completely documented.

The Backstage Pass didn't start until late 2014, but I am glad that it has served as documentation, to some extent, of the business itself, in addition to what one might glean about greater industry events from my humble articles.  The blog is eternally contemporaneous with the events and issues it addresses, except when there is intentional rear-view mirroring for one reason or another.  I'm sure once I depart the business, whatever year that is, I will set to work writing a book about it, and these articles will form the backbone of that manuscript.  We have some tumultuous chapters coming up, and I know it's going to be quite a ride.

The trenches-oriented business reality of the comic and hobby game small specialty retail industry has been even better documented by the likes of Gary Ray and Scott Thorne, and we have occasionally seen additional input from various others, ranging from highly credible to downright mötley.  I'd be here all night if I started charting the various new media channels that we're seeing content of documentary value from.  A lot of this documentation is profit-incentivized, either directly or just as an adjacent way to add value to the writer's top-line enterprise.  However it's getting done, it's good that it is.  This is a strange pinpoint in time, an unusual intersection of narrow niches of business, technology, social media, hobby pastimes, and fandoms.  It's great to realize most of it won't be lost to fading memory when it's over.  Not all cultural flashpoints are so lucky, and some that are, get documented mainly in Retrospecticus Format with talking heads telling us how it all went down.  That can still be done well, as in the link above, but contemporaneous content is broadly superior.

In any event, thank you for being along for the ride these past eight years, and for the five-plus years that The Backstage Pass has been chronicling it all.  There is so much more I hope to do moving forward both with this writing project and other content creation, but the reality right now is that progress within the business is the most crucial and exciting thing I can be working on most of the time.  Hopefully I can sketch enough details down in the meanwhile, that it will be possible to chart and analyze the whirlwind afterward, once the storm has calmed down.

Wednesday, July 29, 2020

Constraints

One of the most stressful aspects of the COVID pandemic for game stores is that it artificially amplifies constraints.  Dealing with this day in and day out starts to wear on a store owner, and I start to feel like Keanu Reeves in that new Bill & Ted 3 trailer, when he says, "We've been trying to write this song and save the world our whole lives.  And I'm tired, dude."
You said it, Ted "Theodore" Logan.  I'm tired, dude.  Tired of every business component taking more work than it should.  Tired of getting chewed out by every deadbeat who thinks we should price-match limited edition product pre-orders against the smallest store in town who pre-sold-out their one case of boosters in an hour at a nickel over cost.  Tired of having arrival traffic down 90% because people call to check pinpoint stock on Nintendo Switches and virtually nothing downstream of that.  And tired of the vocal minority who think we're political puppets or worse for keeping the game room closed and requiring facemasks.

But I think the amplification of constraints is the most difficult thing, because it forms a vicious circle of interdependency.  Here, maybe showing you the moving parts will make this clearer.

The best Dungeons & Dragons product slate ever is on store shelves today.  Right now.  We have the best new sourcebooks: Theros, Eberron, and Wildemount, with limited edition covers for two of them.  We have a staggering variety of dice in every color and material and in every price range.  We have the best miniatures the game has ever had in the WizKids Nolzur's Marvelous line, far higher quality at a lower inflation-adjusted price than even the classic Ral Partha pewters.  We have maps, dice trays, dice towers, character folios, and more.  And now we have Warlock Tiles, head-and-shoulders the finest immersive terrain components D&D has ever seen.

Despite all of the above, we've seen only a fraction of the sales we'd usually get in the category.  Many of our regular players have been in, and their purchasing makes up essentially all the sales we've gotten of this merch.  But a majority of D&D players disappeared with COVID.  We don't know what this means.  In-store play is, of course, not happening, and I wonder whether it will ever be back.  Zoom/Skype style play seems to be thriving.  Tangible game elements become somewhat less important then.  I've long speculated that the "giant table-sized iPad" appliance might virtualize much of the RPG experience, but we might reach the same effective outcome because of remote play instead of digitally-augmented in-person play.  I think there will be a COVID vaccine eventually or it will burn through and be subject to herd immunity, and people will come back to the table to have wonderful times adventuring together.  How long before that?  A year?  Three years?

So since we placed orders well before the pandemic for current D&D stock, and indeed already owned the bulk of our D&D inventory well in advance of that, we now have a huge amount of somewhat illiquid merchandise, that doesn't ship that well and isn't fast-moving like video games or Magic singles, and that even generous bundle specials only modestly move the needle on.  It's not a simple case of $N worth of D&D being on the shelf, where we could liquidate it and have $N.  It's the frozen turn rate.  We should have $N multiplied many times over as the product comes in, sells, is replaced, sells again, and so on.  It's difficult to articulate just how great the scale of this can get to an outside observer.

That same effect is happening in board games as well.  We saw reasonable throughput on board games on our way into the lockdown and shortly after re-opening, and board games are a commodity category for DSG anyway.  That means we stock greatest hits and new hotness, and discount it all, in order to push for market share and establish a competitive position against other local stores, without risking our real meal tickets, Magic singles and video games.  But now that we're kinda sorta reopened, and people are mostly back to work, the public has all the board games it needs, and is buying far fewer of them from us, even with price tags well below Amazon.  They just finished a plate of steak and lobster.  They don't need seconds.  So it stacks up.

With the two main general tabletop categories slowing down sales, we see them overflowing their racks.  And we can't get more of the kind of racks we use right now because restocks from China are still pending transoceanic shipment.  So even though we're the biggest game store in the Valley, we actually don't have enough room for all our merchandise right now.  Even with a giant empty floor where the game room used to be.  We should use game tables to display merch, perhaps, but (1) that's awful looking, (2) it has to be taken back apart anyway once we can reopen the game room, and (3) we're buying some really nice upgraded tables so we're currently selling off the existing ones.

Less room up front and lower sales of general tabletop means we need to lean harder on singles sales, where space isn't as big of an issue.  But we're also constrained on labor!  Fast and furious sales via TCGPlayer since the first stimulus landed have resulted in our million-card inventory being whittled down to, as of this writing, about 450,000 cards.  We're still buying every single day, for cash or credit, and it's not enough.  We have at least 300k cards in the back office right now in various stages of processing that are not entered into TCGPlayer.  We're losing sales every day from people who ask for cards we know we have in the next "waves" to process, but aren't done yet, and are cost-ineffective to deep dive for on an ad-hoc basis.  Our existing back-office staff are running at red-line, they have almost zero slow time on the clock.

So why not add more labor?  Ah, but how are we going to pay for it?  Sales are coming up shallow in D&D and board games, so we don't have "overflow" revenue available to shift toward Magic labor, which is designed to cover its own normal/ordinary pace of intake and sales, and instead is overwhelmed right now.  It's fairly common for a game store with large business components to take from some and give unto others, resource-wise, in an internally Marxist fashion of sorts.  But when there isn't any surplus elsewhere, and every department is subsidizing every other, there's no wealth to redistribute.  (There's probably a greater political lesson to be taught here, but I'm staying well clear of that.)

Thus, we have a dire shortage of Magic singles, our highest-volume category, which we actually do own but can't get processed into the system fast enough, for which we badly need labor, which we could afford if every product category were performing even at average levels, but the two general tabletop categories are both running very thin right now, constraining all parts of this resource chain.  And thus it is that Griffin and I spend significant parts of our working days plugging in labor wherever it fits, so as to give both front-of-house and back-of-house staff as much unobstructed throughput as possible.  And it's still not enough.

I'm tired, dude.

Tuesday, July 21, 2020

Hobby Comic and Game Store Closures, First Half of 2020

Okaaaaay then.  The first-half list for 2020 is short, of course, owing to no particular disruptive events across the industry or our economy.

If only that were true.  What a first half of the year we've all had, and somehow the second half has not started off especially better.  Small businesses have taken it on the chin, and we are here to mark the passage of some that took that blow and did not get back up.

New to this post or to The Backstage Pass?  Here's what we're doing.  These store closure posts are among the highest-read and highest-shared articles I write, and one would think some more official source like GAMA would take up the mantle of tracking this, but I guess not so far.

Today's list has a tag of "COVID" for stores that cite specifically the pandemic disruption as their cause of closure, or which closed during state shutdowns and were discovered not to have reopened.  Obviously a store that was already in trouble might use COVID-19 as an excuse for why they failed, but for the purpose of this article, I am taking it at face value.  The situation was bad for everyone except the mass market, and I see no need to flog a corpse.  Moreover, stores not closing specifically due to COVID surely were done no favors by the gigantic worldwide mess the pandemic caused.

AND NOW THE LIST.

Announced or Discovered Closed: 
  1. Chain: GAME (40 stores in UK closing out of ~260) 
  2. 1000 Lives Gaming (Hartsville, SC) 
  3. 2nd Chance Games (Milton, WV) COVID
  4. 42 Ale House (St Francis, WI) 
  5. ABC and Toy Zone (Chanhassen, MN) COVID 
  6. Action Toys & Collectibles (Jacksonville, FL)
  7. Advantage Games (Northglenn, CO) COVID
  8. Aero Hobbies & Games (Santa Monica, CA) 
  9. AK Comics (Beloit, WI) 
  10. All About Books and Comics (Phoenix, AZ) 
  11. Apache Comics (Mesa, AZ)
  12. Apex Gaming Center (Irving, TX) 
  13. Baxter's Tempe SAK Gaming (Tempe, AZ) COVID 
  14. Big Rapids Hobby Shop (Big Rapids, MI) 
  15. Board Game Barrister (Greenfield, WI) Other locations remain open 
  16. Boards & Beans (Regina, SK, Canada) COVID 
  17. Boardwalk Hobby Shop (Mount Lookout, OH) 
  18. Bobe's Hobby House (Pensacola, FL)
  19. Bonanza Books and Comics (Modesto, CA) 
  20. CCG-Singles.com (Portland, OR) 
  21. ChronoCade (Kalamazoo, MI) 
  22. Coffee With Comics (Glendale, AZ) 
  23. Collector's Edition (North Little Rock, AR) 
  24. Comic Book ER (Cadillac, MI) 
  25. The Comic Book Store (Little Rock, AR) 
  26. Comics Dungeon (Seattle, WA) COVID 
  27. Connected Gaming (Phoenix, AZ) 
  28. Corner Comics (Kirkland, WA) COVID 
  29. Critical Strike Games (Edmonds, WA)
  30. Dice Bag Games (Duncan, BC, Canada) COVID 
  31. Dice & Donuts (Preston, Lancashire, UK)
  32. The Dragon and Meeple (Los Angeles, CA) 
  33. Dragon's Keep Gaming and Miniatures (Portland, OR) COVID 
  34. Dragon's Lair WarGames and Hobby Supplies (Shreveport, LA) 
  35. Emerald Phoenix Comics (Aldergrove, BC, Canada) COVID 
  36. Empire Collectibles (San Diego, CA) COVID 
  37. Ever Green Game and Hobby (Missoula, MT) COVID 
  38. Fables of Calhoun (Calhoun, GA) COVID 
  39. Family Game Night (Orlando, FL) 
  40. Fanatix (Dothan, AL) COVID 
  41. Fight or Flight Comics (Raleigh, NC) 
  42. Freaks & Geeks (Denton, TX) COVID 
  43. G33k Out (Ocala, FL) 
  44. Galaxy Comics (Somerset, KY) 
  45. Game Empire (Pasadena, CA) 
  46. Game Essentials (Superior, WI) 
  47. Game Hunters (Frederick, MD) 
  48. Game Kastle (Mountain View, CA) chain location 
  49. Game Quest Games (St Croix Falls, WI) 
  50. Game Quest Inc (Radford, VA) 
  51. Gamer's Cache (Mountain Home, ID) COVID 
  52. Gamer's Gambit (Danbury, CT) 
  53. Gamers Vault (Montgomeryville, PA) 
  54. Game Rules (Portland, OR) 
  55. GameStreet (Mississauga, ON, Canada) 
  56. Games N Go (Roseville, MN) 
  57. The Gaming Keep (Hastings, MI) COVID 
  58. Gaming on Grand (Escondido, CA) 
  59. Gathering Games (Tampa, FL) 
  60. G Cubed (Bunbury, Western Australia) 
  61. Geekygami's (Bartlesville, OK) 
  62. Geeky Villain (Everett, WA) 
  63. Gerard's Gaming & LAN Center (Webster, TX) 
  64. Hellbent 4 Cardboard (St Petersburg, FL) 
  65. Henchmans Games (Swaffham, UK) 
  66. Heroes 4 Sale (Southbury, CT) 
  67. Hieroglyphic Games (Cincinnati, OH) 
  68. Hidden Treasures Collectibles & Comics (Alexandria, MN) entire plaza destroyed by fire 
  69. Hillside Games and Comics (Asheville, NC) 
  70. Hobby Knights (West Bend, WI) 
  71. Hungry Hippo Board Game Cafe (Decatur, IL) 
  72. Hyperspace (Lakewood, CO) 
  73. Imagine! Hobbies & Games (Sherwood, AR)
  74. Inconceivable Toys and Games (Monument, CO) COVID 
  75. JJGames dot com (Englewood, CO) 
  76. Joe Garage Games & More (Suwanee, GA) 
  77. Kapow Comics (Cumming, GA) 
  78. Killer Rabbit Comics & Games (Williston, VT) 
  79. Lee's Comics (Mountain View, CA) COVID 
  80. Mad Reads (Brighton, CO)
  81. Magic Mike's (Portland, OR) 
  82. MaximuM Comics (Henderson, NV) 
  83. Nerdcore Toys and Collectibles (Ellensburg, WA)
  84. Netherworld (Warrington, England, UK) 
  85. The Nexus 419 (Rossford, OH) 
  86. Now Playing Movies and Games (Tylertown, MS) 
  87. NuGames (Eureka, CA) COVID 
  88. Oblivion Games Inc (Mansfield, TX) 
  89. OOP Games & Hobby (Lynnwood, WA) 
  90. PlayLIVE Nation (Mission Viejo, CA) COVID, chain 
  91. The Portland Game Store (Portland, OR) COVID 
  92. Prime Time Gaming (Macon, GA)
  93. Purple Turtle Comics (Vallejo, CA) 
  94. The Raven's Nest (Marietta, GA) 
  95. Realms Comics & Games (North Richland Hills, TX) 
  96. Revolution Video Games & Movies LLC (Tampa, FL) 
  97. Rocket's Hideout (Baton Rouge, LA) COVID 
  98. Rockhead's Comics & Games (Kenosha, WI) 
  99. Rogue Nation Games (Richmond, BC Canada) 
  100. Ronin Games (Castro Valley, CA) 
  101. San Diego Comics (San Diego, CA) COVID 
  102. Seann's Anime and Comics (Sylvania, OH) 
  103. Sho'Nuff Comics (Tuscaloosa, AL) COVID 
  104. Silver Key Lounge (Mesa, AZ) COVID, indefinite 
  105. Skol Games (Eagan, MN)
  106. Splat! Gaming (Burleson, TX)
  107. The Storm Crow Tavern (Vancouver, BC, Canada) COVID 
  108. Table Top Cafe (Edmonton, AB, Canada) COVID, consolidating into remaining location 
  109. Teahouse Comics (Sandy Springs, GA) 
  110. Tolly's Game Store & Lounge (West Jefferson, NC) 
  111. Toys Cubed (Toronto, ON, Canada) Erin Mills Town Centre location 
  112. Toys Cubed (Toronto, ON, Canada) Oshawa Centre location 
  113. Toys Cubed (Toronto, ON, Canada) Scarborough Town Centre location 
  114. Toys Cubed (Toronto, ON, Canada) Square One Centre location 
  115. Toys Cubed (Toronto, ON, Canada) Vaughan Mills location 
  116. Video Game Trader (Calgary, AB, Canada) COVID, 2 locations closing and 1 remains open 
  117. Video Game Trader (Forest Lawn, AB, Canada) COVID, 2 locations closing and 1 remains open 
  118. Vigilante Gastropub & Games (Austin, TX) COVID 
  119. Villains Comics & Collectibles (Monroe, LA) COVID 
  120. Wandering Havoc Games (Marysville, WA) 
  121. Warcraft Games (Mission, BC, Canada) 
  122. Weekend Warlords (Loughborough, England, UK) 
  123. Weird Realms (Cleveland, OH) COVID 
  124. Wizards Keep Games (Renton, WA) 
  125. Yellow Jacket Comics (Tempe, AZ)
[End of list]

At the time of publication, the list had 123 entries representing 162 stores, totaling chains and multi-location closures as noted in their respective entries.  Typically after these articles go up, I receive emails and messages about stores I missed, which I do appreciate as it helps make these articles as useful as they can be in terms of reference.

The overwhelming lesson of this industry through almost half a year of COVID disruption has got to be something like "You can never assume general business conditions will remain as they are."  I can tell you right now that DSG has suffered for not being able to employ our single biggest marketing draw, which is organized play.  What happens to a store that has little else in its toolbox?  It probably ends up on a list like the one in this article.

When you realize our industry has had to deal with the sudden near-total elimination of organized play and constant supply chain chaos, both factors completely upending even the most prudently planned square footage deployment (generally the most expensive and least changeable part of a store), it is not difficult to see how even a reasonably stable comic, video game, or hobby game store could find itself suddenly scratching the cloth.  And in that unexpected time of peril, resources to weather the downturn may or may not be ready.  DSG had a gigantic inventory to lean on.  What if we didn't?  What about any store that doesn't have a strategic reserve of some kind, whether it's cash, assets, favors to call in, some mixture of those, or what have you?

I have now seen enough evidentiary performance out of stores of different kinds and places that it has become fairly clear how a comic, video game, or hobby game store experiences wild success to where there is not only no danger, but considerable income for stakeholders.  The answer to that question, which so many of us are so avidly chasing, is of course highly dependent on that store's specific physical, financial, and competitive circumstances!  But once configured for maximum compatibility with those factors, things get somewhat more straightforward.  The operational imperatives crystallize.  Don't leave money on the table without getting something to make up for it.  Don't spend good money chasing after bad.  Don't let yourself get rolled by people who are out to gain at your expense.  Get your home situation right.  Most importantly, get your head right, because the action follows the thought, and the result follows the action.  You will reap what you sow.

Get on with it.

Tuesday, June 23, 2020

Five Weeks of Plenty

Starting with the Magic Core Set 2021 on July 3rd -- prereleasing June 26th -- and continuing to Jumpstart on July 17th and Double Masters on August 7th, we are about to get an unprecedented bounty of three enormous, stacked, loaded Magic: the Gathering booster expansions, all released into a tenuous market.  And I really do mean "loaded;" the spoilers and set contents thus far are off-the-charts great and follow up on the pace that Mystery Booster set as a reprint panacea.

It will be extremely interesting to see what the sales curve looks like in terms of pre-orders into release day rack sales into following weeks' sales, and how that compares to a normal booster release's sales curve.  Players only earn so much money and they still gots' bills tuh' pay.

Double Masters is two products of course, including a "VIP pack" targeted at high spenders that features an array of the most demanded cards in the set in each ~$125+ "booster pack."  (Pricing is tentative this early on.)  It's a substantial enough configuration that I believe it will behave in essence like an additional booster release, except in tightly allocated quantities.  For that matter, we're only two weeks removed from Secret Lair Fetchlands, a ~$300+ box set, so we're really looking at a release slate that will feel like five major booster releases over a span of seven weeks.  Firehose of product, indeed.  But the sets are so loaded, I'm not sure demand will waver much.

I am more interested to see how game stores handle this overflowing chalice.  Many game stores float Magic releases on terms or on credit cards.  If the initial movement of a given product is slower than expected, because players have moved on mentally to the next one, that could hit their tripwire and result in a cash flow underrun.  Or, worse, if a store has been floating cash from one pre-order run to the next, and distribution forces a cash call or a second shutdown cuts off the daily sales that pay their ordinary overhead, or what have you, the same cash flow underrun danger exists.

Most stores won't broadcast their cash position, so the telltale sign that they were in trouble will be an unexpected closure or broad clearance sale during or shortly after the big releases drop.  In order to teach and be informative, I will now broadcast our cash position and explain what we're doing about all this.

Video games have run strong during this pandemic.  We are sold out of all current-generation systems and cannot get any more until we don't know when because none are arriving from manufacturers, production runs are still in progress as east Asian factories ramp back up post-COVID.  We get big shipments of controllers every week and almost immediately sell out.  White-hot game titles have been landing and selling through for the most part.  And the used market is on fire; we are almost out of Nintendo consoles, period, and low on games for most of them.  And we've seen big sales bumps for Playstation 3, Xbox 360, and Sega Genesis, in terms of used games that people are presumably catching up on that they missed.

Meanwhile, Magic cards have sold just fine, despite the lack of in-store events or gameplay.  This is surely a vote of faith on the part of our player community that we will eventually re-open the game room, and they are correct, we will.  It's great to have their support now, however, because it puts us in a position to be strong in ways like we're about to be.  And the flow of collections coming in on buys has been substantial, because several stores in town are not paying cash on buys, so those players are all coming to us.

Moreover, our expenses are mostly lower than usual right now, with the glaring exception that we are obligated to pay rent on square footage that includes an empty game room.  Due to the lack of events, staff hour counts are down in absolute terms.  Due to the product mix tilting so much toward used merch, distribution invoices are a lower percentage of the weekly nut.  Payroll and cost of goods are the two largest expense buckets, so when they both run shallow, life is pretty good.  And we've been fortunate to avoid any serious emergencies, like last summer's sudden air conditioner failure of one of our three roof units.  I'm not driving a Lamborghini just yet, but my stress level while sitting at my desk with the checkbook open is pretty low lately.

We do have credit terms with distribution and will accept shipments on that basis, and in an ordinary time you'd typically see us tailoring the numbers so that any given shipment is the amount of restock product and a few new releases that will sell through before the invoice comes due, freeing us up to use cash on hand to buy used merch walking in the door.  This is common to business.  The idea is that you use "someone else's money" to generate sales with margin and then pay back what you were fronted and pocket the profit.  Our cash flow is sufficient right now that we are purchasing the maximum available of each new set, and unlike many stores, we went in heavy on Jumpstart from the beginning, expecting it to be a hit and guessing correctly.  We're taking amounts well above what would sell through during the invoice's terms, because we already know we can cover the invoice without having to sell all the merch first.

All Magic products are allocated on release to some degree; as Michael Caffrey of Tales of Adventure noted in a Wizards discussion group, if you ask your distributor for one million dollars worth of a new Magic set and offer to pay up front in cash, they still won't do it.  Distributors are limiting all stores to purchases within their historic volume range and will surely continue to do so.  In our case this means we'll be getting our biggest ever purchase invoices, plus a bit more for growth, and know in advance that with no urgency to flip the goods quickly, we will be able to keep it in stock long after some of our competitors sell out.  We've been climbing into this position for a while now, and it's a far cry from 2015 when we struggled to hit invoices before they came due.  Now that constraint is gone, which means we can put our attention on having the goods for as long as possible, which is ultimately one of the strongest means of drawing business.

So that's where it all sits, today, on the cusp of five weeks of plenty.  I hope in week six I can look at the shelves and see a comfortable surplus of product and look in the bank and see a nice substantial balance.  Given the demand levels for both the Magic sets and for video games and other things we carry, that outcome seems likely.  And that's pretty great.

Tuesday, June 16, 2020

Calling It Fear Is Dishonest

You've heard it before, I'm sure.  "Don't live in fear."  Don't make your decisions based on fear.  Don't work how you work, live how you live, vote how you vote, based on fear.  You should just do whatever they're trying to roll you into doing, because if you don't, it must be because of fear, and fear is bad, and to be avoided.  No good person admits they experience fear.

That's dishonest, and it eliminates the most important layer of meaning from the Fear equation.  When someone says that about Fear, what they are really condemning is something anyone would condemn, and something that anyone would want to avoid, and that is Fear's bastard child, Cowardice.  And we'll explore that more in a moment.

But Fear has a legitimate child as well, and it is your ally.  A costly ally, but one that can be depended on through the worst challenges life has to throw at you.  And that is Responsibility.  Because when you harness the power of Responsibility, you gain Control.  And control of your life leads to stability, and contentment, and ultimately happiness.

To understand this, it's crucial to understand what fear means and does.  Because fear, as your ally, is a powerful tool.

In the child's mind, fear is the life preserver, the watchful eye and readiness to flee potential danger.  It's a simple kill switch and it usually works, and thus most children survive into adulthood none the worse for wear.

In the adult's mind, fear is more than that.  It builds the guideposts, and it raises the warning signs.  Fear builds layers of context until a mature human being can make decisions six mistakes upstream and avoid going bust or worse.

(1) You don't have that third beer because you need to be up early because your boss has warned you about late starts and you need that money to pay the bills or you end up hitting the breadline and the bricks.
(2) You don't have that third beer because it's the 29th of the month and you know the cops are going to be fishing for DUI arrests and you have a 24-mile commute each way and losing your license is essentially guaranteed unemployment, and you need that money to pay the bills or you end up hitting the breadline and the bricks.
(3) You don't have that third beer because that pretty thing you've been chatting up all night might not remember giving consent, and oh damn now you don't remember for sure either, and then your spouse isn't particularly amused at having to post your bail, and next thing you know all your stuff is out on the front lawn, and she cleans out your joint account, and you have no money and nowhere to stay, and you miss work again because of the arraignment, and now you have to fight a sexual assault charge, and your boss fires you, and you end up hitting the breadline and the bricks.
(4) You don't have that third beer because you don't want to pass out at 75 miles an hour on the I-10 overpass and end your tenure on this earth in a crush of metal and glass.

Nobody thinks through that in full conscious lucidity, but the adult brain processes it all through means of the fear of being left to the breadline and the bricks, or worse, by whatever twisting event sequence you get there, and in that ponderous moment... you lay off that third beer.  And the butterfly never flaps its wings, and Shanghai is spared the typhoon.

I'm sure we can all think of low points in our lives, or even unpleasant situations that weren't part of low points but were just acutely awful by themselves, and the inner urge to avoid revisiting those situations is fear working as a tool for you.  I fear going bust, because I've been there.  I have run completely out of money and been sleeping in someone else's garage, without a mailing address of my own, albeit briefly (I am fortunate) and I was able to take responsibility, gain control, and grind my way back up to solvency because I feared being at zero and being de facto helpless.  I will not allow myself to go bust again, it motivates me every day even though I am now a gigantic distance away from the point where such an outcome would be at risk again.  I am responsible for my own life, and thus I am not relinquishing control.

Cowardice is where the weak person quails in the face of fear and abdicates control.  Where instead of acting and moving forward, or even attempting it, the coward expects someone else to come along and save them.  And when it becomes an indecent spectacle because they grow to rationalize that they are entitled to be saved, embracing their impotence.

There are times when cowardice is forgivable.  Sufficiently traumatic experiences can overwhelm the conscious mind with a degree of fear that eludes grasp.  But that's not the everyday cowardice that ruins most lives.  The everyday cowardice is at a much lower and more basic level, and can be found in the routine evasion of necessary things.  In essence, in the failure to take responsibility, and thus to take control of one's life.  It's all written off to bad luck.  And that's the most corrosive way a person can lie to themselves.  Because everyone knows bad luck isn't your fault, right?

It's OK to get help.  It's not OK to demand it as if by right.  But it's OK to accept and admit what you fear, and then be responsible for overcoming it, thus taking control.

An encapsulation of the above concept can be found in the pilot episode of "Firefly," in Malcolm Reynolds's decisive moment right when all seems lost for the heroes:

"You depend on luck, you end up on the drift.  No fuel, no prospects, beggin' for Alliance make-work.  And towed out to the scrap belt.  That ain't us.  Not ever.  There's obstacles in our path, and we're gonna deal with them.  One by one."

And now, I'll leave you with a look at how we do this in the hobby game industry.

Q: Don't you fear widespread economic disaster?
A: After the way the last few months have gone, I fear this less than I fear localized disasters.  At least when everything was kaput due to COVID, everybody was in the same boat.  Well, a lot of us were.  Seems like the mass market wasn't suffering much at all.  But we were able to take shelter in the near-universalness of the bad situation.  Nobody would condemn us for being closed for the shutdown, or for adopting limited opening hours afterward.  Relatively few players are hassling us about the game room continuing to be closed, since most rational adults understand what is going on.  Customers, by and large, supported us generously and continue to do so.  It has been a struggle in many ways just to make sure we're still running the engine, but the answer to this has been to spend every day working either to generate revenue or on the maintenance of the infrastructure to generate revenue.  I've said before right here on this weblog, every day is an opportunity to advance the business some small amount.

Q: Don't you fear Amazon?
A: There is plenty to fear in Amazon's ability to deploy seemingly limitless resources to ruin the independent retailer facet of any particular product, line, category, or even business if Bezos and his minions so desire.  Rather than the coward's answer of cursing at the sky or hoping someone will take Amazon out of the equation somehow, the responsible retailer builds answers.  First, dealing in merchandise that does better with in-person shopping than via the Amazon marketplace, such as used video games.  Second, dealing in niche markets that have top-of-mind focus that Amazon isn't nimble enough to match, such as Magic singles.  Third, appropriately, with Third Place Theory, hosting events and gameplay.  Fourth, instead of beating them, by joining them, and selling through Amazon's platform.  There are other approaches that can work as well, but those are four clear viable ones.

Q: Don't you fear digital delivery obsoleting physical video game media?
A: I've reached this issue before here on the Backstage Pass, but really, we don't.  No single service is a true Netflix-for-Video-Games, although Xbox Game Pass is absolutely great and everyone should take advantage of it.  But with video games, it's not nearly as easy to create a seamless streaming catalog and interface that matches what physical media can do.  Not just in terms of fidelity, since that part will surely catch up as bandwidth and processing strength improve.  But in terms of licensing as well: Barely a fraction of the games out there are available via Xbox Game Pass, Playstation Now, or Nintendo Online.  Not that many more are available to buy from Xbox Live, Playstation Store, and Nintendo Network (now just Switch, thanks to the hax0rs).  And, de-listing happens all the time.  If you absolutely, positively, want to play a specific game, owning the physical media containing it is still the gold standard.  And that's just counting current games, not the immense depth of the retro back-catalog.  Even movie streaming is suffering from some of these same problems now.  Netflix today isn't the Netflix of a few years ago.  Each of the other services has carved off its licenses and exclusives.  To watch anything on demand, you'd have to subscribe to enough streams to make old-fashioned cable TV seem a bargain by comparison... or you could just own the disc and never face the question.  There's surely a trend line here, and I think we'll see an adjustment around five or ten years ahead.  Retro will still exist, but as old hardware ages and new audio and video technology continues to change, the used video game market will finally end up not cost-effective for the center-of-the-bell-curve mainstream gamer.  That means for the time being, our responsible play is to make hay while the sun shines.

Q: Don't you fear Magic dying?
A: If Magic can survive Homelands, Prophecy, and Saviors of Kamigawa, it's probably fine for the foreseeable.  Even with COVID forcing many players onto Arena, and things looking a little wee-woo back around April, the consensus has roared back loud and clear that the Magic experience is still at its best on the physical tabletop against live opponents.  I have some concern that the Reserved List continues to be something of a ticking time bomb, but in the progression of Modern Horizons, the Pioneer format, and the 2020 Year of Reprints, we can see Wizards setting the table for the eventual consignment of Reserved cards into unsupported play at some point.  Removing the Reserved List cards from Commander is the next big step that has to be taken.  Before you say they'd never do it, recognize that Wizards of the Coast has, very recently, shown that they are ready to remove cards from tournament play purely for reasons having nothing to do with card mechanics.  Anyway, even if they never printed another Magic card starting right this moment, Magic would still be played for decades.  The secondary market would undergo some pretty ferocious adjustments, but it would go on.  Far lesser TCGs that have been dead for years still have avid fan bases, and when you proportion that up against Magic, you can begin to appreciate the enormity of the latter.  And that's how most of us running game stores know we'll be punching our own ticket out long before Magic ever crumbles into dust.  So our plan becomes to monetize it for as long as we want, on terms that work for us, in business structures that work for us, and be ready to move on when it's no longer advantageous from our vantage point to do so.

Most other fears in this industry can be broken down similarly into components, and as long as our particular game store business can find a way to answer each component problem, we are responsible for our own sustainment and we are in control of our future.  It's a stark difference from the litany of retailers in many of the social media retailer groups whose first reaction to any problem of the moment is to curse the heavens and demand that someone, often a publisher, often Wizards of the Coast, rescue them somehow from whatever mundane problem their own incompetence has made blow up in their laps.  Wizards just fronted game stores a free rack of Mystery money and a loaded promo giveaway slate to help the responsible among us push forward past the difficulties of today so we can still sell their wares tomorrow.  The cowardice is pathetic indeed that takes such a boon and still refuses to fuel their own engine with it.

Above all, don't be trapped by the dishonest assertion that you are failing because of fear.  We can choose the coward's path, or we can choose responsibility and then attain control.  That choice will determine whether fear helped us or hindered us.  But there was no shame in knowing fear, and never will be.


Tuesday, June 2, 2020

Rot


"The most disgusting lies are dressed in beauty that'll rot."

Upon lease execution with a five-year personal guaranty, the hobby game store tenant discovered the real reason that suite was empty for as long as it was, at the bargain price it was offered.

After a torturous migration and thousands of dollars in sunk labor, the whiz-bang point-of-sale system that was promised to be fast, accurate, and rugged, turned out to be about the same as the one the store was using before.  In some ways, worse.

"Capital Funding" provided the partners with a fast deposit of $30,000 to cover the shortfalls from slow sales of overlapping high-profile TCG and wargames releases, money fronted with barely any questions asked and no credit check.  Two years later, the store was finally clear of the principal, having repaid a total of $52,516.

Two hot #1 spec books appeared on comic invoices for the week, and boxholders were lining up to pay a premium at their Friendly Local Comic Store to be sure they locked in copies without having to buy on eBay at ten times cover.  The comic distributor shorted all 50 copies of hottest spec book, and sent damaged copies of the second-hottest spec book.  The store filed a timely damage report, and was credited the wholesale price of the books.

The popular indie publisher touted the Friendly Local Game Store as the preferred channel for resale of their white-hot title, but then kept the entire next print run for themselves to sell on Amazon.

The wargame publisher offered generous terms and a top-flight IP.  The store discovered only later that most of the local player base for the game was content to play the figures they had already long since purchased from previously existing game stores, and that effectively sole distribution by the publisher meant any order error caused chaos with the store's efforts to impress the faithful players that remained.

A distributor promised generous allocations of the hot limited edition box set, and on delivery day provided its client stores with a modest quantity.  Plenty of stock was available to the public at market price on the distributor's backdoor direct-to-public website.

The enormous orders for hundreds of long-since-rotated staples seemed like easy money from somebody's silly spec, with none of the cards being factors in Modern or Legacy.  A week later, the Pioneer format was announced, and each of those cards looked likely to debut as metagame all-stars, and spiked tenfold in listed median price.

The rising star employee taking home that game without adding it to their tab was totally inadvertent, a complete accident.  Such a trusted individual would never steal from the company.

The eager beaver with Uncle Rich's bequeathal stood ready to change the tabletop world with their innovative game store idea.  Their $85,700 discharge under Chapter VII of the U.S. Bankruptcy Code will remain on their credit report until 2027.

Crowdfunding seemed like a natural way to ensure a title never lost money.  Only upon completion, when the final bills came due, was it apparent the "wild success" was financially catastrophic.  Game stores the world over fielded angry phone calls from buyers who wanted to know when stock would be delivered, and whether the store would match the original Kickstarter backer discount, even as the publisher prepared to crowdfund the second print run as a pyramid scheme to pay off obligations from the first.

He was the bright young prospect on the store's qualifying circuit team.  After coming close to the money and falling short due to inferior deck selection, he went on a grinding tear, living from deck to deck with the store and maxing out an entire rotisserie of credit cards before suddenly disappearing entirely. Conflicting reports from other players say his parents were on the hook for five figures in co-signed credit cards, or they had forced him to attend Gamblers Anonymous, or both.

She grew weary of her family asking when she was going to "get a real job," and stopped telling them about the tight budget weeks and about the trials and travails of the industry.  Soon, she stopped telling them about her successes as well.  Eventually, she and her family stopped talking at all.

Nobody picked up on the cues at first.  The edgelord player nobody liked was suddenly the soul of courtesy.  Under the façade, the player was angry about being shot down for his unwelcome advances on the new female employee.  Then one night he tried to follow her home.  She says she feels safe for now, but ownership worries she's just putting on a brave face, and that the store ban, trespass order, and injunction won't be enough.

The sole proprietor turned to substance abuse as a brute-force means of fighting exhaustion, desperate to bottle lightning from the hot new release cycle before the revenue slowed.  And it worked!  The cash register sang and the customers happily spent.  He soon found himself turning to substance abuse as a comfort.  And then, eventually, long after squandering the windfall profit, he turned to it out of agony, because he couldn't stop.

Art credit: Varvara Snegiriova
Details have been altered/anonymized for references in this article to the experiences of individuals

Tuesday, May 26, 2020

General Announcement Regarding Reopening DSG's Game Room

QUICK AND DIRECT NEWS: The exact reopening date of the game room at Desert Sky Games will depend on CDC and AZDHS guidance for gatherings over the course of the next several weeks, and on Wizards of the Coast's decisions regarding the date that sanctioned play may resume.  The absolute soonest it will happen will be June 5th; we are not considering any dates before that.  We believe a more likely date is circa June 26th, the Magic Core Set 2021 Prerelease Week kickoff day.  However, it remains a moving target.  At this time we believe it is still imprudent for game stores to resume hosting tabletop gameplay, even though several are doing so.

RELEVANT AUTHORITY: Rumor has it that Governor Ducey will give us essentially free rein to re-open all aspects of our business on or around June 1st, to the extent that we don't have it already.  The CDC has already issued updated guidance that surface contact is no longer believed to be a critical vector for COVID spread, so we could in theory reopen the arcade at any time.  However, the CDC's same updated guidance re-emphasized that person-to-person respiratory spread is still considered a serious risk.  COVID is, after all, a respiratory virus.

EXPLANATION: Look, I have been a strong advocate of limiting the duration of the shutdowns and getting businesses back open.  I am a capitalist's own capitalist.  Nobody on this planet should think I'm making this decision from a standpoint of fear or an agenda to keep small businesses (including mine, apparently) stifled so I can, I don't know, enjoy quarantine or something?  I get that some people have taken advantage of this shutdown to enjoy a leisurely schedule of telework, if not an outright paid vacation.  And I'm enough of an anti-commuting advocate to appreciate how much some people may be enjoying the extra daily time.  But not all of us are lounging through this thing.  Obviously health professionals are slammed.  Everyone in food service has been working their tails off.  I've also been busy beyond all insanity since the shutdown began.  Turns out a couple of owners doing the work of ten staff members, or even half that, presents difficulty.

As I wrote recently, there is a very strong financial motive for DSG to reopen the game room.  It is going to happen.  Just not yet.  And the bottom line is we need to see the numbers continue to improve/flatten/trend_better before it seems prudent from a business standpoint to proceed, and even better would be that occurring in tandem with more favorable official guidance.

We're not a church, fortunately, because choirs were apparently early spread vectors, and basically rooms full of speaking or singing people are very dangerous, which is why all the concerts are still getting postponed.  A TCG tournament, however, is very like these things in terms of droplet emission, and a Dungeons & Dragons game is even worse so for its participants.  In-store gameplay remains an acute concern, while ordinary shopping activity at DSG is reasonably safe at this point by current reckoning.  And yes, we are buying Magic cards and video games and systems at this time.

Thank goodness, it's scorching hot outside already, and respiratory virii fare poorly under those conditions.  Once you come indoors, a sick person or asymptomatic carrier can still spread COVID via droplets, however, so we're not out of the woods yet on that count either.

Thanks to the CDC guidance update cited above, we will likely open the arcade in the near future before opening the rest of the game room.  We're wrapping up some upgrades and maintenance, and we're excited to let you all try them out.

Once we do re-open, the likelihood of us requiring waivers is high.  Unless the Arizona House's bill to shield businesses from COVID lawsuits, a bill that passed just before the chamber adjourned sine die, gets taken up and passed in the state Senate, we're forced to make all comers sign a binding contract indemnifying us from their own potential plague-ridden outcomes, which also means we won't be able to let minors into the game room without parental accompaniment, since minors cannot be bound under contract, which is what a waiver is.  I need the logistical hassle of running essentially a bowling alley but there's just the pro shop and no lanes, like I need a hole in my head.  So as you might imagine, even if we were not already inclined to wait for the health and protection of our staff and player community, we are also inclined to wait to give the legal landscape time to get dressed and compose itself.

I mentioned the Magic Core Set 2021 Prerelease Week above.  This is a tremendously smart thing Wizards has afforded stores the latitude to do.  The prerelease may be run as any number of events (not limited to nine) over the course of the entire week.  Stores that want to run a long series of eight-player pods, one at a time, to keep player counts low and reduce contagion risk, may do so, while still being able to sell through our prerelease product allotments and provide the prerelease gameplay experience our players enjoy so much.  DSG won't be re-opening the game room for this event in the direct face of strongly prohibitive guidance at that time, but if the coast is about as clear as we can realistically expect in today's circumstances, we will end up going ahead with it.

Thank you for your continued understanding and cooperation.

Tuesday, May 19, 2020

Returning to Cruising Altitude

I've been wanting to finish a couple of different incubating articles about broader industry topics, but I can barely find a few free hours these days.  Since so much plot is going by so quickly, I figured this would be another good opportunity to document some of what is happening.
We'll do this in no particular order.

The Governor's stay-at-home order for the month of April ended up lasting until just after the end of the month.  Most mass-market businesses never closed, so there was a real element of unfairness that I think we're going to see fallout from for years, in terms of how much the competitive table tilted against small businesses.

But in any event, on May 4th, small stores were allowed to open to shopping by appointment and curbside sales.  These were actually not permitted during the April shutdown in Arizona, but many stores just broke the rules and did whatever.  Given that none faced any penalties or consequences, it sounds like they guessed right.

Then, starting May 8th, we were allowed to open outright.  However, the 10-person-gathering limit is still in place, which makes it pointless to try to open the game room.  I am well aware that events can be run with as few as eight players, and that we would have two staff members at the front and shoppers wouldn't be near the players if we seated them deep in the room.  That calculus unfortunately misses the point that a game room is only cost-effective to have at all, if it is being filled and used with sales-driving events to a substantial amount of its capacity.  Even our reduced game room needs to see 20 to 30 people seated throughout a day to be worth opening and maintaining and so forth, and that's a scrape minimum.  So until we see significantly more lenient guidance on gatherings, our tables will remain off-limits.

The MTG Ikoria combined prerelease and release fell short in sales over the course of the weekend against the Theros and Eldraine prerelease weekends, but looks much better once I start correcting for differences.  Ikoria's release Friday of May 15th set a new record day for in-store sales.  The previous record was set on Mystery Booster release day, which had almost no pre-orders because Mystery didn't heat up until it was practically in our hands.  Ikoria had the most pre-orders we've fielded since probably Dominaria, possibly War of the Spark (they count differently but both did very well) and still posted a record sales day.  It was sweet both to set the new record and to have it break a record that only stood for two months, after that record had finally beaten the one from the release Friday of Modern Masters 2017.  But sure, Arena is killing paper Magic.  Whatevs, horse.  Anyway we're closed Sundays right now for a number of reasons and the Saturday fall-off for Ikoria wasn't too awful but put together it definitely made the weekend's entire take lower than that for a proper three-day prerelease, and in a few days we'll have a Memorial Day weekend that won't see the same voltage as a Magic release weekend following a prerelease, but Ikoria is still basically non-stop holy water after the enforced thirst of April.

One quick side note on Ikoria.  With the entire COVID mess, this may quietly go without a lot of notice, but the way that Wizards used an "overlay" to re-skin cards for the Godzilla IP is a huge step forward to bringing great licensed IP to the Magic: the Gathering universe.  Since every overlay is tied to a normal Magic card with Wizards's own IP, there is no danger of mechanically-unique reprints becoming impossible by means of an expiring license.  The game can use Hasbro's IP outright, and they can license basically anything else, and have it work without it ruining Magic as it otherwise could.  I posted the other day to Facebook that the team responsible for this idea deserved bonus checks.  I can't wait to see how far they take this.  Dungeons & Dragons?  Almost too easy, they could just print those cards outright but I suspect they want to future-proof that move.  Star Wars?  That's not especially Magic-esque, but possibly.  World of Darkness seems ideal, with very flavorful overlays on the Innistrad plane.  I think the richest vein will be those licensable properties that already overlap the most thematically, such as Harry Potter.  But they just did Godzilla and it was great, even though Godzilla has nothing to do with Magic, so what do I know.

Anyway, we started bringing the staff back on April 27th, the week before the re-opening.  Griffin and I had spent basically an entire month shipping online orders and doing store renovation projects, like upgrading our central video game merchandise "island" (photo above) and installing real cabinets for all the video game media.  The game room is smaller now but looks way nicer.  There are now color display cases on the racks for almost all cartridge titles, a subtle upgrade that adds tremendously to the shoppability of that merchandise.  The sales floor has been reconfigured to make more room for human beings during what we assume will be a prolonged period of social distancing.  The arcade has been under maintenance, but it's also not yet re-opened so that part isn't done.  And we have pleasant lighting effects added throughout the store with more still to come.  With the staff back on hand, we were able to restart most of the normal business processes and get ready to serve human beings on the premises.  That meant a bunch of quick cleanup of tools and materials and postponing a few upgrades for later.

Most of the staff was back in action by last week, and all our full-timers will be back by the start of next week.  Business does not support this staffing level yet, as one record sales day is unfortunately not a full offset to many very quiet days, so we went ahead and took the Paycheck Protection Program (PPP) loan.  It wasn't a ton of money, we could have survived without it, but the COVID pandemic absolutely had a substantial negative effect on our business, and with the loan fully forgivable if you spend 75% of it on payroll and 25% of it on rent, it was a no-brainer for us.  Our payroll and rent figures through June 30th easily exceed the PPP funding total.  It could end up being a bit of a mess when we go to have it forgiven, same as when we went through the process of getting it, but in the end it worked out on the front side, so hopefully the same will remain true when it comes time to close it out.

Many of my peers are taking the Emergency Intervention Disaster Loan (EIDL), and there is a business case that anyone who can qualify should take it as a gigantic hedge, particularly against the possibility of a late-2020 COVID resurgence.  I probably should be taking it too, but I really just don't want the debt.  Our balance sheet is pretty decent lately and should only get better as business returns to cruising altitude.  For the moment it seems like the funding has run out anyway, or is close to it.  If Congress reloads the trough, I'll reconsider pulling the trigger.

Distribution is finally like 90% of the way back.  We did get deliveries during the shutdown, despite that there wasn't a need to get some of that product, where the product in question is mainly meant for in-store discovery and purchase.  I would love to have gotten triple the video game consoles that were shipped in, but as it happens I'm glad we got what we got because it all has been selling quickly.  I wish I could say it has all been selling easily, but nothing is ever easy when you're a small business, and the shopper who has only ever bought from Amazon and Wal-Mart comes in expecting concierge service and abusable returns, all at impossibly low prices, and tends to end up unhappy with the experience that we delight our everyday visitors with.

Meanwhile, it has now been 90+ days since the last time anyone traded in a Nintendo Switch, Playstation 4, or Xbox One S or X.  Take that information as you will.  Have a great week!