Musings on Kickstarter

The introduction of Kickstater to board game publishing over the last year or so has caused some major changes, with a lot of new independent games being published and dispersed.  It’s also caused a lot of consternation among game stores, and for myself.  I’ve been trying to figure out why I dislike the entire system, and what my concerns are about such a program.  So, here we go:

Present Concerns

  1. Additional work: Scanning through and researching all the board games available on Kickstarter just adds another task to an already busy job
  2. Additional capital: I’ve spoken about this before, and it’s a real concern.  Having to find additional non-working capital to purchase these games is an issue.  The delay between payment and delivery creates a significant ROI requirement, which is not helped by…
  3. Lack of Retailer Support: The few times I find a project worth backing, there often isn’t even a Retailer Support level.  So we either have to contact the publisher to create one (and check back if they do — which isn’t even certain!) or we buy at MSRP.
  4. Lack of Online Retailer Support: I’ll add an additional caveat that there seems to be an even higher level of elitism among Kickstarter publishers than among normal publishers with many of the ‘Retailer support’ levels only available to B&M stores.
  5. No recourse: If and when (because there will be a when) a Kickstarter project is never fulfilled, there is no legal recourse.
  6. Varying demand: Of course, you never know if a game is going to be a hit.  However, with the traditional distribution channels, I can hedge my bets by ordering 1 or 2 copies initially.  That’s all that will sell for many games.  With a Kickstarter-backed project, I have to take 4 to 6 copies and then pray that they all sell — knowing that the customers who really wanted the game might have already purchased it themselves through Kickstarter.

Overall, these concerns have made Kickstarter a non-starter on a corporate basis.  I personally still support some projects, but those are my personal funds.

Future Concerns

While I know I lose some sales and some customers to Kickstarter, it’s not a big issue.  It’s a secondary competitor — one that has a leg-up in terms of getting some product faster, but no more dangerous than any other competitor.  At least, presently.  It’s what might happen in the future that concerns me the most.

Scenario 1: Kickstarter is the financing method for publishing all games

If Kickstarter becomes the financing method for all companies (and there are some indications of that with established publishers like Queen Games and Steve Jackson Games using it), then we will see a major change in how business is done.  The concerns then become:

  1. How much of our customer base are we going to lose?
  2. What percentage of games will sell exclusively through Kickstarter / direct distribution?

Greater Risk

Here’s the thing —  as an online store we might actually be more at risk than your general B&M store.  A core group of our customers are avid boardgamers: Gamer Geeks.  These are customers who are looking for the hottest new games, often with the highest amount of bling and exclusivity. Exactly. This is the same group that are most likely to finance a Kickstarter project.  If we lose a significant number of our Gamer Geek customers, we’ll definitely be struggling.

No More Distribution

There is, frankly, a lot to be said about cutting out the middleman.  If a Publisher can sell the game direct to customers through a system like Kickstarter, then their profits increases significantly.  For them it is better, financially, to sell 1/2 as many games directly to customers than the full amount through regular channels.  If you assume most games are priced at about 8 – 10 times the component cost, then the publisher of a $50 game would make approximately $45 per game selling direct, compared to $15.  I’m not including shipping here, which will push the profit from direct sales down somewhat, but you can still see the attraction.

So what’s to stop publishers from blocking all sales to distributors & retailers? If you realise that 80% of all your demand has been soaked up by Kickstarter, why not just sell the rest direct on your own website? Or just not print more than your Kickstarter funding covers and then put up a 2nd Kickstarter for ‘unreached’ demand?  Suddenly, the retailer and distribution chain disappears.

Lower Margins

Here’s another variation on the above: publishers do allow retailers to purchase; however, they reduce the retailer margin.  An example would be the Ogre Kickstarter where the retailer support level was $200 for 3 games  – or about a 33% discount compared to the usual 45%.  That doesn’t sound like much, but most stores only have a profit margin of 3 – 5%.  A reduction of over 12% in their margins would put most of us in the red.

All the above has the potential to create a major disruption in the publishing channel.   And it doesn’t even have to be all publishers. If, say, 50% of the major publishers start doing this, game stores and distributors will be majorly squeezed.

Scenario 2: Balanced Use

The above is a doom-and-gloom scenario.  What’s likely to happen is something less extreme.  Publishers might use Kickstarter for new and/or risky games where they aren’t certain of their return.  For reprints and classics, they will likely distribute through their normal channels, using the funds from their first print run to do so.

This likely means that retailers and distributors will see reduced sales of new games, and will be much more likely to stick to classic games and bestsellers.  When they do pick up a Kickstarter game, it’ll be a minimal number, since they will know it’s ‘sold through’ already.

Hmmm… maybe we should ask BGG to add a new category to all games: Kickstarted: Yes / No.

In the end, I expect at the retail level we’ll see a lot more breadth of games (more games) but much less depth (numbers printed).  Publishers will likely do smaller print runs in an attempt to ensure they get their Kickstarted games funded, and a large number will be pre-sold.  Retailers will thus have much fewer copies to purchase, and those that do arrive will disappear really fast if they are good games (see Belfort as an example – note, Belfort wasn’t a Kickstarted project as clarified by Michael below) .

I’d also expect there to be much faster discounting of games in this scenario, as retailers attempt to move products before they go stale.  If Kickstarter increases the total number of games by say, 30%, an already busy release schedule becomes even more packed and retailer inventory budgets get squeezed further.  This scenario would be a change, but not a major change.

Scenario 3: A Vicious Cycle

Another possibility is a slow decrease in support for Kickstarter projects in general, and board games in particular.  I would not be surprised if game stores start becoming much more focused on casual gamers:  customers who aren’t as interested in new games, and whose gaming budget might be only $100 – 200 per year (instead of per month), and who are thus quite happy to play / buy the bestsellers of yesteryear.  When it comes to serious gamers, the focus shifts from supporting board games to supporting CCGs and Miniatures even further.  Both of these categories are significantly harder to fund via Kickstarter due to their higher production costs and need for ongoing expansions.

If the above scenario plays out, we might even see the following vicious cycle occur:

Publishers put games on Kickstarter -> retailers buy fewer Kickstarted games -> publishers aren’t able to sell as many games, and are increasingly reliant on Kickstarter pre-orders, adding more new games to Kickstarter -> retailers further reduce support of board games.

If that happens, I’d expect that only a few online stores who either (a) bite the bullet and support Kickstarter projects or (b) lower their pricing significantly to make up for the lost Kickstarter ‘perks’ will stock a significant breadth of board games.  What you see on the regular B&M store shelves will increasingly be the current winners — FFG, DOW, SJG, Rio Grande, etc. — and getting on those shelves will become even more difficult for independent designers, if not impossible.

Final Words

Of course, all of this is dependent on the Kickstarter bubble not blowing up completely as bad products outweigh good ones and customers walk away from supporting the majority of products. If this happens, then not much will end up changing in the end.

6 thoughts on “Musings on Kickstarter”

  1. You will see more and more ‘regular’ publisher (i.e. long-term run folks) using Kickstarter.
    Many will however produce more than just the KS orders so they are able to place the extra copies in distribution. Game Salute actively promotes that way of doing business.
    Others (and this is complimentary) will allow retailers to order from KS at retailer rates (usually 50% off MSRP). But this is just for the initial run, once the KS is trough ad the retailer has sold his KS copies, then the normal distribution channels must follow up. (Or the game must disappear from the market if it’s not a longterm thing.)
    Regarding online retailers, the core of the problem is that some do regular retail, just they do it online, while some others are aggressive hard-discounters who only care about their bottom line and not about how what they do today affect the market they’re in tomorrow.
    As a publisher (or trough a distributor) if I sell 6 games at 50% off MSRP to a retailer (BM), he knows he can expect to sell the game at msrp or near it.
    If an online retailer buys 60 copies, gets a 60% discount off MSRP and dumpt the games at 40% off MSRP (as he has lower running costs) he makes profit today but the BM retailer is now screwed : he must sell the copies he bought at MSRP or near it to get his 5% margin but for the public, the expected price is now the 40% off MSRP as set by the online retailer.
    Until this situation is resolved, it’s not surprising to see some publishers and distributors shy away from online retail altogether.
    If this was a huge market like food or cars this wouldn’t be a problem. but for games, where most small publishers are guy with a real job on the side printing smll volumes this is a huge concern.

    1. I’m always puzzled why a publisher would sell to a retailer at 60% off. Why not just 50% like any other retailer – you’d ‘push’ the pricing up that online retailers would charge. By the above numbers, it isn’t a huge amount more – 60 >- 70% but it’d put them towards a more level playing field in terms of product cost.

      There’s also the implicit assumption that those 60 games that your online retailer just sold would actually go to a B&M store if the game wasn’t available online. Which might be true for really hot games (see Eclipse or Space Hulk or Agricola when it first came out) but I’d hesitate to say the same for most games. In fact, there’s an argument to be made that by removing those games from an online retailer, the publisher is removing his games from a whole section of the market.

      Either way; it’s all opinions. There’s no real data / stats to back up either side of the argument so it comes down to belief. On a personal basis, I dislike it – but then again, I have a vested interest to dislike that kind of prejudice 🙂

      On the main topic of KS – I’m curious to see what happens. There’s a lot of additional cost being added to publishers by doing KS e.g. additional perks, shipping & handling and customer service for direct orders, Kickstarter’s cut, etc. For the established players; I wonder whether it’d be worthwhile for them to give up the additional margin to receive the funds immediately.

  2. Regarding the capital risk that KS represents for retailers, I’m all in agreement with you.
    Having a distributor that can take retailer preorders alongside with Kickstarter seems the best way to alleviate this problem (so you see, the middleman still has a role to play in the future.)

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