Wednesday, December 30, 2015

Why I Keep Coming Back to Play Again

Last week's article got me thinking about the people that I enjoy playing games with.   I am certainly a casual Magic player now, though entirely skilled and able to play at a high level.  I just don't keep up with the format metagames other than Commander.  I play board games, LCGs, and even some miniatures games.  I won't be painting up a 40K army any time soon, but that's due to lack of time rather than lack of interest.

The relationships that keep me in a given game are a big part of this.  For example, earlier this year I found that I was busy enough not to be able to play much, and the odd game out was one of my favorites, Android Netrunner.  I prepared to sell off my collection.  However, I changed my mind when thinking about how much I enjoy playing games with the people in my regional Netrunner player community.  I kept my cards, and I know I may not get to play very often, but I'll enjoy it on the rare occasions when I can.

Once a month, though we skipped December out of scheduling logjam, we have a paid staff team-builder for DSG where we all have dinner and play games of one sort or another.  The hard business rationale for this is to get our people knowledgeable about popular games.  But mostly we want them to have fun, which helps build friendly relationships among them and also helps add enjoyment to their job as a staff member in the company.  Sometimes I'm "game mastering" and don't get to play, while other times I get to join right in, such as for our six-player Warhammer 40K tutorial melee.  These game nights are a delight and I hope the logistics permit us to do more with them.  Our January team-builder will be RPG-centered, using Star Wars Force and Destiny.  Our RPG expert, Tanner, is going to game-master for us.  I'm excited to try that game system.

Every month or two, as children and work and schedules permit, my in-laws visit, and we play board games.  Sometimes we have friends join us, but mostly we keep it small because of the child care aspect.  We let our children play with their mutual cousins and our friends' kids and we thrown down on the game table, whatever stuff I've gotten hold of.  For New Year's Eve we have Codenames and Dead of Winter on deck.  This "game night" is competitive, it's fun, it's an open rotation where we can work in family visitors and such.  We often mix in a "foodie" dinner if the ladies have arranged for it.  I enjoy it tremendously and it's the kind of thing I wish it were feasible to do with more of my friends.  Maybe if my schedule eases up this year...

For constructed Magic, I own one Commander deck.  Just one.  Five-color Progenitus, if you're curious.  I'm in the process of blinging it out to maximum, though I'm allowing that my CE Beta dual lands are as spiff as I am going to worry about getting for those ten cards.  The collecting chase is fun.  I've managed foil Khans fetchlands, but I want the judge foils.  I have Expedition foil enemy fetches, so those are maxed.  By personal preference I want the original Ravnica block foil shocklands rather than Expeditions.  Due to my time as a Level 3 DCI Judge years ago, I am preferring judge foils over most other versions for cards that have them, such as Demonic Tutor, Force of Will, Crucible of Worlds, etc.  I enjoy occasionally joining in Commander Night at DSG, especially when guys like Patrick Hug and Dustin Chapman are there with their absurdly lethal brews to serve as a benchmark for my fine-tuning.

For that matter, I play a game every day with my business partners, in particular DSG's store manager, Patrick Hug.  That game is called Small Business Retail.  So far this session has been running for a few years and we're finally starting to put some quality points on the scoreboard.  It's an expensive game to play, though, and it's a live cash game where you can really end up losing your stack when you make a mistake.  I don't recommend it for the faint of heart.

But when it comes to Magic especially, nothing keeps bringing me back to the table quite like the Gamers Edge Draft Crew.  I have known some of these guys for literally a quarter-century, longer than Magic: the Gathering has even existed.  Others I met along the way: at Wizard's Tower, at Arizona Gamer, then at Gamer's Edge, Ray Powers' store, where the group kind of crystallized for the most part.  I wrote about that store progression in an article a few months ago.

There are something like 17 or 18 levels of erstwhile DCI Judge in that photograph.  Veteran pro players may recognize Ray and the likes of Matt Stenger and Dan Gray (yes, that Dan Gray).  The other guys are unknown to most of you but are just as important to me.  There are a few more that weren't there that day for this photo.  We are the Crew.

Since Gamer's Edge lasted from 2000 to 2005, there was a fall-off in our gameplay for a while after that.  The dominant game store in the area from then until 2012 was Gamers Inn, and though we played there at times, it just wasn't our place.  Until Shadowmoor/Eventide in 2008, Ray still ran the regional prereleases so we all got together for those.  I was rocking the eBay-and-backpack-dealer gig from 2008 to 2011, so I even sold off some of their collections on consignment.  Who knew a Magic boom would end up happening.  If we had known that, I think we all would have kept our cards.  Hindsight is 20-20.

In the years since the end of Edge, rather than playing Magic, we got together for holidays.  Sporting events.  Bachelor parties.  Weddings.  Funerals, unfortunately.  Vegas trips.  Fight nights.  Barbecues. Casino nights.  We've done things we'll never forget, and other things we'd prefer to forget.  There has been trust, and there has been friction.  At least three pairs of us in the group have had fallings out, and one of those pairs mended fences after a while.  There have been babies born, then children, and now teenagers in some cases, picking up the torch and becoming the next generation of the Edge "family."  Most of the original ownership of DSG came from this group.

The group is sufficiently close that we're careful to make sure our significant others have a chance to get along, which can be intimidating for them when one of the single guys meets someone new and brings her into a social group that has so many years of history built up.  Some of the wives are close friends now.  They even have a secret Facebook group where the Edge men aren't allowed.  I assume they're making fun of us 24/7, despite Steph's assurances that they mostly chat about other stuff.

Every few weeks, currently on Mondays, the Gamer's Edge Draft Crew convenes at Desert Sky Games and Comics for a booster draft.  Sometime another venue substitutes in a pinch.  We usually draft the newest set.  There are more than eight of us, so it's virtually assured to fill a pod and most of us don't mind sitting out to give others a turn.  We want to draft "properly" for play value, so we redraft the rares and foils at the end according to final standings.  We've had people join us when we were stuck at seven, but it's a very rare occasion.  Some of them held their own, but others found out what an absolute buzzsaw this group can be on the table.  Think about what happens when people who have been booster drafting for as long as there has been such a thing as booster drafting, play amongst one another over and over again for years on end.  That kind of practice leads to a deep proficiency, almost on the level of muscle memory.  Some of it's pretty insular, knowing tendencies of each other more than format particulars.  But mostly it's broader practiced skill.

A few of the guys draft outside the group and they keep up with archetypes, so late in an expansion's tenure they tend to dominate.  But all of us know the fundamentals of limited drafting, deckbuilding, and gameplay so well that when the set is new, anyone can win any game.  Guys who use their DCI number twice a year at most will put together shockingly effective beat stacks.  Other times one of us will experiment with a derpy strategy and fall flat with it, but it was fun to try.  Some of this group goes and cashes at limited Grand Prix events. Others content themselves to the local game.  Every one of us thinks we could sit down to draft in a Pro Tour Top 8 and put up a respectable fight.  We all have careers, families, lives outside the game, so I don't see us putting in the prep hours like a devoted player grinding the pro circuit.  But you never know.

So as 2015 draws to a close, I hope you all take a moment to think about the people who YOU enjoy your comic or game hobby with, and what keeps you coming back.  The objective with all things tabletop is ultimately to have fun.  When I get to play, really play and not be preoccupied with other things, I have an absolute blast.  This is true with the family and Game Night friends, with my Netrunner peeps, with my store staff, with the Gamer's Edge Draft Crew, and everyone else I occasionally get to game with.  As long as it's still fun, even if the trials of life send me in a different direction for a while, I won't stay away for long.

Thank you for visiting my business blog and I hope you have a safe, healthy, and prosperous 2016!

Tuesday, December 29, 2015

Casual Players Are Not Necessarily Newbies Or Bad Players

A few weeks ago I wrote an article about why it was both unwise and wrong to pay grinders to play Magic -- that is, to pay more than 100% of admission fees for tournaments out into a prize pool, placing the prize pool into negative escrow so that the average player EV is a profit and the average store EV is a loss.

I termed this practice "social OP prizing" because it comes from an illusory promise on the part of the grinders that if a store will, in effect, pay them to play cards, the store will more than make it up in other spending, on sleeves, snacks, sodas, etc.

This promise is illusory because the player community can enforce the store's payout via social means (hence "social OP prizing") but the store can never really enforce the player's spending.  Many of the grinders making that promise have no intention whatever of spending one cent more than they absolutely have to spend, and fully expect to profit from the negative escrow.  They expect to be paid to play cards.

Some store owners are socially adept enough to manage some modicum of enforcement, and good for them.  It's an extremely fine line to walk.  But that management doesn't scale well, and you can't get blood from a stone.  So the store has to make up the difference somewhere.  And that's going to come from the customers who do spend, which my article termed "angel customers" (as is one of the common monikers used within the trade).  And the second half of my article's argument rests upon that: it is unfair and wrong to expect angel customers to subsidize the grinders through ongoing negative escrow.

The above four paragraphs set forth my argument from that article, leaving out all the explanation and groundwork by which I built the case for it.  As sometimes happens, the underlying argument kind of got lost in the volume of explanation, and that's bad writing and editing on my part.  I'm sorry about that.

OK, so I posted the article on December 15th.  I shared it around the retailer groups on Facebook, and we had some neat business discussions on it.   A day or two later, individuals wanting to stir the pot posted a copypaste of the article (unlinked, improperly attributed) to my regional grinder Facebook group.  The admins kindly deleted the infringement and I posted a genuine link, rather than having an endless litany of bootleg ones pop up.  The discussion that ensued had a few people who got the point, and a few who missed it.  Mainly a lot of grinders got caught up in assuming my objective was to encourage stores to eliminate or curtail competitive play.  Overwhelmingly that was the take-home from the negative reactions.

Almost a week later, someone posted the article to the Magic subreddit.  Eerily the same discussion ensued.  Some folks got the point of the article, others, mostly grinders, took the article as an indictment of competitive play in a broader sense.   Again, my explanation overwhelmed the reader, leaving no room to appreciate the money shot.  And today's article is largely in answer to those grievances.

You'll note that somebody else, not me, initiated both postings of that article to player-focused forums.  I had no intention of posting that article to such audiences.  The internet is public and I don't have any objection to people reading these articles -- in fact, I know many local players enjoy the "peek behind the scenes" this blog provides -- but this is a business blog written primarily for an audience of those interested in the comic and hobby game trade.  Everyone is welcome to read, just understand that the context is going to be business-oriented so that's the perspective you're going to be shown.  At no point was this written as a troll or ploy for attention.  I almost wish it was, I got more page views from reddit than I had gotten in the past three months of articles combined.  Apparently I need to get into the clickbait business.  That's where the money at.

I think the best approach I can take here is to address the major complaints in turn, because that will lead us to the underlying misunderstanding, as you'll see.  So, in Q&A format, here we go.

Q: Why are you so upset about stores that run social OP prizing?  Is your business failing?

A: Well, 2015 was our best year ever, in gross and net, by a lot.  So we're okay.  And this is business, there is no emotional dimension to this.  I'm not "upset" at anything.  This is a Millennials thing I believe, projecting emotion onto everything they see, hear, and read.  I'm Gen X.  Born in 1974.  We can't afford feelings; the baby boomers spent all our money.  And yours too, as it turns out.  See?  We have more in common than you thought.

Q: How is social OP prizing any different from just spending promotional dollars / advertising?

A: Different mechanic, different time-frame, different objective.  First of all, an advert is store-initated from its very core.  There is no exchange of promises; the store gratuitously offers deal X and all comers may partake of it as they wish.  Second of all, adverts can be one-off things.  And in fact I completely support the idea of a store having special tournaments that go over 100% in prizing -- big events, that sort of thing.  Memorial Day Legacy tourney, 1st prize Black Lotus.  Maybe the store profits, maybe it loses money.  It's not social OP prizing because there's no ongoing component and thus no contiguous escrow.  Finally, the purpose of advertising and promotion is to generate arrivals -- that is, to gain customers first and foremost, by acquisition and retention.  Organized play can and does fulfill both halves of that function at times, but OP that is focused on grinders only serves the retention part of that objective.  A grinder is already a player, and already has his or her game, and already plays it, and already knows where there are events for it, and where the highest EV is.  Accordingly, the promotional dollar spent to attract that grinder's business doesn't have the same ROI as a promotional dollar spent toward the wider audience of non-grinders.  Orienting tournaments toward grinders, if you think of it as an advertising expense, is buying a six-pack and pouring three cans out on the curb.  You paid for all six, but you end up only getting to drink half.

Q: What about the argument that grinders are good for your store because they bring in more players for tournaments?

A: So I should lose money on OP and... make it up in OP volume?  That's a bold plan, Cotton.  Rather than losing money at all on OP, it is healthier and more sustainable to grow sales organically, which is what I do, by offering competitive prices and selection.  It turns out that attracts a crowd too, filling the seats in my game room, and I am content to let organized play run at break-even.

Q: But you aren't at break-even!  You're paying out in store credit so you get full profit!

A: Not really.  The margin on redeemed credit from events helps to offset the cost of the thousand square feet of space with tables and chairs and no product in it.  Those sales of snacks and sodas?  Those also help offset the cost of that space.  There's an equilibrium most stores reach.  The cheaper the location, the more likely the store can run negative escrow and survive -- setting aside whether they should, and looking at only whether they could.  In the end, a store can't take losses in all these different places and expect to make it all up with Dr Pepper.  It just doesn't happen.

Q: You're wrong about whether Magic is a competitive game.  WOTC spends a lot of effort and money on making Magic competitive first and foremost, with the Pro Tour and so on.

A: Here we come to the crux of the issue.  Grinders think they are most of the Magic-playing market, and almost the complete opposite is true.  Wizards of the Coast has spent untold blood and treasure to attract new and casual players and that is almost entirely where their business focus is.  The Pro Tour costs what, a few million dollars a year to stage?  Magic grossed $330 million in 2014.  The marketing toward competitive players is chump change compared to what Hasbro puts towards acquisition -- the strategy they embarked upon in 2009 starting with the Magic 2010 Core Set and the original Zendikar, and which resulted in the Magic boom that continues to this day.

At the Atlanta GTS Distribution trade show, WOTC floated a figure that something like 85% of all DCI numbers have never been used outside of a prerelease.  Never!  Mark Rosewater is frequently commenting on figures like how 38% of Magic players are female but only 5% of players who play in sanctioned events frequently are female.  WOTC's own marketing materials that come with intro decks and prerelease packs tell players to start with Intro Decks and Deck Builder's Toolkits, move from there to Fat Packs, and lastly on to straight booster packs.  If you are a grinder and hang out with grinders and visit grinder internet sites and post on grinder Facebook groups, it is very easy to think the entire Magic player base is grinders, and a few noobs who haven't learned to grind yet.  From my perspective here in the trade, other store owners and I see very different numbers in very different ledgers.  We see our lifeblood being provided by a vast ocean of players who play for fun.

I do not hate grinders.  I even like having grinders in the store in some respects.  They help set the expectations and the etiquette for competitive play, especially when they're personable and friendly.  And because so many grinders live from deck to deck (losing them more EV than they ever gain grinding, paradoxically) they keep my singles case nice and full with their trade-ins.

I could write an entire article about how grinders give up all their gains when they fly to a Grand Prix or something and cash for $200, or don't finish in the money at all.  Yes, yes, I know, it's a long game, lifetime winnings are what counts, not just short-term gains and losses.  But seriously, and be honest now, how many of you are net-positive lifetime?  Millions of Magic players, and only seventy-six of them (as of this writing) have cashed to six figures total after how many years of buying, collecting, playing, failing, learning, testing, playing again, all those hours, all those dollars.  On that same list, only 179 people total have earned more money playing Magic in their lifetimes than a kindergarten teacher earns in one year of salary and benefits.  You guys are bending over a dollar to pick up a dime over and over again, but you assail the store owner who won't pay three packs per player into your five-dollar buy-in.

So, then.  No, I don't hate grinders.  You guys exasperate me sometimes.  I wish you had the perspective that comes from years of been-there-done-that.  One day you will.

From a business perspective, the numbers don't lie, and the numbers say that casual players far outnumber the grinders, and that's where a store should focus its promotional efforts.

Importantly, the grinder community is not the only place where competitive, high-level Magic play will occur.

A casual player is not necessarily a newbie or a bad player.  This is the fundamental misunderstanding that grinders have about casuals.  Don't pretend otherwise, I read your subreddit threads, I read your Facebook groups.  To a grinder, "casual" is a synonym for "Noob with Craw Wurms."  You know it's true.  And that's part of how you misapprehend how crucial casual players are to the ecosystem.  You figure if they can't get good, they'll quit, and if they do get good, they'll turn grinder, and that's who is out there, so what else matters?  Turns out that's not the case.

Here is what casual players are in my store's events:

  • Pro-tour players who just want to play and sharpen their game, and don't care about EV as long as it's not atrocious.
  • Drafters who gave up the Standard treadmill years ago, but still love Magic, who are practiced and expert and tend to go 4-0 at prereleases, and sometimes cash at sealed Grand Prix, but may not keep up with archetypes.
  • Commander players who have heavy "Johnny" player profile tendencies and would rather invent something than merely pilot a deck.  And they're not just durdlers; some of these players' Commander decks are downright lethal, rivaling anything I see in the online decklists.
  • Experienced players who simply don't like playing against opponents other than their friends.
  • Adult players who prefer not to play against teens or younger adults because they have more fun against their peers.
  • Teens and younger players who prefer to play against one another because they find older adults too intimidating.
  • Women who like to play in a better-adjusted player group and didn't like the time she visited that one store and the repressed 19-year-olds kept staring at her chest.
  • Competitive players who go full-blast at Grand Prix and PPTQ events but don't like spending their Tuesday evening matches against a guy blasting EDM into his earbuds rather than interacting in the game on the table.
  • Yes, some number of new players.
  • And yes, some bad players.  But practice makes the difference.  I would go so far as to say no player is truly bad if that player is attempting to improve his or her game.

That's a lot of players.  And the Magic player experience is fluid -- a grinder may drift in and out of some of those archetypes over time.  It might even be more accurate to say a casual player drifts in and out of grinderhood once in a while.  Maybe funds get tight but they don't want to stop playing, so they have to hunker down.  Whatever.

Competitive play is good.  High-level play is good.  Substantial stakes and prizes can be good.  There is room in the Magic universe for a wide spectrum of players and experiences.  But stores need to keep in perspective that the most vocal contingent of players does not represent the true customer landscape, and it is unwise and wrong to tailor the entire organized play economy based on an incorrect premise.

I don't really want to end the year's posts on that note, but I don't know what kind of time I'm going to have to write again this week as business has kept me insanely busy since mid-month.  If I don't manage to put up some sort of Retrospecticus in the next 48 hours, cheers to you all, and have a wonderful 2016!

Tuesday, December 22, 2015

Pray I Don't Alter the Deal Any Further

This week's article was going to be a reflection on the holiday season at the store.  But then some tremendous discussions came up, so I'm going to pivot to those.

One thing that happened was that many days after after last week's article went live, the greater Magic competitive player community noticed it and has had some discussion, at times heated, both on Facebook and on Reddit.  Some players took the article pretty hard in some cases, even though the main body of the post was directed at store owners, not players.   Though everybody is welcome to read these articles, this is a business blog first and foremost.   However, in respect to some genuine perspectives I have heard from players on the topic, I will revisit that in next week's post and perhaps improve on some areas where my message fell short because of poor execution on my part.

But this week I've written about the other big deal that came up in the meanwhile: The Asmodee Group, owners of subsidiaries Days of Wonder and Fantasy Flight Games, dropped a pretty big news bomb on the hobby game trade with an announcement late Thursday, just as most store owners were sitting down for vigil showings of Star Wars: The Force Awakens.  I'll get to the particulars in a moment.

The board game player community pretty much worldwide rose up in furious rancor over the implications of the big news.  I was ready to look at that perspective, addressing why it is going to be better for the players in the long run that Asmodee ripped the band-aid now and fixed the online market.  But then Monday afternoon Asmodee issued a "clarification" that was anything but, that seemed to backpedal on some of the original announcement, and left all parties shaking our heads.

So now for this week's article, I'm just going to try to untangle the mess a bit.

The announcement, first and foremost.  Here is a link to the letter Asmodee sent to distributors and stores (this one linked from GTS Distribution).  Asmodee Group, a subsidiary of Eurazeo (basically the European analogue of Hasbro), is merging its domestic operations with those of subsidiaries Days of Wonder and Fantasy Flight Games, into a new entity called Asmodee North America (ANA).  ANA will headquarter in Minnesota at Fantasy Flight's office, uff da.  And with that consolidation there are some changes coming to the product market:
  • As of 1/1/2016, only five of the thirteen U.S. distributors will be able to resell ANA product;
  • As of 1/1/2016, the Fab Five can only resell ANA product to ANA-authorized retailers;
  • As of 4/1/2016, ANA-authorized retailers cannot sell ANA product online;
  • As of 4/1/2016, ANA will authorize a separate class of authorized online resellers; and
  • The mass-market channel gets handled differently.
Significant changes right there.  A side-effect of the first bullet point is that Days of Wonder will no longer be Alliance-exclusive.  I have a great working relationship with Alliance, but I know some retailers are not fond of them, and they will doubtless cheer this news, where I am largely indifferent to it.

Let's also dispose of one thing right away: It's completely legal for ANA to impose these restrictions, and they could have gone much further, up to and including price-fixing, had they wanted.  This was made possible by the 2006 Supreme Court holding in Leegin v. PSKS, which established that the rule of reason could permit extensive contractual controls in a vertical distribution agreement.  It's not an accident that you pay the same price for an iPhone or a set of PING blue dots regardless of where or how you buy them.  Hadn't you noticed everyone charges the same price for a Playstation/4?  So yes, they can do this.

In case anyone doesn't immediately associate publishers with products, the ANA portfolio is worth about a third of the board game category in the hobby trade.  It includes all games with the Star Wars license, for starters.  It also includes all the Living Card Games such as Android Netrunner and A Game of Thrones.  Fantasy Flight publishes under license all Warhammer products other than the Games Workshop miniatures, from board games to role-playing material.  Days of Wonder is responsible for megahits Ticket to Ride, Five Tribes, and Small World.  Asmodee proper owns a smattering of game studios and has a pretty great signal-to-noise ratio, counting among their offerings the 7 Wonders series, Splendor, Formula D, Mille Bornes, Timeline, and so on.

Some of you may recall in this space not long ago how I stridently called out Fantasy Flight for failing to manage their distribution in order to prevent the gross devaluation of their product.  I am not so arrogant as to think their move was in response to my blandishments, particularly given that this was clearly in the works for much longer and was essentially already done and preparing to launch by the time my article went up.  But it happened, and depending how it is executed, it may have happened just the way I clamored for.  So I am pretty delighted about that possibility.

One of the points I made was that Games Workshop, for example, protects the value of its products by highly restricting online sales.  You can find Warhammer 40K miniatures online any day of the week, including straight from the manufacturer.  But GW sells online at MSRP (and, I'm discovering, offers downright legendary customer service as their value-add to that).  The smattering of small retailers who sell GW product via Amazon and eBay are typically getting it via third-party arrangements and thus can't profit on deep-discounting it.  This keeps the average discount percentage somewhere in the teens, depending when you look and at what product.   That's manageable.  That's parity with small brick-and-mortar retail.  Yeah, everyone knows it's a little cheaper online, but if it's not a big deal, a lot of people will shop local.  Beyond getting the item immediately, there's still a general market preference toward shopping in person; as of 2014, despite the online juggernaut, brick-and-mortar still accounts for more than 90% of all retail sales.  There are the social factors also, which as I've said before is a lever I do not like to tug because I think the value proposition doesn't improve enough from it.  But for some consumers those factors do matter a lot, and I'll gladly deliver on them as best I may.

Contrast the Games Workshop status quo with Fantasy Flight products regularly being chopped 40% or more every day online, from small stores dumping overstock to Amazon all the way up to behemoths like Cool Stuff Inc and Miniature Market running on a razor margin.  Amazon itself doesn't crank the price down until third-party merchants do so first; usually it is content to be the lowest price by mere pennies.

The question, of course, is whether the new ANA policy is going to allow the Cool Stuffs and the Miniature Markets of the trade to continue what they are doing.  It's the whole ballgame, really.  Most of the retailers I've discussed it with aren't confident at all.  And ANA released a clarification email on Monday reassuring players that they'd still be able to buy online, but being vague beyond that.  Great, so are the deep-discounters being cut out of the action or not?  We don't get to know yet.

I give the ANA top brass a little more credit than that, some benefit of the doubt.  It is literally their job to think about these things and figure out the best approach.  If I take them at their word, they intend that small retailers who create community should be able to resell ANA products in-store at list price.  That cannot occur if Star Wars Rebellion debuts in the spring at $99 list and appears online for $54.

As I said before in articles right here, I completely respect that a majority of players shop primarily on price, secondarily on selection, and only after that do other factors come into play.  I'm a married father of three, you gotta I know I grocery shop at Costco and Fry's/Kroger, not Whole Foods.  Price is an extremely strong argument.  Price is often the final word for a commodity item.

So are ANA games commodity items?  A game you take home and play with your family, and never again interact with the greater public or your vendor of choice, certainly behaves in a commodity fashion to some extent.  A miniatures game or living card game (or trading card game, of course) is a different animal.  If there is no playing community, the game sputters out.

I want to emphasize that last point because it has been consistently missed throughout all the gnashing of teeth over the ANA announcement:

If there is no playing community for a miniatures game, LCG, or TCG, the game sputters out.

It doesn't matter how cheaply you got it at that point.  It is now worth zero.  Just ask anyone who owns a bunch of Spellfire cards or Dot Hack Enemy cards or Rivet Wars minis.  Nice bargain.  By the way, CSI gets to keep your money.  Enjoy your worthless stuff.

Wizards of the Coast faced this problem in the late 1990s and early 2000s with Magic.  With game stores struggling to keep up the pace against online deep-discounters, WOTC saw attendance drop, and engagement drop, and sales overall, in the aggregate, decreased.  The gradual implementation and strengthening of the Wizards Play Network system limiting access to product to brick-and-mortar stores and requiring event participation to secure allocations helped address this.  There are many parties gaming this system today, running bare-bones storefronts just sufficient to get product and doing most of their business online in a race to the bottom for razor-thin margins.  Magic runs on pure adrenaline right now, it's so hot... give it a downturn, which by regression to the mean must inevitably occur, and you'll see the Gaming Goats of the world run out of room for error.  Some may survive, others won't.  But the plan to implement controls so that online deep discounting didn't dump the entire value out of a Magic card has largely worked, despite the best efforts of an entire industry to ruin it for ourselves.

A game that requires community to play, needs to be profitable to some extent for retailers to carry, or they just won't carry it.  Where Magic is concerned, players rightly scoff at such an empty threat.  Stores will at least carry Magic for the foreseeable, it just sells too well not to carry.  But with ANA's games, it's another story.  Prominent retailers around the trade were starting to make noise about dropping support for those lines, with players lining up to play X-Wing in the store with ships they all bought online.  Games that had huge money put behind them for store-sale initiatives, like Elysium, stumbled out of the gate and appeared at 45% off list online.  Fantasy Flight's lines in particular were failing to meet minimum turn until we price-matched Amazon starting in November, and only now are they moving at an acceptable rate -- and if our metrics show the net isn't good enough because of the discount, we were prepared to move on to other products.  But now we'll wait and see how this new arrangement works out.

The big complaint on the player side, of course, is that they're angry they won't get product at 47% off anymore.  It's just about money.  Most of the rest of what's being written in those Board Game Geek threads and Reddit comments is just window dressing; it's about money, it's always about money.  And like I said, I understand price-sensitivity.  So I fully respect that a player's concerns may start and end there.

But here's the thing: The 47% off was never the right price.  It was never sustainable, it was never part of the manufacturer's plans for the product or the commercial channels' expectations for the product.  That discount level put that company on a trajectory to come and go and not become evergreen long-term in the hobby.  A lesser discount online, on the other hand, is okay.  It is possible for a healthy ecosystem to exist.  Stores still provide a value proposition that measures up against that for a segment of the player base.  Immediacy, community, tactile value, and so on.  Heck, I'm price-matching larger discounts now, I'd obviously price-match a lesser discount if it made sense for the product line.

Those players who bought online discount every time still aren't going to pay list price.  They never did before, they aren't about to start now.  Store owners must recognize and accept this.  What will happen is going to depend a lot on what ANA does and how they clarify which outlets may sell online.  However, if the net result is that this ends up like the Games Workshop online restrictions, ANA games online will have that average discount percentage somewhere in the teens.  Let's even be generous and say it will be about 20%.

A discount of 20% is not a discount of 40%+ and the customers for that channel are going to be unhappy and vocal about it.  But, and this is a big if... if ANA is right, just like with Games Workshop, they are not going to lose much in the way of sales, and the smaller, sustainable discount will become the "new normal."

Perception goes a long way.  There are typically small or no discounts on toys and games by the likes of LEGO and American Girl.  It's just an accepted part of what those product brands are about.  And that's something ANA wants people to perceive about Asmodee, Days of Wonder, and Fantasy Flight.  ANA doesn't want people thinking their product is worth cost and not a dime more.  They want people thinking their product is of tremendous worth, because of the high production value and the great amount of entertainment it can deliver.  Time will tell if they succeed in this effort.

Well, I guess next week may still not be my holiday retrospective, but wherever you go or whomever you visit this weekend, have a safe and joyous time and be healthy and prosperous.

Tuesday, December 15, 2015

Why Paying Grinders to Play Magic is Both Unwise and Wrong

Virtually every game store of consequence sells Magic: the Gathering right now, and this article is most topical for that game, though the principles in theory carry over to any other game that is supported by organized play (OP).  A substantial number of game stores today, in particular Magic-centric stores, are engaging in a toxic practice: awarding more money in tournament prizes (or store credit or product equivalent) than the store collects for the event in admission fees.  (This creates negative escrow, essentially a rebate with recipient to be determined.)  Since most tournaments are won by competitive players, or "grinders," this practice results in the store "paying grinders to play Magic."  This practice is both unwise and wrong, and today's article is going to demonstrate why.

Once upon a time, as recently as 2008 or thereabouts, OP was economically healthy across the industry.  I regularly played in events in the 2006-2008 period where most stores charged $5-$10 for constructed-deck events and added one to three booster packs into the prize pool per player.  Even after offsetting some of the staff and facility costs that OP incurs, those stores made a little bit of money on OP, even if the players didn't buy anything else.  The store did much better if the players did buy things, of course.  Not enough to pay for the owner's next ivory back-scratcher, but bread-and-butter staying-in-business revenue at least.

By today's standards, that cost and payout would seem terribly shallow.  But it was the standard at the time, and we were playing for entertainment anyway, not in a misguided effort to grind for EV (expected value).  Don't mistake this for casual play -- I was entirely a competitive player back then, and twice I reached the finals of a Pro-Tour Qualifier and scooped to the other player rather than traveling, which I abhor -- but I knew what I was doing with my time and money, and that was entertaining myself.  Magic was recreation, not work.  Importantly, the majority of other competitive players at the time treated the game the same way, even the pros and pro hopefuls.  Jonny Magic Finkel himself, literally one of a tiny number of people skilled enough to make grinding for EV a realistic plan, worked in financial management as his day job.

In that time, there were already Magic-centric stores willing to flip boxes for a buck over cost, and these typically sported the most aggressive tournament payout structures, yet they rarely ran negative escrow, and even if they did, who cared, those usually failed and healthier stores chugged along.  Then in 2009 the Magic 2010 Core Set and the first Zendikar expansion ignited a boom market that has lasted to this day, and brought with it an explosion in the number of game stores, especially those focused on Magic.  Now, of course, we're in year, oh, five or six of that boom, and Magic-centric stores continue to sprout up all over.  With that has come a saturation level: there are only so many players needing a store where they can play, even with the market in a peak cycle.

As you might guess, with supply outgrowing demand, prices must fall, and where OP is concerned that meant some combination of lower admission fees and/or higher prize payouts.  As of this writing, the end of 2015, the competitive standard in most regions I've kept tabs on has been a 100% prize payout.  In other words, the store breaks even on organized play, with no extra earnings to offset the added costs of conducting events.  Fortunately, stores have become somewhat more efficient in the singles trade and adept at monetizing concessions and the like, but still, a revenue stream has dried up.  Yet Magic has been so hot that the stores running negative escrow remain alive on pure adrenaline.

Desert Sky Games and Comics is at the standard par, paying out 100% of admission fees collected for OP.  That is to say, each player buys in for $5, we add $5 in store credit to the prize pool.  I charge sales tax separately, which one of my competitors enjoys pointing out, but that cancels out because sales tax is included in the credit prize payout and thus is not charged again when the player makes a purchase redeeming that credit.

By and large, my customer base is cool with this.  The majority of my customers don't participate in organized play at all, of course, which is how a retail store is meant to operate.  I don't have to conduct a tournament for the guy who just wants to read Batman or the girl who wants to bring Dead of Winter to game night with her friends.  But from among my customers who do enjoy OP, mostly Magic or Fantasy Flight players, the substantial majority of them are happy with the 100% or 1:1 prize payout.  Many have told me as much.  They are aware it's not the most any store in town pays out, but they think it's fair, they understand it's sustainable, it is more than some stores pay out, and it comes bundled with a great environment, a friendly staff, a good selection, competitive pricing on merchandise, and so on.

The problem, of course, is the same as when you feed the squirrels at the Grand Canyon.  They come to demand more.  And in a market where new stores continue to proliferate, and supply continues to outstrip demand even despite the ongoing growth in demand, that meant that comic and hobby game stores, especially Magic-centric stores, have had to pay more and more generously to attract more players.  And attracting players has serious rewards: a store's OP numbers directly impact the amount of premium product that store will be allocated by Wizards of the Coast.  Beyond Magic there are also rewards for attracting high OP attendance from Fantasy Flight (Regionals event hosting) and WizKids (product allocations) and others.  Stores are told by publishers that they need to run themselves as cozy ultra-boutiques, but all the economics are geared to reward the store that leases a former Elk Moose Lodge Hall and sets up seating for 350-player mega-tournaments, regardless of what they do on the retail side of the equation.

Thus it is that the Magic-centric stores in my region, as elsewhere, have begun offering tournament payouts of more than 100% of admissions collected.  Some of them fudge it on a pack payout, some of them do credit, whatever.  They use this as an opportunity to hide or bury that sales tax charge, and if there's some loose math in there, what's the big deal?  Point being, now the competitive or "grinder" players in my area, a vocal minority of my customer base, inform me with regularity that DSG is unacceptably stingy with prize payout.  They tell me I am offering subpar EV to compensate them for their time and effort.  As though people were supposed to get paid to engage in recreation.  Remind me to have a frank discussion with the people at Harkins Theaters and Golfland Arcades, who apparently owe me decades of back pay.

The grinders tell me that I'm missing the boat on how this is supposed to work.  I'm supposed to pay out more generously on tournaments, and in return they'll be my regular customers, shopping with me, buying singles, sleeves, sodas, and snacks.  Organized play is promotional, you see.  You use it like advertising.  To bring people into the store.  And then they'll buy things.

That's the agreement, the contract if you will (in the looser, social sense of the word "contract").  I pay them more, running my events with negative escrow, and they'll spend money in my store.  I refer to this, for lack of a better term, as "social OP prizing."

Unfortunately, social OP prizing is a terrible deal for a store, making it unwise, and what's more, it cheats a store's best customers, the ones who spend the most, making it wrong.

Can you see the glaring defect in social OP prizing?

It's unilaterally unenforceable, and thus fatally one-sided.

Here's the thing.  Players can enforce the payout the store promises.  A store has a reputation to maintain, and is generally expected to keep its word.  In this modern age of social media especially, any store that welched on a payout would be castigated on regional Magic player Facebook groups and competitive player message boards and the like.  Every community has a player or players who "do the math" on every prize payout and publish their findings, deciding whether or how much the store might be making or losing running the event.  If they decide the store isn't walking the talk, it will go viral and Friday Night Magic at that store will have Crickets vs. Tumbleweeds at the feature table every round.

This scrutiny is a good thing to some extent.*  It prevents the shadier stores operating at the margins from claiming Big Money! Big Prizes! Big Winnahs! to draw in business and then skimming off the escrow.  The bad side of the prizing scrutiny is that it only goes one way.  The community will hold the store accountable for social OP prizing.  Nobody holds the grinders accountable for whether or how much they spend in return.  It's not even realistically possible to do so.  As a result, the store pays out all this money, fronting it in fact, and might get nothing out of it from a significant portion of participants.

Okay, so what?  There are surely some deep-pocketed spenders who will make up for that, right?

That line of thought is the reason paying grinders to play Magic is not just unwise, but wrong.

Let me put it a simpler way: It is cheating the big spenders to force them to subsidize the players who don't spend.

Is that clear enough?

Those big spenders, angel customers, whatever you want to name them, are purchasing recreational entertainment for some amount of money dollars.  They are entitled to personally consume and enjoy every bit of the value they are paying for.   After all, they paid for it!  While many of these individuals are sufficiently generous that they might allow a poorer player to bum an event entry off them once in a while, if you asked them if they were willing to cover a portion of nut for everybody every day, I'm sure their charitable inclinations would diminish quickly.

But a store that uses social OP prizing does cheat those players, and may not even realize it.  Somebody is paying to cover the cost side of that equation, and if the store is paying out more than 1:1, by definition somebody is subsidizing somebody else, unless every participant is spending in precisely equal amounts on singles, sleeves, sodas, and snacks, which we know doesn't ever happen.

This is why many competitive/grinder players love social OP prizing so much.  They will never admit this out loud, but they know full well they can spend little or nothing and the store will have no recourse, and the big spenders who are supporting their EV grinding by proxy will also have no recourse.  But if the store doesn't pay out in full, it's straight to Facebook or Reddit with an angry screed, and a giant splash of mud all over the store's Sunday shirt.  Either way, the grinder wins.  Why wouldn't a grinder push for such a prizing policy?  The grinder just wants money.

If there's no recourse, the contract really isn't a contract at all.  There's no mutual exchange of value.  There are some parties paying in and not getting full value out, and there are other parties taking value out that they didn't pay for.  Free-riders.  And an ecosystem cannot sustain the presence of free-riders indefinitely.  Once the providers decide to withdraw their contributions, or are incapable of continuing to provide them (such as for a store that goes out of business because it allowed social OP prizing to bleed dry its cash flow), the party's over.

Some store owners who are socially adept can extract payment from underspending or non-spending players more effectively than others.  There are stores in my area whose owners are exceptionally talented at this.  Good for them.  To the extent that they do that, it reduces the costs wrongfully incurred by the big spenders under the social OP prizing scheme.  Doubtful it eliminates the subsidy entirely, as that's just not realistically possible, but it softens the blow.  They're still cheating their angel customers, just not as much as they otherwise would be.

But that skill doesn't scale.  That socially talented owner can never truly step away from the wheel sustainably.  If he or she did, things would seem normal at first, but the more often that owner was absent, the more the social compliance would taper off.  A grinder who does not have to spend money, usually won't, in the end.  A store that plans to be around for a while with an owner who plans to have a life outside of work needs to have a sustainable, delegable workflow, which is where social OP prizing is a non-starter.

The wrongness of social OP prizing becomes even clearer as soon as you reverse the filter and look at the image from the other side.  If a store is not running social OP prizing, we're at a default, no-strings-attached status quo.  Every player is responsible only for the cost of his or her own entertainment.  That's all.  The store gets paid when it provides mutually agreeable value in exchange -- when it offers something the customer wants and is willing to purchase, full stop.  In regular OP with positive or no escrow, some of that money gets shuffled around in accordance with the final standings, but everybody bought in fairly and everybody has the same skin in the game.

Under normal OP prizing, the customer doesn't owe me anything.  And let me tell you, I find it very easy to enforce when someone owes me nothing.  See?  I've collected it already.  I'm collecting it right now.  Check out all that nothing I'm collecting.  It's sparkly.

Seriously though, under normal OP prizing, the store has not fronted social money to the players above and beyond 1:1, so there is no nebulous social requirement that the player spend... some amount.  That he or she must spend it at... some time.  And some frequency.  Nope; the player is free to spend or not spend as he or she wishes, and the store may sustainably offer anything within its arsenal, from products to services and all in between.  It's fair and it's legitimate and there are no strings attached.

I'll close with a few thoughts addressed toward each party involved.

Store Owner Paying Grinders to Play Magic -- Look, I'm not your mother, you own your business and you can do whatever you want.   It probably feels like you're doing everything right, especially if you're the "cool" store to be at.  You're paying players generously and man, they love you!  The hardest-bitten grinder speaks of you in glowing tones.  It can be a really addicting thrill rush to be so popular so fast and seemingly so easily.  But that fame is mercenary, fleeting and fickle.

You can't let yourself be drawn into a race to the bottom, especially this way.   If your area is really competitive, I get that.  Man, do I ever get that.   But you're cutting your own throat and screwing your angel customers, and that won't last.  Magic won't be red hot forever, and the day you close, all those grinders who loved you will rattle your door handle for thirty seconds, shrug, and move on to another store.

Angel Customer -- Now you know the truth.  If you're playing at a store that pays out more than 100%, I hope you win a lot, because the store is underwriting that prize structure out of your wallet.  They may not realize how unfair it is for them to do this, or else they know full well and they're playing you for a sucker, hoping you won't notice.  The store will make you feel like a celebrity, just like the grinders make the store feel like the cool place to be, but it's illusory.  They hope you don't take your money somewhere else, where you and only you get the full EV of it, whether you win or lose.  If their respect for you was real, they wouldn't be the middleman conveying your money to the grinders.

I regret and hereby apologize unconditionally for every single tournament where my store paid negative escrow, especially now that I realize how unfair it was to you.  When I came to the understanding of how toxic the practice was, I ended it in my business forever.  I've lost a lot of angel customers over the years and I realize now some of them probably got tired of being the main contributors to the grinder economy.  If so, I deserved to lose them.  If I ever earn them back, they will be doing me a kindness.  I strive to treat my present-day angel customers right.

Grinder -- This article hasn't been kind to you, and that's a little bit unfair too.  I've said before that a customer's preferences are neither right nor wrong, but just a pattern of behavior, and it's up to store owners to adapt to it.  The difficulty level comes in because grinding for EV is a level of action that it is not beneficial for a store to service.  You can hardly be blamed for making hay where you can: you know you have store owners eating out of your hand and willing to pay you money.  Maybe they're in distress, maybe they don't realize what they're doing to themselves, maybe they even think they're in on the deal with you -- an illusion they'll be broken of when the next new shiny store opens up five miles away and promises you the moon in order to get their numbers for Advanced Plus.  Whatever the reason, you are justified in accepting money freely offered to you.

But stay with me just a little bit longer here.  Look: I don't have a problem with you being competitive.  I dig that all the way, that's the side of the game I came from, I used to be a DCI Level 3 Judge, been there done that.  I do have a problem when your desire to make money playing Magic has a negative impact on the player community.  I rejoice for the day when you discover that doing almost any other labor with your time will pay you considerably more in virtually all cases.  Look at the top pros, and notice how most of them finished school and got decent jobs and earn more in an hour at work than they could grind in a month going 4-0 at a local Friday Night Magic.  When they play, it's a pure game, and the stakes don't figure in until they're on a greater stage.  You say you want to be like them, and that's great!  Go with good fortune.  Finish school, get that job, and become a player who focuses on superior play, not on the fingernail of local-level EV.  You'll be a lot happier, and so will everybody else.

And if it really is just about the money and nothing else and you are absolutely determined to play cards to grind for that money, go play casino poker or blackjack and become an expert at it.  That's what casinos are for, and you wouldn't be the first Magic player to strike gold at poker.  Why waste your time here, in an industry that is going to resist your preferences at every turn, except where it facilitates your needs and then falls on its own sword in doing so.  Just step up to the big leagues.  Nobody plays poker for love of the game theory.  They play for money.  If you want money, get good at playing casino card games.  The casino is where your heart already is anyway, whether you ever reflected on it or not.  That guidance is my gift to you.

That's it for this week!  Next week I'll put a holiday spin on my observations from within the comic and hobby game trade, and I welcome you here Tuesday morning for your Backstage Pass to the festivities!

* In fact, I welcome scrutiny, provided it's fair and even-handed, and everyone incurs it.  I'm one of the more transparent store operators I know -- witness this blog, for example -- mainly because I've learned that in order to grow to a healthy long-term size and scope, you need to have defined processes, delegation, and workflows that scale, and you just can't do that and be keeping secrets.  Too many people need to be taught how things work.  If you're burying bodies out behind the dumpster, the employees with the shovels are gonna figure out that it's not just rolls of carpet they're carrying.  So you run a clean store with clean books and clean money protocols and fair policies and rules, and you don't apologize for making a living off the single-digit-percentage profits from that.  There are things I keep confidential, but operational methods have to stand up in the light.

Tuesday, December 8, 2015

Being In Two Places at the Same Time

This past weekend brought with it the second year of the Phoenix Comicon Fan Fest out in Glendale at the Cardinals' Stadium, and Desert Sky Games and Comics was there with our most elaborate booth thus far with the most merchandise we've featured to date -- all while running a full itinerary of events at the store in Gilbert.

Weekends like this are when a store gets to enjoy some of the payoff for the expense and effort of scaling up.  At the same time, it became painfully clear that there is still a much higher ceiling we could reach in scale, and there is much more efficiency we could get out of our current scale by optimizing our convention/festival/carnival booth deployment framework.

Thursday morning, my two main business partners and I drove the 50+ miles to the stadium for load-in.  Thanks to an early arrival, we were allowed down the ramp into the parking area behind the field tray and were free to disembark all our gear right away.  We drove back up and parked in the main lot to make room for other vendors, and Patrick, the other Mike, and I spent a fairly busy few hours rigging up a gridwall fixture structure and deploying all our merchandise.

We've done this a few times already so a lot of the learned-my-lesson stuff was routine by now, including our technology and our sundries.  The big leap for Fan Fest 2015 for us was no longer being bound to the booth table, plastic garage racks, and hanging things solely from the pipe-and-drape.  Building a gridwall fortress would be utter overkill at the local church carnival, and we'll gladly run a smaller booth at such an event and break out the plastics, but for Comicon, even the little stepchild of Comicon, elaborate booths make an impression.  And next year for PCC Prime in June, we'll be even bigger and further-reaching.

Once the setup was done, I still had a day's work to do at the store!  I was there until almost ten in the evening, which does happen sometimes.  The midnight oil hasn't been necessary for the most part since Patrick and I got into the grooves of our respective roles.  I'll be pulling plenty of late shifts this month as I ready our Microsoft RMS point-of-sale changeover, but that's a one-off project.

Friday, we had Patrick with two staff members at Fan Fest, while I worked the main store along with fulfillment and the front-of-house staff.  The early December frame is notoriously slow in our trade, with students studying for final exams and the working world alternately finishing year-end deliverables and attending weekend holiday office parties.  Patrick gambled that we'd only need two staff for Friday Night Magic, and we almost got there.  It was a busier night than expected because attendance hit the marks we forecast but walk-in sales in general exceeded par.  It would have been really great to have another fully trained staff member available, and we're very lucky there were no illnesses.

We've been on the verge of another hire for a while now, but we know the belt tightens substantially just after the beginning of January, so we're reluctant to pull the trigger with all of our current crew performing solidly.  As I write this article, I think we may just move ahead with interviews and get the hire done.  DSG's business is growing and we're diving into some new categories in early 2016 and returning to an old one we never wanted to leave (console video games).  We need more human beings and we need them to get their sea legs sooner rather than later.

Saturday served ample notice of where scaling up still had work to do.  Patrick's convention crew operated as scheduled, but I had a morning of multiple family and friends events taking place and we had forgotten to start our opening staffer a half-hour ahead of time so the Imperial Assault tournament could get set up.  It ran strong and the day continued into Netrunner, MTG Standard, D&D Attack Wing, and Warhammer 40K.  In fact, our day's sales had a huge spike right at the end from Warhammer sales.  I was especially pleased with that because those were hours we weren't open a few months ago.  Gambling that holiday business would be solid and that our metrics would reflect growth, we returned to being open later on Saturdays and Sundays.  Thus far that bet has paid off.  But during the time I was on campus, I frequently had to set aside my administrative work to help coordinate events and work on sales exceptions, much like a manager on duty.  Usually Patrick would be doing this on a Saturday, the store's biggest mainstream business day.  But he was across town making us as many new friends as possible, so "janitorial duties" fell to me.  We've got an up-and-coming staff member learning his way into management, and he's going to have a very lively December with us once the holiday shopping switch flips "on" around the tenth or eleventh of the month.

Sunday was busier than expected at Fan Fest, which had been mediocre up until then, and far busier than usual (though we expected this) at the store, with the Pokemon City Championships underway.  An onslaught of nearly a hundred Poke-players basically blew the rest of the day's gameplay right off the map, and for hours we ran umpteen microtransactions for concessions.  I bolted mid-afternoon for more family time before heading back to Glendale for load-out, and discovered that no sooner was I out the door than the sales truck rolled in, with our daily take tripling between 2:30pm and close of business at dinnertime.  Sweet!

Unfortunately, as is typical for Phoenix Comicon, load-out was something of a fiasco, with long waits to bring vehicles down the ramp even though I arrived there ahead of the show closure.  The staff and I ended up just hoofing it up the ramp multiple times with our utility cart -- a tool we could probably stand to own another of -- and we allowed ourselves an exhausted dinner and debriefing before dumping the entire rig at the store for Monday morning clean-up.

Proving we have the workflows to have, essentially, two stores for the weekend, optimization to be desired of course, now how do we get more efficiency out of this scale?

An obvious answer might be "Just open another location so you'll have two stores all the time."  Down the road that's likely to happen, but the reality is that a second store when you haven't scaled up sufficiently just ends up being twice the risk exposure and little of the benefit beyond maybe somewhat better branding reach.  You take all the problems and challenges of a store and then double that, and since you're almost always going to cannibalize from your own clientele at the new location, it takes time and expense to grow to where you're actually ahead of your previous performance pound-for-pound.  It's tempting in a world with "just good enough" turn-key solutions like Crystal Commerce to multiply a game store and chain up with a flourish.  I think you end up putting too much stress on an inadequate backbone structure, and eventually something's gonna give.  To chain up sustainably, you need to start doing things like the professionals do, and that means a far vaster framework of scale than most comic or hobby game trade stores can even sniff at.  Do it right, and the growth potential is sky-high.  Just look at GameStop, or even Starbucks.  Do it wrong, and you pour a lot of money down a rat hole.  A friend of mine owns and administers two, just two, large sporting goods stores.  He has shown me how the great mechanism works from behind the scenes, and his level of scale dwarfs anything I've encountered in our trade, period.  If I'm going to multiply my everyday retail footprint, I'm following his playbook.

Based on emphasizing our strengths and using our resources at hand, I believe expanding our convention presence and operation is the winning agenda for DSG right now.  Even small festivals and carnivals tend to have far greater customer traffic than an average retail day at the shop, and the cost of entry can be as cheap as zero and is usually only a hefty sum when the event is very hobby-focused and very large.  The risk exposure is orders of magnitude less than opening another full store location.  The deployment process can be mastered; the deployment kit can be improved and refined. The merchandise mix can be gloriously modular and can be quickly and easily fine-tuned for any expected audience.  And the best thing about the remote operations option is that with enough attention and labor to allocate to it, we can run it with incredibly high frequency -- which then increases visits to the main store, allowing us to grow into the larger staff roster organically.

I don't know that the Booth Barker plan is for everyone, or even most stores, but in our trade it should be something every retailer at least explores.  The Jedi Master of doing this is probably Pat Fuge of Gnome Games, a triad of stores in eastern Wisconsin.  Fuge has his finger on the pulse of virtually every community activity of consequence.  If a public event is happening, Gnome Games is there.  Every municipal office knows who he is, every merchant association around has him in their iCloud Contacts.  As soon as you finish paying for that funnel cake, there's a friendly face asking if you want to learn how to play Splendor.  It's not a bad circuit to traverse.

Now if you'll pardon me, I think I need to be touching base with the Amazing Arizona Comic Con organizers about some booth space.

Tuesday, December 1, 2015

So This Is What Retail Looks Like

It's easy in the comic and hobby game trade to feel like your business is the exception to every rule, the outlier on every metric.  Last weekend was a rare chance for us to experience the opposite.

The misfit feeling was pronounced for us on previous Black Friday weekends.  While our store had reasonable business just by dint of it being a weekend as always, there was never that explosion of dollars and doorbuster mayhem like you see at the big box stores.  We tried to run special events and it never mattered.  Got a bit of attendance but nothing like other holiday tournaments, got a bit of revenue but nothing like December 26th or a typical weekend around tax refund time or goodness, a Magic: the Gathering release weekend.

In 2012, our store was new, and our November sucked rags.  A steep drop from a golden October fueled by Return to Ravnica, Magic's State Championship tournament, and the delightful corona of being the new hotness in town.  Fortunately, we weren't paying any rent yet, so grinding up enough eBay sales to pay the bills was a perfunctory exercise.

In 2013, Theros drove a reasonable November, but the Black Friday weekend did nothing for us.  DSG was still a Magic: the Gathering store first, foremost, and almost entirely.  We had just received our first shipments of graphic novels, and December would be the beginning of comics, which by mid-2015 had become our second-biggest category.  Our special Black Friday booster draft marathon was stillborn.  Friday Night Magic revenue salvaged the day.

In 2014, I had taken over main operations in July, and my store manager turned in his notice the week before Thanksgiving.  My staff didn't have a ton of confidence in me yet.  I had spent four months trying to rebuild the tatters of my inventory resulting from the departure of the previous manager and ex-business-partner.  We didn't have a lot, but we had a decent amount of Funko POPs, we had comics, and board games were only a mild embarrassment.  And we had a ton of Cards Against Humanity.  I botched the execution a bit with an overcomplicated rack of special offers for Black Friday, but it was still a solid sales day, as was Small Business Saturday.  Not holiday-shopping good, though.  Not like late December got to be.

This year, November was pretty slow for about half the month.  You've already read here about my travails at trying to jump-start sales in a board game category for which I have a respectable amount of coverage on the shelves finally.  Magic has been in a lull due to Battle for Zendikar underperforming.  Comics and miniatures have been strong and are a huge part of what is making the month work.  With Black Friday weekend on the horizon, I hoped against hope that a year and a half of building my store up into a "real retail" operation would finally pay off.

Execution this time was easier; I was informed by the previous year's trial and error.  Other in-town stores brought in restaurant menus full of complex sale conditions, and I hit the advertising blitz with the simplest, easiest, most attractive offer I could imagine.  "As easy as 1-2-3 at DSG."  1. Amazon Prime price-matching on board games and miniatures for any purchase totaling $35 or more.  2. All graphic novels 40% off.  And 3. Buy $100 worth of Magic or Pokemon cards and get a free playmat.

Black Friday 2015 was bigger than our the three previous Black Fridays combined.

It was even better than that, actually, because almost no store credit was used.  Only about 4% of payments taken were in Itchy & Scratchy Money.  Store credit redemption varies, on heavy tournament days it can be as much as 25%-30% of all payments taken.  Not the greatest for cash flow, but it means we got the value ahead of time so I'm okay with it.  However, as this year as churned on, we've seen the store credit percentage steadily decay, and our outstanding store credit pool steadily empty, while buys have remained frequent.  Too damned frequent in some cases.  What this tells me is that we've hit a sweet spot for offer amounts.  High enough to attract sellers, but low enough to be advantageous to the store.  If we don't overpay on store credit, it doesn't build up.  Now I'm free to reexplore the tournament payout math to optimize further.

While we did see traffic in normal goods, the sales were spectacular hits by any measurement.  We rejoiced at the amount of deep stock board games and trade paperbacks we saw being bought.  By late Friday afternoon we had run out of empty boxes to give people to help them carry out their giant stacks of board games.  Comics moved.  Toys moved.  Youth products moved.  About a dozen people took the playmat deal, in most cases bumping up a $70-$80 singles buy to reach the century mark and earn multiball, which is exactly what offer #3 was intended to do.

In short, it was like we had hoped to be all along -- our store, once little more than a TCG bowling alley, was performing like a bona-fide genuine authentic fair-and-square retail establishment.  And for once, Patrick and I were able to stand back and survey the commerce with satisfied nods, reveling in the beauty of it all.

Note that I offered no discounts on Magic: the Gathering cards.  Just because it's Black Friday doesn't mean the bank is selling $20 bills for $10, as another store owner wisely observed.  I don't criticize the stores that did some stock thinning and cashing in some chips by offering singles specials and booster box incentives on the less-valuable expansions.  It's a holiday weekend and people want to spend; you have to sell what you've got.  Some of the MTG sales I saw around social media, though, were sheer lunacy.  Boxes of any in-print product at $75?  Clearly distress selling, a Hail Mary to meet rent by Tuesday.  I don't know if the Great Magic Shakeout of 2016 is going to start early, but the canary in our particular coal mine ain't breathing so smoothly right now, I'll put it that way.  There are an awful lot of stores opening lately with three cases full of singles and thirty banquet tables, and little else of consequence on the premises.  They had better hope Oath of the Gatewatch is better than its predecessor.

Small Business Saturday didn't set any records, but was on par with solid Saturdays not coinciding with a new Magic release.  Plenty of American Express cards came out of wallets to do their thing, and that's what the promotion is all about so I accept that with aplomb.  Sunday pulled its weight and kept the stock thinning going, which is all I needed it to do.  Despite stocking moderately heavy compared to recent sales, we almost ran out of Cards Against Humanity.

Later this week DSG will be appearing at the Phoenix Comicon Fan Fest at the Cardinals Stadium in Glendale.  I'm definitely looking forward to having two stores for a weekend, especially with early December being the single deepest trough in annual sales on a consistent basis.  Then around the ninth or tenth of the month, the switch flips "on" and shopping season begins in earnest.  Nothing would delight me more than to take part in that merriment... as a retailer.

Tuesday, November 24, 2015

Thoughts, Part 3

The last few weeks got pretty heavy, so this week I'll lighten up with a return to my periodic, anthologic "Thoughts" series of articles.  My first two installments (part 1) (part 2) touched upon a variety of topics based on whatever I observed at the time.  I'm still kind of fixated on solving "the board game problem" at DSG, where I have a passionate customer following and good arrival traffic, but the category underperforms its sales metrics substantially, and the specter of price resistance, mostly not an obstacle in the past, has risen from its grave to rattle its chains.  Accordingly, today's Thoughts will all be about the board game category.

Last week's article ran so long I didn't get around to mentioning one of the little litmus tests or telltale signs, you might say, that the board game market at brick-and-mortar retail may have become compromised, perhaps fatally, by online deep discounting.  Gary Ray calls this "last man standing," and I see it a little more cynically as "having exhausted all other options, we came to you."

Take a hot board game, I'll use examples from the past year that come readily to mind.   Dead of Winter.  Codenames.  Risk Legacy.  In each case, there was brief availability in distribution (or, for Risk Legacy, via WPN Direct), followed by a pronounced outage where no product was available.  In each case, my initial stock of those games was modest, an amount a prudent retailer would order before knowing whether the game would be a hit. At DSG's scale, that meant four Dead of Winter, six Codenames, and four Risk Legacy.

In each case sales were nonexistent at first and the product sat on the shelves.  Then, the game got hot all of a sudden.  Dead of Winter was on Wil Wheaton's Tabletop, the others caught on from whatever social media or advert campaign, et cetera.  But still nothing.  The game was the toast of the town and I still couldn't sell a copy at list price.

Then just as I was ready to pull them from the shelves and take advantage of the eBay closing prices being at a premium due to supply scarcity, and sometimes after I had already done that on a few units, I would start getting the calls, messages, and visitors asking for the game.  They quickly bought what little I had left, and of course then I couldn't restock the title for a long time.

The entire time the title was out of stock and the Amazon and eBay price was out of sight, I was bombarded with regular requests for the title.  For Dead of Winter I even had a waiting list, since I hadn't learned this lesson yet.  My entire staff started learning the script.  "Yes, we do carry it, but it is out of stock in distribution.  We've ordered it and as soon as it's reprinted it will absolutely be here."

Eventually, at long last, I got a restock of each.  And of course since I had placed backorders with multiple distributors, I got quantity from all of them, more or less at the same time.

And then... crickets.

The calls stopped.  The requests stopped.  Nobody ever asked for the game again.  Okay, one or two people.  Out of the eight-deep restock of Dead of Winter, I have five copies left, and that was after buying one for myself.  For a game people tried to buy from me almost every day for most of a year.  I have yet to sell a copy of Codenames or Risk Legacy from the healthy restock I finally got.

What happened?  Where did everybody go?

There are several possibilities, and they are not exhaustive.

1. My in-town competitors are just crushing me, and they got all those sales.  There are two other "alpha board game stores" in town that sell at list, and I don't doubt that they saw somewhat better results than I did just due to their sheer longevity and deep, decades-built clientele.  But they had the same sourcing problems I had.  Even if their initial sell-through happened faster, they still sold out, same as I did.

2. The repeated requests were coming from eBay flippers, garage dealers, flea market dealers, or what have you.  Some of this was certainly happening.  But the sheer volume of it... unless I was hearing from every grind-hard in the American Southwest over and over again, the lion's share of requests had to have come from players who just wanted the game.

3. The game withered on the vine.  Too long out of availability, players gave up and moved on to the next hot title.  I think this is a plausible part of the equation.

4. Some other factor I haven't considered.

But I think we all know the real culprit, the proximate cause in the majority of cases:

5. Most people buy their games regularly at deep discounts online, and only turned to us when that reservoir ran dry.  Once we were refilled, everyone was refilled, including the deep-discount sources those players were accustomed to using, so once again they had no need to turn to brick-and-mortar at list price.

Man, it's a damned good thing Magic, comics, and miniatures are so strong this year, because if I were counting on board games to make nut, I'd be looking for a way out of my lease.  The most frustrating thing is knowing the board game industry is booming, seeing the racks full to the rim at Barnes & Noble and Target, and envisioning the gigantic amount of sales all these other retailers are making on board games, so the market is out there... but we're just making the ancillary sales, if that, and an underwhelming modicum of activity otherwise.

Moving on.  One thing an industry publisher told me last week that rang true was that with most board games, there's no ongoing investment or attachment, resulting in board games being far more vulnerable to commoditization.

With a collectible card game or miniatures game, cultivating a relationship with your local game store is an important part of the equation.  Without an LGS, tracking down the cards or figures you need becomes a tedious and expensive pack-surfing routine or an endless series of PayPal expenditures and waiting for little parcels to arrive, hoping each card really is "near mint" as claimed and dealing with hassles regularly.  As well, having a place to play is pretty crucial to collectible games because the metagame quickly grows well beyond the bounds of a kitchen table playgroup.  It's similar with the comic book hobby, where you're most likely going to subscribe at exactly one store to all the books you want, and that store is going to facilitate things for you.  Yes, there exist online sources for all of this, but it's almost all just small local stores selling online -- the collectibles side of the trade is the part that is toughest to scale up, so the mass market isn't doing that much of it, and it's where local retailers add a lot of value just by having the goods and knowing about them.

But with a board game, even something awesome like Dead of Winter, well, you only really need to buy it once.  And you're only going to play it at home, 99% of the time.  It's tough to make a case that you should pay anything more than commodity pricing for it.  Meanwhile, both the mass market and online discount warehouse stores can scale up simple, box-shaped commodity SKUs very easily.  They've already solved that workflow.  They can already do it better, faster, cheaper, and more profitably than any LGS-scale store.

Your only rationale for not taking the bottom price overall for that board game is going to be some combination of the rest of the brick-and-mortar value proposition: You get it immediately (relevant for Cards Against Humanity when the dinner party is in three hours); you avoid the risk and hassle of a damaged or incorrect shipment; you can use up store credit if you've been saving any; social reasons, and so on.  I'm not sure whether all that put together equals the incremental delta between the online price and MSRP in many cases.

This might be an endemic flaw to the board game category, something where the first publisher to solve this quandary definitively, and to have sufficient control over distribution to prevent a race to the bottom, will taste profound success.

Maybe this is why the comic and hobby game trade stores that focused on "collectibles" outnumber the pure game stores among those that have been around for decades.

Related subtopic and I'll leave it at that for the week: Board games have become increasingly card-based, which is sensible due to production costs being so friendly for playing card media.  Meanwhile, players have become increasingly attuned to how easily cards wear down, mostly due to the pervasive influence of Magic: the Gathering.  The natural result of this is that players tend to want to sleeve their board game cards. I sell far more sleeves for card-based board games than actual card-based board games.  And though I do enjoy the revenue from selling packs of all the oddball board game card sleeve sizes, my life would be an order of magnitude easier if publishers would just use the standard playing card size as much as feasible.

I want to call out the following publishers for making the decision to keep their cards standard-sized and thus easily sleeved with the most sleeve options the market offers: Stone Blade Entertainment (Ascension series); Cryptozoic Entertainment (DC Deckbuilding, Lord of the Rings Deckbuilding); Brotherwise Games (Boss Monster series); Asmodee sometimes (Splendor, Elysium); and Z-Man Games (Shadow Hunters).  I'm sure I've missed some, props to them as well.

Anyway, that's all for this week, if you're in the U.S., I wish you a happy and safe Thanksgiving!

Tuesday, November 17, 2015

How It Is

This article, which I'll warn you in advance is lacking in brevity, is about what happens when philosophy meets the reality of a comic or hobby game store's operational struggles.

It's happening to DSG right now, and we're at a decision point.  If I chart the wrong course, I could severely hurt DSG.  Even if I make the right calls, if I base them on the wrong reasons, the execution will be wrong and I could still fail.  I could sit still and do nothing, which, if wrong, could result in failure.  If I make the right decision, DSG should benefit tremendously.

Oh, and I don't have enough information to make the decision.  But I have to make it anyway.  So I have made it.  In consultation with my business partners, we came to a consensus, and as the administrator, I am pulling the trigger on it.

So.  How did I approach this?  (You lean forward, intrigued...)

I am a student of Objectivism.  (Wait, come back!  We have caaaaake!)

Don't worry, I'm not recruiting.  In fact, Objectivism doesn't work that way; you're supposed to integrate concepts for yourself, firsthand, not be talked into it.  That's part of why I say I'm a "student of Objectivism."  I don't claim to understand it perfectly.

But one thing I do understand about Objectivism is a concept my good friend Chuck Prime summed up in one simple phrase: "Don't lie to yourself."

That reaches far.  You know what it means.  People evade.  They rationalize away bad decisions.  There are the obvious examples, of course, like the alcoholic who swears he can stop any time he wants to and doesn't have a problem.  I eat a cookie even though I know it's bad for me.  I lie to myself that it's not consequential.  But it is, and that's why I am out of shape.  There are differences in degree, obviously.   The gambler who believes if she makes enough bad bets, the next one will finally pay off.  The spouse who manipulates his or her loved one out of a misguided expectation that they can change that person, or that they can prevent that person from changing.

What "Don't lie to yourself" really means, is an advocacy of recognition of reality.  This doesn't mean we can't think big and dream bigger.  What it means is that we can't expect to wish our way to that outcome.  We have to acknowledge what is, and when we have accepted it, we will have the insight to act, to bring about the change we want.

Wishful thinking achieves nothing.  Wishful thinking can be very dangerous as a rationale for business decisions, in place of observed facts and plain logic.  Instead of making a decision based on the best available information, that decision is instead based on fiction, the fantasy of how the person wishes the situation could be, rather than how it is.

If I'm trying not to lie to myself, wishful thinking is about the wrongest thing I can do.

So what does that have to do with the game trade?  Stay with me here.

Often on this blog I've said that customer buying preferences are not inherently right or wrong, but just a pattern of behavior.  It is up to the store owner to adapt to customer behavior, not up to the customer to behave as the store owner wishes they might.

Store owners wish all customers were wealthy multi-genre gamers who spend lavishly on a regular basis.  In reality, very few customers are like this.  An observable majority of customers of the comic and hobby game trade are enthusiastic and passionate about their comic or tabletop interests, but make their purchasing decision based primarily on price, secondarily on availability, and only after that do other factors come into play.

Again, the above is neither right nor wrong.  The information above is how it is.  Certainly it rings true anecdotally as well.  I am a married father of three; my household is on a tight budget, and you had better damned well believe that I shop on price a great deal of the time.

"But you've said yourself, Bahr, here on this business blog, repeatedly, that this trade is based on boutique store business models.  That discounting is bad.  So does price matter or doesn't it?"

Price matters because of how it relates to value.  Many of these same customers spend hundreds, even thousands of dollars, on games.  How price-sensitive could they possibly be if they are doing that?

They assess price, but on a deeper level the customer decides whether the item is worth it.

Value is the backstop to price's promise.  And if value fulfills that promise, price comes out looking like a champion, regardless of what the number actually is.

Value can be objective or subjective, and price elasticity is an expression of the spectrum thereof.  I like to teach the two extremes of price elasticity with the examples of a ten-dollar bill and a human heart.  A tenner is perfectly elastic.  You will sell an infinite number of them at $9.99 and zero of them, ever, at $10.01.  A human heart is as inelastic as a good or service could feasibly be.  A buyer who needs it will buy one, and only one, and it won't much matter how high the price is.

On the purely objective end of the spectrum, goods like water, gold, and steel have chemical and/or biological properties that make them worth a given amount fairly reliably.  Even if someone doesn't want to buy that gold right now, it's not going to be difficult to find a buyer at market value in short order.  That predictability reinforces the value perception of the objective good.

Games are entertainment goods, by definition indulgence purchases.  Their value is much more likely to be on the subjective end of the spectrum, far more elastic.  How much fun does a customer think he or she will have with this item?  And generally due to market iterations, we have seen price strata arise that are tied loosely to the cost of the production of the good but can sway in either direction based on the reputation of the publisher, the characteristics of the product line, expected resale value retention, and so on.  Games Workshop gets to charge more for miniatures and sell them, because the quality is perceived as excellent.  Magic cards hold value because the market for them is so liquid and format staples are perpetually in demand.

A wise company manages their product distribution to maximize its value.  Vertical pricing and distribution agreement structures are legal now, thanks to a 2006 Supreme Court ruling.  That's how Wizards of the Coast was able to get distributors to lock online-only businesses out of access to Magic: the Gathering.  The most obvious examples are outside our industry, of course.  Apple, PING, Subaru, Nintendo.  Each uses a combination of selective access, quantity limitation, quality guarantees, and market positioning to reinforce the value of their wares so that customers are willing to pay full price.  And it works!  It works so well that the resale value of these items remains high, despite that secondary-market transactions take place completely outside any control whatsoever of these manufacturers.

I mentioned Wizards of the Coast.  Other companies in our industry are doing this now as well.  Games Workshop is known to do it; they forbid their direct accounts from selling new product online, they enforce a minimum advertised price (MAP), they require that retailers stock and merchandise their item in a manner that is master-planned to reinforce the value of the product line, and the discount differential versus third-party distribution makes for an extremely effective dangling carrot.

Recently WizKids took a huge step into this fray, limiting initial orders on HeroClix and Dice Masters product to fifty cases per store.  This affected huge online discounters while having close to zero impact on small local game stores.  Why do this?  Because WizKids knows, just as Wizards of the Coast knew in 2006, that if a collectible game isn't being played at the local level, it will eventually sputter out, and small local game store support is the linchpin to that mechanism.  So far it has worked for HeroClix: the first expansion released under the new plan, Superman vs Wonder Woman, held at nearly MSRP for weeks on Amazon before follow-up orders and volume saturated supply, and as of this writing the Amazon low is still less than 20% off MSRP for the critical SKU, the "booster brick."  The HeroClix set before that, Nick Fury, is readily available online at discounts approaching or in excess of 50%.  That's a pronounced increase in value perception.  This week, Dice Masters will get its first controlled release, Amazing Spider-Man.  I am optimistic and excited to see what happens.

Not all publishers in our industry are on board with this plan.  By not supporting the value of their products with vertically integrated resale structure, they allow a landscape in which their products are bought en masse by massive online discounters and countless garage dealers and flea market hucksters and sold in a race to razor-thin profit margins and the bottom dollar.  This percolates through to every major resale channel: Amazon, eBay, Craigslist, et cetera.  And ultimately that makes these products' value, subjective or otherwise, plummet.

So, on products that seem like they should have robust value, because they are good games,  especially when they are good games with large audiences, my customers have the option of paying me list price for the item, or obtaining it for less money, sometimes a lot less money, from another source.

I do offer some things in the value proposition that customers have, at times, found persuasive.  Immediacy.  You get the item now, and time is a scarce resource for many.  Tactile appeal.  You can pick it up and check it out.  Risk.  Ever order something through the mail and had it arrive late, incorrect, or damaged?  Ease of transaction.  This includes things like using store credit, and also (less so nowadays) discomfort about using one's credit cards online, and like such.  Degree of incremental difference.  As in, the local price is higher perhaps, but is it higher enough to bother sourcing the item another way?  Few people care about the price difference on the $14.99 SKU that's $12.68 online.  A lot of people care about the $99.99 SKU that's $57.34 online.  And then there are abstract social factors.  There be dragons, venture not into yon uncharted currents.

Accordingly, I must recognize the impact of price on the value proposition.  If I pretend price doesn't matter because I can tug at a social lever of "supporting one's local game store," I am lying to myself.  I believe a lot of customers do want to support their LGS.  I know many of them personally.  I know their intentions are sincere.  A lot of these customers are extremely supportive of DSG.  I also know they can read the numbers on a price tag perfectly well.  And it's disingenuous of me to expect them to set their own value judgment aside, arbitrarily, and pay full list price for a product every time, if the manufacturer isn't even willing to take steps to make the product's value worth that price.  And it's not fair to expect those customers to subsidize the other players either.

The manufacturer that hits this issue the closest for me, because of the combination of having great products, a huge audience, and significant devaluation of their products because of online discounting, is Fantasy Flight Games (FFG).

Fantasy Flight holds the tabletop license for Star Wars, so as you might imagine, they have many products that would have been market-viable even if they weren't that great.  But as it happens, they're generally excellent.  The X-Wing Miniatures Game is the flagbearer.  There are also the Star Wars Living Card Game; the Imperial Assault Miniatures Game; the Armada Miniatures Game; the three-faceted roleplaying system Edge of the Empire, Age of Rebellion, and Force and Destiny; and more, including a deep-engine tabletop board game called Star Wars: Rebellion due to arrive in early 2016.

Games Workshop also licenses the Warhammer line to FFG for card and board games, which have included 40K Conquest, Fantasy Roleplay, Dark Heresy Roleplay, Forbidden Stars, 40K Relic, and as of next week, the Warhammer Quest cooperative card game.  Other FFG games that are hits include Android Netrunner, a reboot of the WOTC 1996 asymmetrical TCG; A Game of Thrones Living Card Game; Talisman, an evergreen classic now in its fourth edition; XCOM cooperative board game; Civilization; Cosmic Encounter; Battlestar Galactica; Citadels; Descent: Journey in the Dark; BattleLore; Fury of Dracula; it goes on.

These games have a huge audience and their metrics on my sales floor have been underperforming their reach for literally years now.  This has continued despite constant efforts to promote sales, efforts both internal and external to DSG.  In-house, I have given FFG games massive boosts in shelf presence and room positioning, product champions have volunteered to provide extensive organized play and drawn big turnouts, I have spent advertising dollars specifically to draw in and grow the audience for these games.  Externally, the 2014 dockworkers' strike resolved, filling my racks with product, FFG continued to produce organized play premium goods that players wanted, and the tabletop game industry has grown overall.

Despite all that, a majority of my sales of FFG games have been either low price-point SKUs, pre-order bundles offered at a discount, revenue from a special Independence Day sale we ran, or closeout/overstock mark-downs.  Some angel customers have willingly supported the store full-tilt and that's something I will never forget, and I will always look out for those individuals when it comes time for retailer support of various kinds.  Moving out from those angel customers at the core, we have our tournament regulars in the next orbit, who were the next most frequent buyers.  And moving out further, we have tournament attendees who simply bought all their stuff on Amazon, in some cases speaking vocally about it right in the store.  That's as far out as the store goes: there are hundreds of members of some of the FFG regional Facebook groups, and online discount deals are a common topic that propagates.  These guys are buying tons of product and they aren't buying it from me.  I once thought I was just doing a lousy job running the line, but checking against other retailers both local and national confirmed that my situation was more common than the other way around.

More frustratingly, FFG has made things worse at times.  We understand the Target timed exclusive on the X-Wing Force Awakens core set.  Disney made you do it, we get it.  That SKU has been a colossal choke in the game trade because so many of the players got it at Target on Force Friday -- and why shouldn't they have?  It was the only choice they were given!  But just last week during the X-Wing World Championship, FFG's own commentators told viewers and listeners that they could buy their new X-Wing product on Amazon, rather than supporting their LGS.  That was obviously a gaffe, but it shows how firmly rooted the idea is, that FFG's own people think of it off the cuff.  It's cheaper online.  Just buy it there.   Our product isn't worth any more than the cheapest you can find it.  Our product's value is less than the price we suggest for it.  MSRP, after all, stands for "manufacturer's suggested retail price."

After extensive metric review and other research, DSG has decided that maintaining FFG product at list price (MSRP) is no longer viable at this time.  The turn rate doesn't meet the level we hold every product line accountable at in order to justify its space in the store and the cash tied up in its shelf stock.  This is symptomatic of board games overall, because with many publishers it's the same problem.  There are board game publishers devalued further than Fantasy Flight, and unfortunately they are the norm lately rather than the exception, but their audiences aren't as large and their product lines aren't as broad.  I can keep one copy of Upper Deck's Marvel Legendary on the shelf as customer courtesy, even though it's an infrequent sell.  Notable exceptions, board game publishers meeting or exceeding turns at list, include Steve Jackson Games (publisher of Munchkin) and Looney Labs (publisher of Fluxx).

So what do we do about FFG?  If I am correct that the product is good and the problem is that the manufacturer is not upholding its value well, then its price should be extremely elastic.  That is, a reduction in price should cause a greater-than-par increase in sales.  (This means FFG is leaving money on the table by failing to protect the value of their product.)

If I cut a margin in half, I have to sell twice as many units to make up for it.  The overhead math on that can reach a little farther, because of the costs of labor and space and other factors it's more like we'd need to sell to four or five times as much, but let's just suppose we are dealing with spherical sheep in a vacuum here, and call it 1:1.

If I'm wrong, then lowering the price shouldn't make much difference.  Sales won't pick up, and I'll make less revenue than if I had done nothing.  FFG games are inelastic; they're just not as good as I thought, and maybe FFG was right to encourage people to scrap for them at bottom dollar.  Perhaps that is the case.

From the context you may infer that I am going to reduce the price on Fantasy Flight products in my store, and you would be correct.  But there's more.

I won't do this haphazardly, of course, and this is something that has been under development for a while.  I have made some arrangements within our supply line that make a move like this even possible to consider.  That was the first big factor.  But beyond that, I want the product's value to stand for itself.  And at the same time, if there is a benefit to advertising a lower price -- and decades of Wal-Mart adverts establish that pretty well -- then I want that benefit too.

So we're doing this on two fronts.

Effective immediately, and at least through the end of 2015, Desert Sky Games and Comics is price-matching Amazon for Fantasy Flight Games and WizKids products on purchases totaling $35 or more.

There is some fine print, of course.  We're going to use the main Amazon price, not third-party seller offers.  By requiring the $35 ticket, everyone gets Amazon Prime -- we're not going to count Amazon main shipping in the price match, unless the SKU item is not eligible for Prime.  Mixing and matching is fine.  Heck, if you want, you can buy $50 worth of Magic cards and one pack of $5 Fantasy Flight sleeves and by golly we'll Amazon price-match those sleeves because your total ticket is over $35.  Other terms and conditions apply but that's the clutch of it.

Why am I including both FFG, which is not upholding its products' value, and WizKids, which is upholding its products' value?  Because I think the outcome will tell the entire story.  I think the price match will be much less elastic on WizKids items.  I think their new products are going to be worth more.  I think WizKids will become a healthier product line, pound-for-pound.  Not just HeroClix and Dice Masters, but also D&D and Pathfinder miniatures and the rest of what they produce.  And this will make me put more money into their lines and more calendar into their events, hopefully creating a virtuous cycle.

We're also going to count everything.  This will be a study in metrics and an experiment in retail psychology data gathering the likes of which we have never engaged before.  And, honestly, Magic, comics, and miniatures are so strong for us right now that we have the luxury to do this with a line that is flagging.  We're curious to see whether this sort of thing might be workable in the future across the board game category, which has had a lot of devaluation.  I'm not expecting iPhone levels of price resiliency, but I'd be happy not seeing marquee SKUs at fifty cents over wholesale.  There is no excuse on the planet for the 5th Edition Dungeon Master's Guide to be available at 45% off MSRP online, as it is right this moment as I type this.  List price is a complete fiction at that point.

We did a test run on this last weekend when we had several FFG tournaments going.  We announced it to the players and were cheered.  Throughout the day, they hit that X-Wing shelf like the antidote was in there.  About a thousand dollars in FFG product moved in a single afternoon.  The Amazon price match ranged from a worst-case ~40% discount (Force Awakens core sets) to no discount at all (X-Wing Most Wanted).  The discount averaged almost 18%.  The volume moved was... more.

Did we make the correct decision?  I won't know for a while yet.  There is much data to gather, much observation to make.  But I know this.  At no point in this process did I lie to myself.  From beginning to end, we forced ourself to look at the landscape not how we wished it was, but how it is.