get paid to do the Catan thing...
Sorry, I just couldn't resist. But this title ties in perfectly to what I want to talk about today, money. You see, if you're old enough to remember Tone Loc's song "Wild Thing" you remember a line that went something along the lines of this: "I need fifty dollars to make you holler, I get paid to do the wild thing." That song was released in 1989, so adjusting for inflation, the working girl Tone Loc was speaking to now needs $112.42 to do the Wild Thing, and that will be the end of our Tone Loc discussion and the beginning of something else, a discussion on board games. In this discussion we're going to dig into some economic theory, and use some terms that economists love. I want to start things off with some definitions so I can use these words throughout this post and everyone knows what I mean by them. (Other people, especially globally renowned economists might mean something different by them.) Commodity - The basic goods that are used to make products. Commodities include things like copper, crude oil, coffee beans, and wheat. We can think of commodities as belonging to two groups, soft and hard. A soft commodity is grown, and cannot be stored for long periods of time, like cocoa or sugar. A hard commodity is extracted from the planet to the detriment of humanity and used to make robber barons richer, things like oil and precious metals. The key here is that commodities do not enjoy differentiation. Crude oil is crude oil, and while we all know we make gasoline and diesel from it, crude oil is also used in the creation of millions of other things; toothpaste, crayons, golf balls, sunglasses...etc...etc... Product - Products are made from commodities, and enjoy differentiation, with value added through branding and marketing. Products can be durable or consumable. Durable goods include things that are long-lasting, think of household appliances and jewelry as common durable goods. Consumable goods are used quickly, or need frequent replacement. Chances are very good you made a trip to gas station recently. Gasoline is a consumer good. Which ties back to Crude Oil, the commodity used to make the product. When the price of the commodity changes, the price of the product must also change, and we see it quickly and frequently with gasoline prices as they relate to the price of oil. These two prices are in constant fluctuation as the world constantly uses gasoline, and needs more crude oil to make it, but also as crude oil is extracted and refined. If a refinery goes up in flames, gas production diminishes but the need for gas doesn't go down, so prices go up. At the same time, if a global pandemic results in people not leaving their houses, but oil is still being extracted from the planet and refined into gasoline, the prices go down, because storing all that gas sucks for manufacturers, who want it pushed into the world and not figure out where to keep it (because, you know, that shit burns really well). This all brings me around to Settlers of Catan, whoops, wait, it's just called Catan now. Many many moons ago I sold my first copy of Catan for $42. That was the MSRP when I got started in the industry. Ticket to Ride at that time was $50. If we turn to our inflation calculator we learn that $40 in 2009 is $51.98 today, and $50 in 2009 is $64.98 today. So, are the recent price increases in these games a bridge too far? I'd like to present you with two agreements, because if I'm not debating myself, why bother.
While price increases to $60 on both of these games feels like a lot of money, they are worth it. Catan and Ticket to Ride are evergreen gateway games that people love, and the entertainment value of them at $60 is more than fair. Ticket to Ride and Catan are gateway games designed to introduce people to our hobby, and they should be sold as loss leaders to get people involved in our hobby. See, told you I could make both arguments. Let's continue. I've said it before, I'll say it again, and I'll keep saying it over and over whenever I'm asked all the way until the time I die. We sell luxury goods. We do not sell necessities. We do not sell mass market goods. Luxury goods exist in economic theory in a place where demand rises faster than income. Let me break that down. If income goes up 2%, and the demand for that product goes up 5%, that is a luxury product. Go check income trends in the United States, I'll wait. Now go check hobby game sales trends in the United States, I'll wait again. Did you see a correlation where hobby game sales rose more than income levels? You did. That's because (according to Statista) the hobby market was about $920M in 2014, and was worth more than $2B in 2020. If we want to just break out the board game market, it was approximately $160M in 2014, and $435M in 2020. This represents an increase of 171%? You can guess that household incomes didn't go up 171% in that six years, right? (They went up 21%.) When I start babbling about fashion and luxury goods in my gaming blog I lose a lot of people, because I have a pretty strange set of passions that include fashion, so let's talk about luxury goods here for a moment. In the fashion market, and in the luxury markets in general, we talk about entry, mid, top, and elite-level luxury brands. These brands fit into boxes that aren't always neat. Entry - Maybe it's luxury? Some people might think it is? This place is where you can find Hugo Boss and Lincoln. Mid-level - This is luxury, we all agree, but it's not the top level of luxury. Here we can think Dolce & Gabanna, or Land Rover if we want to stick with cars. Top-level - Leading luxury brands that are well known; Armani, Cartier, Mercedes, Porsche. Elite-level - Some people have never heard of them, but those that have heard of them know it's luxury, very few people will buy them; Bugatti.
Luxury Goods live somewhere on these three pyramids of volume, awareness, and level of luxury, determined by smart academic people doing a variety of studies. I love one in particular that is done by Vogue, the Vogue Business Index (I'm not sharing my login, you'll have to sign up for Business Access if you want to read it). They study a metric called 'Unaided Awareness' where they ask people to name luxury brands. No prompts, no forms, just name them. How many luxury brands can you name?
Did you get Chanel? It was the most popular one in the 2020 list, narrowly beating out Louis Vuitton and Gucci. That's enough about the theory of luxury goods. Let's talk about what we sell. We know that by economic definition they are luxury goods, right? (The demand increased at a greater rate than incomes, yes?) We know they also are expensive and they are limited in supply, right? Cost and scarcity are two more marks of a luxury product. Yes. So, why do we fight it so hard? Catan stayed at $42 for at least a decade, and then has seen several price hikes that make it feel untenable, but I just disagree with that, because I don't sell Catan. I don't sell Ticket to Ride. I sell an experience. I sell the luxury of free time spent with friends. Catan is just the vehicle which that luxury takes. Catan and TTR will be available in the mass market, and we're going to lose on price when Target or Barnes & Noble chooses to dump it all, that's just the reality of it this. Asmodee, or whoever owns them these days, will stick us with rules on how and where we can sell products (which leads me to an entirely different legal argument for another day) without enforcing those rules on the companies that actually damage their brands (wanna know why Calvin Klein isn't a luxury brand anymore, read some history books on fashion). I don't always love what is coming out of Asmodee, from either a product or policy position, but I'm going to take care of my company and they're going to take care of their company, and that means I'll keep stocking Catan because I'm not gonna pass on the number of copies I sell in a year. Despite my misgivings, and real concern about this price point, I also see this as a training tool that has me very excited. I want customers trained to buy luxury goods. A Coach handbag is going to last longer than the WallyWorld brand handbag. Maybe someone who buys the Coach handbag will spent a little more in the future on a Versace, and then a little more on Chloé, before getting a Dior, or a Chanel, or a God willing, a Hermès. I don't need customers looking for knockoffs, that's what WallyWorld and Sorry! are for. I need customers trained in the luxury shopping experience, taught to value expertise and quality. Truthfully, 80% or so (I made that number up just now) of the product in this market is underpriced. You want proof, look at what people in this industry get paid. If raising prices on Catan and TTR teaches new customers this is the value of a board game, and then all games get more expensive (while maintaining my real margin, not with publishers eating more and more of my margin...looking again at Asmodee) then this is probably good for publishing, good my business, and good for my employees, who can be paid more with the additional money we make. Here's the truth, a rise in prices doesn't lower the amount of things you sell. It rarely has. Remember we sell a luxury product. Price your products accordingly, and stop acting like everything is just another bushel of wheat, because we don't sell commodities.