As an industry, we are suffering. I spoke last week about how bloody October was on the retail level, but as I thought about it more and more we're doomed because as an industry we are bloated at every level. Originally, when I was writing about the struggles in retail, I thought that distribution might be a primary culprit behind some of our issues, but as I thought on it more and more, I came to realize that we are bloated at every single level. .
Who is to blame for that bloat? I think it's all of us, although I will lay a decent amount of the blame at the feet of one company during this post.
Retail is to blame because the barrier to entry is easy. I'd venture that a hundred new stores have opened every year over the last half decade, while forty to fifty stores have closed. That pace of growth is not sustainable for the industry, on numerous levels.
Distribution is to blame as well, because in the chase for their cut out of the middle they have engaged in unhealthy buying practices, and those unhealthy buying practices have left some of them in unhealthy positions. Much like retail, distribution depends on information to make smart buying purchases, and the flow of information is too slow across the three tiers.
For retailers, the change is easy. I look at a new release solicitation in a GTM or Meeple Monthly and go "Hmmm, that comes out next month and this is the first I've heard of it, oh well, skip it."
Distribution already placed their order though, and let's hope they're psychic, because they're stuck with shit. That shit goes on sale through distribution, or in the case of some distributors gets shipped to their own shell-store and sold online for prices that are only sustainable for a company that paid distribution prices on it. That practice is a great way to guarantee no retailer supports the game.
Publishers are not blameless for this either. There are far too many publishers pushing far too many new products on a monthly basis. I remember the olden days when a publisher could make four games a year and be healthy, and when all four of those games would be Triple A games worthy of demo space. Now it's a constant churn of new product, and if something sells out its first print run it's mostly irrelevant on its return. The Meeple Monthly I get from ACD each month is approximately fifty pages longer than a healthy industry can actually support. You know the back part of it? You can pretty much throw it away. I'd venture that 95% of the products in the front part of your monthly trade magazine don't deserve space on your shelves, and 99% of the products that are short-solicited don't deserve space on your shelf.
Which causes problems. Publishing pushes something out without enough notice, distribution is forced to order blind, and then retail may not give a damn.
This bloat is unsustainable, and I feel like the multi-level pursuit of the almighty dollar is causing a huge disruption to the industry.
I earlier laid the blame for this at the feet of us at every level, and I truly believe we're all at least partially to blame, but the fault for this must start with the single largest entity in our industry.
Wizards of the Coast, probably at the behest of GiantToyCorp has attempted this year to turn Magic players into ATM machines, and the opposite has happened. In what has been the most aggressive release schedule in Wizards history, Magic has fallen as a percentage of my business, and I couldn't be happier. Look at this year...
Aether Revolt - 20 JAN (Booster) Modern Masters 2017 - 17 MAR (Booster - $9.99 MSRP) Mind vs Might Duel Deck - 31 MAR Amonkhet - 28 APR (Booster) Commander Anthology - 9 JUN (LIMITED) Archenemy: Nicol Bolas - 16 JUN Hour of Devastation - 14 JUL (Booster) Commander 2017 - 25 AUG (LIMITED) Ixalan - 29 SEP (Booster) Kaladesh: The Gift Pack - 20 OCT Merfolk vs Goblins Duel Deck - 10 NOV Iconic Masters - 17 NOV (Booster - $9.99 MSRP) From the Vault: Transform - 24 NOV (LIMITED) Explorers of Ixalan - 24 NOV (Board Game?) Unstable - 8 DEC (Booster)
What a strange mixture of way too much darn product. The Duel Decks I used to order 12 or 18 of I order six of, and I'm still looking at three copies of the most recent one. The booster boxes I would order eight cases of I'm happy at four. The limited products I could sell twenty or thirty of? Nope, I'm not getting that many. A year with a second Masters series, and it was spoiled what feels like years ago? No one cares.
This industry has suffered a catastrophic popping in every full decade of its existence. In the 80s the RPG market crashed, taking publishers with it. In the 90s the CCG market crashed, in large part because Fallen Empires was printed to meet a demand that was wholly artificial. This pop took retailers and distributors out, and crippled many publishers for years to come. In the 00's, Wizards of the Coast once again caused a huge market disruption with the fiasco licensing issues of D&D that resulted in the D20/OGL bubble bursting as Wizards crippled the flagship brand of role-playing with thirty months of inactivity, and then released 4th Edition Dungeons & Dragons as a horrid product and limited third party support for it. Once again, publishers got hurt, and retailers got hurt.
I think we're approaching the second CCG pop, which would fit the pattern of the last three decades, where RPGs go bad, CCGs go bad, then RPGs go bad again...so it's time for CCGs to take their turn.
Wizards of the Coast, at least the people at Wizards who are responsible for Magic brand development and release schedules, are apparently off their rocker. The only positive thing accomplished by Magic this year is that they've taught Magic players how much fun other games are. Buried under an untenable release schedule, Magic players are spending their money in other places. I've had so much joy watching Magic players learn Bunny Kingdom and Ethnos, or pick up their first ever paint brushes for their new Warmachine army.
Unable to feel like they can keep up with the product release schedule that Wizards of the Coast has set, Magic players are actually just finding new games to play. I sincerely didn't believe that was even possible.
Not every segment of this industry is ready for that. Many stores depend on Magic-money to pay for other things. They get to carry a small selection of miniature games, or some board games, because of the money that Magic generates for them. There are also manufacturers who live and die based on the success of Magic: The Gathering. I can't imagine that I need much Ultra Pro, Ultimate Guard, DEX Protection, or Pirate Lab, in my store if Magic isn't a thing.
I hope that those companies, as well as retailers, are aware that we're approaching an industry reckoning. As publishers work more and more with retailers to protect their brands, through the use of 'authorized retailer' programs, or price protection, Wizards of the Coast has gone the exact opposite route with Magic: The Gathering. The single largest entity in our industry has no price protection, and if there are any sort of regulations on who is allowed to acquire it at wholesale they appear to be unenforced. The primary goal of Magic: The Gathering in 2017 was, apparently, to make as much money as possible, with no regard for the future health of the game.
The most crystal clear picture of Magic's problem, and the larger problem it is causing for the industry, has been the selling habits of retailers and distributors over the last sixty days or so. Iconic Masters isn't even in retail yet, and the preoder prices on this $240 MSRP product are dipping as low as $160 or so. Everywhere I turn I hear of retailers who are cutting their orders back, an absolutely unheard of phenomenon for a Masters Set.
I'll share numbers with you.
For Modern Masters 2017 I was offered 48 boxes as my allotment as an Advanced Plus store. I took all 48, and could have maybe put my hands on another 12 if I felt like paying a little extra, which I was loathe to do because the margins on Magic are bad to begin with.
For Iconic Masters my allotment as an Advanced Plus store is 64 boxes. I giggled, and ordered 20. This is a problem at every level of the industry. Wizards shipped my Advanced Plus allotment to distribution before distribution knew if I even wanted it. I don't. So, now distribution is sitting on that stuff in that warehouse, and owes Wizards of the Coast some money on it. They're not getting that money from me, because this product isn't worth the effort. I can currently sell it for a 17% margin online, which doesn't keep my lights on. I'm even afraid that number is going down, we're not seeing the end of the online dump on this product.
Magic is no longer guaranteed money. I would argue that since the Planechase Anthology release each new Magic product has been a coin flip. A weak Standard format, a glut of confusing product releases, and the difficulty in acquiring the handful of desirable products, has weakened Magic to the point where I'm not sure brand management understands how to fix it.
This weakness will affect retailers. A weakness in retail affects distribution, especially if distribution has extended credit to a significant number of retailers. A weakness in distribution affects publishing, because if distribution has too much money tied up in dead Magic product, it can't buy all the cool new board games.
I won't try to give you hard and fast numbers, but I'd ask every retailer to engage in an exercise. Pull your October numbers from your point of sale system. Eliminate all the sales of Magic: The Gathering products, as well as ancillary products that only sell because of Magic. Then, from your expenses, eliminate all the money you spent buying Magic and its ancillary products. Yes, I'm asking you to pretend Magic doesn't exist.
Can you pay your bills?
Can you still eat?
If the answer is no you need to examine your business plans.
Strangely enough I find that I have the least amount of sympathy for the middle tier. I tongue in cheek refer to distribution as the 'soul sucking freight forwarders' of this industry. They're a necessary evil, but not always a pleasant experience. They're also the place where I think the three-tier bloat is the most damaging to the industry.
I recently took a survey of retailer friends of mine. I'm a horrible human being with not many friends, so the sample size is small, but let's talk about results. I asked those retailers to tell me which distributors they use regularly, and placed the definition of 'regularly' as at least twelve times a year. It is my opinion that if you're not ordering from a distributor at least monthly they are not important to your business model. It was posited that 'regularly' might need to mean twenty-five orders or so annually, approximately two each month, but we stuck with twelve times annually for the question. The question was also limited to full-line game distribution companies, discounting places like Wizards and Games Workshop, single or dual line publishers we order direct from.
Twenty-five retailers responded to the survey, and all of them use Alliance. This makes sense, because Asmodee and its owned properties are currently vital to the success of a well diversified game store that isn't living and dying on Magic. Twenty of them use ACD, and eighteen of them use GTS. After that the numbers get sketchy, as five other distributors were mentioned, but none of them garnered mention from half of the retailers surveyed. A distribution tier that deep is, in my mind, unhealthy for the product that publishers are making. There are too many distributors attempting to be everything to everyone. There are too many publishers sending product to seven or eight distributors here in North America, and when a retailer can't get it from their primary distributor those publishers expect we'll just set up six more accounts, because 'Distributor You've Never Used' has it in stock.
That distributor, in my mind, took stock from the channel and made it harder to find, which is bad for publishing, and bad for retailers. I'm going to say something controversial here, I don't believe that exclusives are bad. I kind of like knowing that if ANA product is out of stock somewhere it's out of stock everywhere. I don't believe that exclusives are the answer, in that I believe they are the extreme solution to a problem that can be solved with a less extreme solution. Don't go to only one distributor, go to two or three, and pick the right ones.
The slowdown of Magic has resulted in responsible retailers, diversified, retailers making difficult choices, and passing on games from publishers we consider partners and friends. This has meant distribution sits on that product longer, and it eventually gets dumped cheap. It never had a chance, and in some cases that's sad because they were good games. These same retailers are, like me, also cutting orders on Magic at the same time, which is putting distribution in the unfortunate position of being into Wizards for thousands, or tens of thousands, of dollars in Magic product they can't sell. Iconic Masters is looking like it has the potential to be a second Fallen Empires, and it's going to leave a bloody carcass of an industry in its wake.
1994 and 1995 were bloody times for this industry. Too many publishers were pushing out too many CCGs, and too many retailers popped up to cash in on the fad. Those retailers played what we still call 'The Allocation Game' in an effort to get enough Fallen Empires to meet the demand they expected. Little did they expect Wizards to meet every preorder, and distributors forced those retailers to take every order, leaving retailers with crippling debt they couldn't pay, and as they shut their doors distribution was left that with that debt to Wizards. We're approaching that bottle neck again. Wizards has once again allowed poor decision making and a lack of marketplace understanding to push us toward the brink. An aggressive product release schedule can generate excitement, but it can also crush a player base who is not financially able to keep up, and I sincerely believe that's where we are.
Each time the bubble has burst on this industry we've lost some companies, and others have changed. Seriously, you and I might be looking forward to Cursed Court from Atlas, but do you remember the ten D20 supplements they put out once upon a time? How about the twenty supplements for D20 gaming released by AEG? Those companies survived when they could no longer put out D20 supplements, but what about Silven Publishing? They were one of many small companies destroyed in the collateral damage of poor Wizards management.
Fallen Empires ruined retailers and distributors. The end of the D20/OGL era ruined retailers and publishers. For the third straight decade it appears that Wizards will cause a bubble to burst in the industry. Who will it ruin this time?
I can answer the question only by saying it won't get me. After that I hope it doesn't get any publishers I really enjoy products from. I hope it doesn't get the distributors I use.
I'm not here telling you Magic is over. It's still a core Hasbro brand, and probably doing closer to $100M annually than $50M. Magic survived Fallen Empires and the bubble popping in 1994-1995, and it will survive this as well. Of course, if you look at the last two pops that were brought on my Wizards of the Coast, they never seemed to be in danger even as they did harm to the industry.
Maybe it's part of the WotC strategy, to build up a segment of the industry just to thrash it and see if they can pick up some shattered companies to increase their market share. I'd almost prefer to believe they are diabolical and evil, rather than just plain incompetent.