What does the Coronavirus mean to the board game industry?
First, I want to apologize for the delay in these blogs going up. I'll be better about this moving forward (famous last words).
Today, I want to talk a little bit about the Coronavirus. This will be a shorter update, but I wanted to give you all some perspective on something that is breaking in the news and absolutely impacts your hobby.
First and foremost, the Coronavirus is a serious situation and we should keep in mind that the human impact and cost are the first and foremost thing on my mind, and should be on everyone else’s. I am happy to call a lot of our partners in the region friends and my brother-in-law has resided in Chengdu for the last few years. Our thoughts are with those affected and our sincere hope is that this disease is contained as quickly as possible with the lowest possible loss of human life. At of now, over 100 people have died from this disease. As of this morning we know there are cases in Japan, Germany and the United States. No matter the business impact, it is of course insignificant when faced with those who are directly suffering from this disease and we should remember that.
The impact to the board game industry is already being felt. I am sitting in a hotel in Nuremberg Germany waiting for the start of the Nuremberg Toy Fair tomorrow where we will be meeting with partners from all over the world to show our upcoming games for 2020 as well as theirs. It’s an important time of year for board game publishers as 3 significant toy fairs for the year all set-off one after another. First Hong Kong, the Nuremberg and Finally New York. These are extremely important shows for the industry at large, especially for those of us who have titles that operate in Specialty or Mass market stores or independently owned toy stores. GAMA in March is the “last” piece of our trade-show circuit and focuses on the hobby space.
So far this year Pandasaurus' have directly seen 3 “major” impacts.
- One of our partners has been unable to travel to Nuremberg.
- The port of Hong Kong is severely limited in operations
- Factories may open later than anticipated coming back from Chinese New Year.
For #1, one of our important printing partners has been unable to attend the Nuremberg Toy Fair because of a quarantine that they are being asked by their local government to adhere to. The impact on this is felt in a few ways. First and foremost we will miss face to face meetings with our most important production partner. We last saw them in Essen in late October and this is an important moment for us to talk about production schedules for 2020 and 2021 and ensure that all of our projects are on-time.
Moreover, they were specifically bringing us a final production sample of one of our new games Sonora. We have an earlier sample with us, but it means we cannot show the nicest version of the game to international partners. This always can be an impact as of course it gives potential localization partners confidence in our ability to order games and fully analyze if a game is right for their product line.
We were also going to show them several early samples of our upcoming games for later this year to discuss production pitfalls in person and show samples. Hopefully we can meet with them in NYTF in a few weeks time and the impact will be minimized. But if they are still unable to travel it may not being until March that we can speak with them, and at that point our GenCon releases will already have needed to be sent to the printer.
Regarding the limitations in the port of Hong Kong the impact is presently minimal. However, lots of manufacturing companies and toy producers are headquartered in Hong Kong but own factories in mainland China. Or own factories in Hong Kong but source components from mainland China. This can cause these factories to lose massive amounts of time and delay games for those producers through the year. This is one to keep an eye on as time goes on as it may really harm mass-market producers of games and toy companies.
For #3 we’re still in the ‘wait and see’ moment. We don’t know what the Chinese government will do but of course the safety of the people is and should be the priority. During Chinese New Year lots of workers go back to their hometowns in China to spend time with their families. It’s the most important holiday during the year both culturally and economically and has major impacts on our production schedules in the rest of the world where factories routinely close for 2-4 weeks at a time. Most publishers plan their year around Chinese New Year. For Godspeed (our Kickstarter from last fall) we were lucky to get our games on ships before Chinese New Year which was really important for an on-time delivery of that game.
But, our UK Games Expo and Origins releases? They have gone through pre-production before Chinese New Year and are designed to go into mass production once the factory opens back up. We are also presently sold out of Machi Koro base game and have low-stock on several other games. This is when we were planning on reprinting titles for the first-half of 2020 to sell to retailers. A delay in the opening of the factories could severely impact our plans for Spring of 2020.
We recently announced Sonora will be part of BGX, and we need to ensure the game scan be properly loaded onto boats to make it to that trade show on time. Our confidence there is still very high for that title being on time. But we have another unannounced title that is far and away the most important release we will have in 2020. It is in jeopardy of being delayed.
This game (project X) is something *really* special. We are releasing this year one of my favorite games we’ve ever published in Godspeed. We have an Elizabeth Hargrave design coming out later this year. We have a sequel to our best-seller The Mind, and we’ve got Sonora which is one of the most unique games we’ve ever published.. this is to take nothing away from any of those games because they are all going to be amazing (it’s gonna be a good 2020 for Pandasaurus Games).. but project X is something really special. And any delay in the factory opening could have ramifications towards the delay of the title. This could cause a ripple effect as a delay from the planned release date could cause it to turn into a Gen Con release. This impacts our cashflow not-insignificantly as moving expected revenue back 60-90 days creates the need to delay future games to offset losses in expected revenue.
Cashflow is something I'll write about more in the future, but there is a saying for small businesses. Cashflow is King. You could run a perfectly profitable company where every release makes money and still go out of business if you owe money before you are owed money. Pandasaurus runs a pretty conservative ship when it comes to cashflow, and a delay in the release of this game would almost certainly cause games we intend to release in 2020 to come out in 2021, which would then impact whether or not we sign games for a 2021 release. A companies cashflow (and release schedule) is a complicated spiderweb of interconnectivity, and any unexpected hiccup in revenue must be met with a measured response of expense reduction or expense delaying.
But, it won’t just be us affected by this. It will be everyone across the board. Lots of games will be delayed, Gen Con games may slip down the release schedule. Factories could develop production log-jams that take months to sort out.
Point being: Upcoming releases are going to be in-flux in a big way. This will ripple well outside of the board game industry. Lots of stuff is made in China, and anything that slows the Chinese production engine down is going to impact the global economy and the logistics pipeline. I promise people at much larger companies are scrambling right now to figure out the impact. We know Microsoft and Sony are planning big console launches this year. Apple and Samsung will have new phone launches (Samsung probably very shortly). These are all things that will be affected, and you are seeing that in the global stock markets that tend to not like surprises in general, but certainly not something that affects a global economy that while strong has had a lot of experts side-eyeing for the last 10 years or so with distrust.
So, short one today, and as I said before, the most important part of this is of course the health and safety of the people of China, Hong Kong, Taiwan, SE Asia and the rest of the world who are affected.