The business of board games – everything was late edition.

Hey y’all – this is a blog post I started writing in late 2021 and never really got around to finishing.   A lot happened in 2021.  Personally we welcomed our first-born into the world and she had some in the larger scale relatively minor health issues that required several weekly doctors visits and a pretty rough first 3 months of her life.  On a company level, the shipping crisis + delivering Dinosaur World kickstarter at the same time was a massive lift that ate into what little extra time I had for writing blog posts.   

So between not sleeping, my co-owner being on maternity leave it led to me getting a lot of work done at odd-hours and this blog post took a back-seat.  So, bear in mind you are reading my thoughts from nearly 18 months ago – some of which were written at 3AM while a smol baby was screaming its head off so I could try and buy Molly a few hours of sleep.   Turns out there is no paid family leave when you own the company so its a lot of triage and coffee by the bucketload.   Honestly an October 2021 delivery date is potentially worst possible timing in the history of the company for Charlee to be born.  Woops.

I am posting this sort of “not really accurate anymore” post because next week (or next month – somtime in the future) I am going to follow up with a “what actually happened” because as rough as late 2021 was (and the shipping crisis was financially and from a stress-level was *extremely* bad) early and mid 2022 was actually far scarier for most board game publishers. 

Anyway, step into my time machine (or your time machine, its hard to say who killed who [go play buy That Time You Killed Me if you didn’t get that joke])

Welcome to August 2021:

So, this is likely not news to, well, anyone with eyes, ears, and the desire to buy things going on right now. But things are a mess out there, and board games are really no different than any other consumer good, which is to say: late, in short supply, and late some more. Unfortunately, Pandasaurus Games is experiencing this fully.

The cause of all of this mess is multi-fold and I’ll try and break it down into a few causes:

• The supply chain broke
• Demand spiked
• Everyone underestimates 1 & 2 horrifically.

The Supply Chain

So, the global supply chain has led to a massive reduction in the cost of consumer goods over the years, and a massive reduction in the cost of doing business for basically everyone. Effectively, everyone who works in manufacturing (yours truly included) relies heavily on a complicated international web of suppliers.

Pandasaurus Games is not in the business of stockpiling 6-9 months worth of product. We like to order what we are going to need for 90-120 days for a few simple reasons. We pay only for product we are going to need, we pay to store and ship what we will need, and we shorten the turnaround time from when we pay for something to when we make money.

Some simple math to illustrate:

Let’s say we estimate selling 20K units of “Game X” at $50 a piece over the next 12 months. If we order 20,000 units of “Game X,” we will pay about $9 a game. So, we write a check for $180,000. That will require two or three 40’ containers to ship products to consumers, so tack on another $18,000-$27,000 in shipping costs (or worse – I’ll get to that later). Now we’ve written a check for about $207,000 to purchase these games.

I am going to assume this is not a new game, but a reprint of a popular game. This means sales of “Game X” will be predictable, but I am going to cheat a bit and over-simplify things by assuming our monthly sales are flat throughout the year. This is not true – usually sales spike when a game first comes out and, for an evergreen, again around Fall and into the holidays (along with some weird spikes like Valentine’s Day). But I am tired, and I feel like cheating a bit, so we’re going to estimate about 1,600 games will sell every month.  

Normally when we reprint a game, it takes about 90 days for production to finish and another 45-60 days to ship on the water.  We generally pay for half the print run at the start of production, the back half at the end of production, and then pay for shipping after the games get to our warehouse. 

We also pay to store games. This is important, but I am still tired and am just going to not include it in these calculations. While it’s not a de minimis cost, it does cost around $15-$25 bucks per pallet per month, with some weird rounding for partial months.  A 40’ container usually has around 20 pallets in it (give or take) so if you don’t sell any games for a month, each container will cost you about $300-$400 in storage fees. This WILL add up in a hurry if games just sit idle and don’t sell.  

But back to math. If I am selling 1,600 games a month and gain $20 in revenue, minus shipping, and royalties to the designer – let’s say we make $18 per game after paying for freight shipping and designers – we are gaining about $29,000 in net revenue every month of sales. Ignoring our storage fees (again, if you run a business, DON’T DO THAT), it will take us 7 months to break even on our print run that, as a reminder, cost just over $200,000.

Alternatively, we could just print what fits in a single container (7,200 units of a Ticket to Ride sized game) and we will pay maybe $9.50 per game to print and about $9,000 for the container.  Now we’re at $77,000 for that new smaller, leaner print run. It’s a lot less cash out of pocket for sure. We still make the same $29,000 in revenue per month, which means we would get our money back in 2.5 months. In this scenario, we will run out of games quicker since we only made about 4.5 months’ worth of games, so we will likely start a second reprint around the time these games leave the factory to keep a good solid supply of games in stock. So smart!

It also means if sales slow down we can adjust our print runs.  Or if they speed up we can also adjust to print more.  When you print less at a time you are more flexible and the risk of massive losses are severely reduced.   Spending 77K dollars is significantly less risky than spending 207K dollars if a game stops selling.

But we aren’t the only super smart ones out there. Our factory does the same thing with paper. And plastic. And those thin plastic wrappers with the little tab on them that hold decks of cards together. The shipping company does the same thing with containers, and ships, and everything shipping related. Every link in this chain is being run in a super-efficient system where we only spend what we must for the immediate demand we have.   This lets all of us stretch our dollars further and take on a lot less risk, and as a result we can price games more aggressively because the overall risk is low.

And we are all so smart right up until…

Demand Craters and Spikes

In the world of business, we all want to sell a lot of our stuff. It’s the thing we want the most – for people to want to buy our product. And the more people want to buy it the better! And for our printer, the more people who want to print games the better for them! And their paper supplier is really looking forward to getting more paper ordered. And Boaty McBoatface from the shipping company loves when people want to ship stuff.  

Except we are all going through this whole global pandemic thing, so demand hit an all-time low. It was also not safe for people to work in super packed factories and, because of lots of reasons, supply was lower (working conditions) and demand was lower (folks out of work, less going out, less everything).   Every step in this chain tightened our belts, meaning we printed fewer games than we normally would as we tried to make do as best we could. Some industries saw brief, unexpected pandemic spikes (puzzles were an obvious one) and games did kind of okay – especially evergreen titles. New games fared a little worse, since it was hard to discover new titles without game nights, conventions to see new titles, etc.   Some companies fared better than others and some fared worse.   We sold a *lot* of the Mind and Machi Koro in 2020.

Then something happened: we started to get vaccines. Vaccines in most of our dominant markets (American and European) began to really tick up and infection rates started to tick down and OH MY GOD EVERYONE WANTED TO BUY STUFF. Great, that just means we need to print a whole bunch of games so we can take advantage of this new spike in demand.  We thought we would move forward with a big order, but OH NO EVERYONE ELSE DID THAT TOO. Paper guy was out of paper. Factory needed twice as long to make games. Boaty McBoatface was full AND stuck in the Suez Canal. 

What the heck is happening

So, remember that lean, mean machine I was describing earlier? Yeah, it broke. The underlying assumption of every link in that chain was that demand spikes were somewhat predictable and cyclical. Previously, we could all plan around seeing more demand around Christmas and experiencing delays around Chinese New Year.

It turns out the global economy coming to a complete halt… and then slowly reopening… and then oh my god it’s the roaring twenties and everyone is sitting on flag poles, and oh no it broke again and everyone was back inside… is not actually predictable. These global supply chains are extremely large and extremely complicated. You can’t just spin up more supply overnight to meet demand. You must hire people that may have been laid off a year ago, but they might be switching industries and they just aren’t going to hit the ground running. You have to find raw materials and the mines/mills/refineries that provided them previously are also short staffed from a drop in demand a year ago. 

This means that really slick “new product arrives just as you run out of the old product” global economy completely broke. The restocks didn’t come in when we needed them, so we ran out of stuff. Sometimes that’s board games. Yesterday at our local ramen shop it was noodles. Cars are in short supply. Housing markets are going off the charts globally. It’s a mess out there.

If you want to adjust to this “spike” in demand, it means a lot of hiring needs to take place rather quickly and it needs to take place globally – but hiring folks is a big expense and a big risk for a business. So you really can’t just hire up to meet the massive demand spike, because what if the demand spike suddenly stops?   One of my main jobs as the owner of a company is making sure our staff is safe in their jobs and not having to eliminate positions willy-nilly.

This has led to a lot of people guessing as to what is happening, who to hire, what to buy, and when to buy it. How much risk do you take? Given that prices have gone up and timelines have slowed down, do you place a massive order today trying to guess at demand in 6 months? That answer is “yes,” but with the caveat that you are not going to print for today’s demand, rather at some quasi-educated guess of what tomorrow’s demand might be.

Okay, but please just tell me about the crazy stories you are seeing.

So, the wildest things I have seen this year:

• Our production of Dinosaur World finished in May of 2020. The last container didn’t leave China until early July 2020. My factory was writing me daily wanting to know when we could take these games off their hands. We couldn’t get the games out of the warehouse because there were no containers to load them into. That is right, we couldn’t even get a single shipping container.
• Factories ran out of space. See #1 above. Our factory was literally out of space in their warehouse at various points in time because games were finishing production faster than they could leave China. It’s like that I Love Lucy Episode with the chocolate, but with games.
• Pricing went up after printing finished. This happened to us twice and has never happened before. Basically, one of our factories called and told me they lost money printing one of our games early in 2021. After some discussion, we agreed to help them out of this situation because they are great partners of ours. So we wound up spending more money than we had budgeted for – but I also don’t want to leave a business partner holding the bag when they’ve been good to us over the years.
• Costs for a container tend to hover around $6,000-$9,000. The price is now roughly $17,000-$19,000 per container. Update from 2023 – it spiked at one point at around 38K for us.
• We keep missing boats. In the before-times, if we booked passage on a boat we would generally know which boat we were on about 10 days before the ship set out on the ocean. Now we basically send games to the port and beg Boaty McBoatface to please, please let us on his boat. Sometimes we have waited for WEEKS to get on a boat.
• The ports in the US got so clogged games would sit on the ocean for nearly a month at a time. This happens occasionally, but it was basically the reality for about 3 months straight.
• We can’t keep containers once the boat lands. Normally we book ocean freight from China/Germany to our warehouse in TN. But we aren’t being allowed by the shipping companies to keep our containers. They need to ship empty containers back to China to fill with more stuff to bring back over to the US. This means we can’t book a container past the port itself in CA, much less to TN. Its wild to think containers were once not worth sending back to China so we turned them into bars.  [back from 2023 – RIP container bar]
• This is when you take your games to an intermediate warehouse (usually near the port) and unload it to temporarily store product so that you can give the container back. This costs about $2,000 extra per container at a minimum. This is now pretty normal for us.
• Moved warehouses. We pivoted our TN warehouse to CA temporarily and are shipping games out of the West coast. Since most of our customer base is located in the Midwest/East, it’s costing us more money to ship games from CA, rather than from TN which is nice and located in the middle of our biggest customers. But it’s saving us weeks of time and is ultimately cheaper because…
• 18 wheelers from CA to TN are like $9,000 dollars right now. Normally you would never truck things that far; you would put them on a train from the port to the nearest big railyard, and then truck from that railyard to your warehouse. But ChooChoo McTrainface relies upon shipping containers being loaded onto flatbed train cars and we can’t keep our shipping containers. Therefore, we can’t put games on our ChooChoo friend and we can’t afford to truck games across the country. So here we are.
• Oh! And we all broke the west coast factory capacity. Remember our fancy trick of moving our warehouse to CA like a bunch of smart people would? Turns out EVERYONE ELSE had the same idea. So these warehouses are hitting capacity limits. It has taken us up to a month to get an appointment to deliver games to the warehouse. So often games sit in that transloading warehouse for weeks and weeks with no way to get them out of there. You probably guessed that the transloading warehouse is not in the business of just holding games for free, so that’s more money spent.
• We often rely on air freight to get games to conventions, as it’s fast and we can usually recoup the higher shipping cost by selling at full MSRP. Our plan was for Machi Koro 2 to arrive at Gen Con via air freight. But the cost for bringing over 200 copies was $7,000 - just for the air freight, not including local transport fees. If we sold EVERY SINGLE copy of Machi Koro 2 at Gen Con, we would make less than $7,000 dollars in revenue. Needless to say, there won’t be any Machi Koro 2 for sale at Gen Con.
• Our warehouse got robbed of a bunch of games.   They made good on it, but that was an insult to injury to finally have Dino World show up at the warehouse and then just have games sniped.

What about printing in America?

This is the most common comment we read online. Here’s the thing: we have all thought about it. Literally all of us. That 12 point list is the collective knowledge of our entire team and a bunch of outside experts in global logistics working 60-70 hour weeks trying to fix the supply chain. This is the best solution our collective experience has.

There are no factories sitting empty in the US right now with the ability to make board games. The factories that do exist in the US often source plastics, dice, and other components from China anyway. Even considering this giant global supply chain headache, it is still cheaper to produce in China.

If we all flipped to US production RIGHT NOW, we would break what little capacity may exist (it’s not like US employers are having an easy time finding qualified employees). I do think that this entire experiment is going to lead to some industries repatriating production to the US (and Europe), but those are likely to be higher profit industries. In Texas, we are seeing a massive uptick in chip fabrication – an industry that was huge here in the ‘80s, but had waned until the present day.  

Board games are a relatively low margin, low revenue industry. It’s why so many of your favorite games are made by companies with 10 or fewer employees instead of 1,000 employees. We are an industry that exists in the margins and relies upon excess capacity left over from bigger, more profitable industries creating capacity in a supply chain. It’s possible games will start to be printed in North America more often, but it’s unlikely that any of our companies are going to be the driving force that creates more capacity to produce board games in the US.   We’ll be waiting on big toilet paper to do that and we’ll ride on their coat-tails

Are my games gonna get more expensive?

Yes. I suspect you will be paying more for a board game in 12 months than you are used to. $60 games will become $80 games. $20 games turn into $30 games. The prices may not come back down for years, if ever. I suspect some of your favorite game companies won’t make it out the other end of this. We’re doing ok, but I know some of my friends in the industry are struggling with all of these increased costs and lost revenue. We are too, but we’re lucky to have some evergreen sellers that are helping to get us through 2021 and into 2022.

Please, please be patient with us. Everyone in our industry is basically working themselves to the bone and freaked out most of the time trying to stay ahead of this nightmare. It’s really hard out there right now. This isn’t me trying to be self-serving.

Shipping costs are spiking and many companies have been absorbing those real costs for years during Kickstarter fulfillment, especially those big meaty 90 boxes of minis games.   I suspect you’ll see a spike in shipping costs especially for those games.    [Update from 2023 – Look what a smart guy old-Nathan was].

Back to 2023: This is about as far as I got.  Part of the reason is every time I wrote this things got WORSE.  Much worse.   Every time I update this the information changed.   So, now I can share it with you as a “moment in time” post about how things felt in September-November of 2021 and not worry about making it accurate to what happened later.

We decided to deliver Dinosaur World in 2021 instead of waiting for shipping prices or shipping time-frames to normalize and it cost us a lot of money.  A lot more than we thought it would.   The back half of 2021 was not profitable for the company.   Dino Worlds Kickstarter absolutely lost money.   I’m still happy we were able to make good on our promise and get the game to backers as quickly as we could, but we absorbed some unexpected losses for sure.

There was also a child-care shortage (nannys were nearly impossible to find, daycares all had 18 month waiting lists – one of my neighbors put a sign in their front yard looking for a nanny-share, it was wild).   So that meant on top of running a company we were both full-time at childcare.  So the time to finish this thing just never really materialized.    But now its 2023 and I’ll be back with a “what the heck was 2022 like” post.   Spoiler:  that demand spike uh…  unspiked.