Business of Boardgames: What does Covid-19 mean?

So about a month ago I wrote a blog post about the impact of Covid 19.  I was mostly upbeat and talking about production issues in China and what impact that would have on supply and release dates.  Clearly, things have changed.  A lot.

First and foremost, the Novel Coronavirus is a health crisis, and the safety of human lives is paramount above all else.  Stay safe.  Follow the directions of your local government.  This mostly means practicing good hygiene, social distancing and staying away from groups of people that you don’t already live with.   Stay safe and be well everyone.

This blog post is going to be talking about the cold impact of what the covid 19 impact will be on the board game industry

Well, this isn’t good

The first and most obvious impact is retailers nationwide are closing their doors, altering hours and making other changes to their business model.  I have talked to FLGS store owners who have completely shut their doors for the time being.  I have spoken to some who have closed their organized play areas and are just operating as a retailer.  I have spoken to others who have begun doing curbside pickup.

The reality is bars and restaurants are largely being forced to close.  Some cities and states are closing “non-essential” businesses.  There are models out there that say the US is effectively at 17-19% unemployment right now.  This is because hourly workers are largely not earning wages.  Service industry employees who largely worked off of tips are largely not earning tips.  Gig economy workers have a lot less Lyft rides than they had a few weeks ago. 

The impact of these two things cannot be overstated.  As a board game publisher, our primary means of getting games into gamers hands are largely closed for the next few weeks.  And the reality is without some sort of massive and swift government intervention, some stores have shut their doors and will not reopen them.  This goes for restaurants, bars and basically any retail that was forced to close for any length of time.   Sporting events are cancelled (SERIOUSLY YOU CANNOT MAKE ME STAY HOME AND TAKE AWAY SPORTS..   thank god AEW is rasslin in empty arenas still).  Gyms are closed.

The impact to those businesses are really bad.  I encourage you to check up on your FLGS (or any favored local business) and see if there is something you can do to support them if your finances allow.  Buy a game, buy a giftcard.  See if they are doing delivery food.   For those workers that are out of work, I am truly truly sorry.  You are bearing the economic brunt of a global health crises.  Check with your local government to see what relief may be available to you.

I try to stay not very political in these things and usually fail, but this is a health crisis today and an economic crisis tomorrow.  We need swift and extreme reaction from governments everywhere.  Stimulus packages are going to need to be orders of magnitude larger than what we’ve previously seen, and they will need to be sustained through when retailers are allowed to re-open.  The recession that is to come is going to be *really* bad if we lose 5-10% (or worse) of retail globally.

Conventions

Conventions are being cancelled left right and center.  I live in Austin, and SXSW was probably the first major convention to be cancelled. At the time it looked extreme, but today is feels prescient by the mayor.   UKGE has been postponed.  Smaller local conventions are cancelled.  Unpub has been postponed.  The “big two” coming up this Summer in Origins and Gen Con are still on now, and hopefully we have this thing licked by then and the show can go on.  But there is always the possibility that this isn’t the case.

GAMA trade show was last week in Reno, and while the show did not postpone or cancel, we did.  We kept our team home for their safety and well being.  I still flew in for two big seminars we had paid for, but otherwise hid in the hotel room and self-quarantined upon my return home before it was the trendy thing to do.   I estimate that we lose about 15-20K in non-refundable expenses not attending the show.  We had already paid to ship our entire booth to Reno before we made the decision to cancel.  We also had shipped a lot of product and paid for our big hanging banner to be rigged from the ceiling.  We lost some opportunity to market our new titles to store owners, and it was an all-around massive impact to us.  It was also the right call, and I am incredibly proud of our company for putting the health of our team above that of money.

There are companies worse off than us that rely on regular convention attendance to make their revenue for the year.  There are free-lancers and artists who rely on selling commissions and shows to make their money.   They are going to be devastated by this.

The reality for show-runners is cancelling a convention is often a decision to go bankrupt.  If you think about it, convention runners generally have 1 or 2 sources of revenue a year (if they run multiple shows).   If you lost 100% of your expected revenue for a year, there is little chance without government intervention that you could stay in business the next year.  Hotels are losing tons of money as are the businesses that rely on tourism.  For SXSW about 1/3^rd of their employees have been laid off and over 400 million dollars in economic activity for the city of Austin is gone.   These same hotels and restaurants that are forced to close now are also losing revenue around these large conventions.  Our favorite local restaurant is now closed, but prior to that they lost 3 full-restaurant buy-outs around SXSW.  

Again, I’m gonna sound like a broken clock.  But if local economies want these conventions to continue to bring in 100s of millions of dollars into the local economy, they are going to need an injection of money to survive.  Proactively guaranteeing this injection of money also makes it easier for conventions to make purely public-safety decisions and not economic decisions around the cancellation of their shows.

Well, I’ll just buy stuff online

Well, that lasted about 72 hours.  Amazon is no longer accepting shipments of non-essential items (i.e. food and household goods).  That includes board games.  They are also directing orders for essential goods to the front of the line.  

These are fantastic decisions for getting needed goods into the hands of people who need them to survive, but it’s a revenue stream that was cut-off for our company, and the reality is that hurts.

So, where are we?

Well.  Basically, anyone who buys games from us isn’t presently placing much in the way of orders.  We had a few large orders placed a few weeks ago and I suspect that we’ll see a few smaller orders from distribution, but things will be slow for a while. 

Our Amazon seller luckily can drop-ship on behalf of Amazon so our games are still available on that platform for now.  The FLGS that are open are doing a pretty brisk business as people are looking for something to do to entertain themselves. 

Once FLGS do reopen (along with everything else) I expect a rush out of the house and back into the world by customers hungry to not be stuck inside anymore.   But, we are looking at a recession in the eye.  We are looking at our customers in FLGS having not had revenue for weeks on end.  The reality will set in and the landscape will look different than it does today.

What does the future hold

I don’t know the answer to that.  The markets don’t know either.  Basically everyone is thrashing their hands in the air wildly and freaking out about the uncertainty of it all.

I will make some bold predictions:

• More conventions will be cancelled. Some conventions won’t make it through this and will not happen going forward.  Mostly smaller cons that won’t get the attention of local government if they didn’t exist.
• Some stores will struggle when reopening. This is a hard thing to type, and I hope I am wrong.   Same with basically any small local shops, bars or restaurants.  Losing 2-4 weeks (or more) of revenue hurts.  Call your local and national representatives and push for local mom and pops to be included in any kind of aid packages.  We have to support the local businesses that make our communities what they are.
• The day we can all go back into the world, the event tables at FLGS are going to be FLOODED with gamers. Friday night magic will be rockin.  D&D groups will be everywhere, and it will be glorious.
• If you can, please buy games from your FLGS if they are open.  Do curbside pickup.  It doesn't even need to be a Pandasaurus Game.  They need your help right now.
• I expect some publishers won’t make it through the other side either. This will take a little longer but the impact of a recession, lost revenue in the short term and lost money on conventions will probably claim a few publishers.  Things were already looking a little rougher in the marketplace 6 months ago.  This will be all it takes to push some smaller and mid-sized publishers out of business.
• Consumer habits will change. I think we’ll see less giant 100 dollar plus games succeeding than we do now.   With high unemployment and economic uncertainty consumers will spend less money on entertainment than we all were a few months ago.  Board Games are still a fantastic bang for your buck entertainment value.
• Evergreens and safe bets will be key. Stores will take less risks when they re-open on unproven titles.  We plan on pushing Machi Koro, The Mind, Silver and Gold, Machi Legacy, The Game, Mental Blocks and our other proven hits hard and expect them to be most of our revenue for the next year.  We are also pushing most of our new releases back till May/June when stores are open and rocking again.
• Less new games will come out. This was already going to happen, but expect a redoubling of that.  This year Pandasaurus Games will launch a maximum of 8 new titles.  Our highest SRP will be 60 USD.  Most of our games will be under 40 dollars.   Expect to see more of the same from other publishers.  There will still be a market for large lavish games, but it will be significantly smaller than it is today.
• At the end of the day, the impact of Covid 19 will be swift and harsh and is going to expose cracks in the game industry that were already there. We’ll dust ourselves off collectively and keep on moving forward because we are a resilient industry filled with smart passionate people and gaming is what makes all of us tick.  From distribution and publishers to FLGS owners and our customers.  Shoot us photos of you playing games with your family, because it means a lot to all of us.  We get up and do what we do every day for y’all and seeing games help get you through this means everything.

That’s it for today.  Stay safe kids.  Wash your hands.  Don’t hoard stuff you don’t need.  Have food in your pantry, but don’t stockpile it so others can’t get what they need.  Donate excess goods to a local food bank and try and remember that we are all in this together, and those of us that were already in the margins are going to be the worst affected by all of this.