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