The raging pandemic has swiftly shaken up many business models around the globe thereby creating a number of instant winners such as technology giants and those distributors who managed to switch to online commerce. However, it also decimated companies in the hospitality and tourism sector or even your local family shop around the corner. Sometimes though, the impact has created some surprising results. The pre-Covid19 booming board game industry is no exception.
The board game industry has been growing above 10% p.a. and reached an annual value of USD10bn. The USA has become the largest market followed by Germany, UK, France, Italy and Spain. Even people in Asian countries like Japan, Korea, and China have discovered the joy of sitting around a table drawing cards and rolling dice to collect victory points or push military counters. The game industry has long left behind children and adolescents as their key client segment and instead has followed Generation X and Millennials into their adulthood with ever more sophisticated games and higher price tags. Mark Zuckerberg and Reid Hoffman have made no secret that they are lovers of classic board games such as Catan and Risk. Naturally, one would expect that the lockdown phase in many European and Asian countries would have led to a growth bonanza in the industry where people sit at home, dusting off old games and rediscovering the joys of a virtual world that can be experienced without technological devices. The assumption certainly holds true for companies such as Ravensburger, which apart from being a global board game publisher, is also the leader in the booming Jigsaw Puzzle segment. However, many of the smaller publishers in this creative industry are struggling and have had to adapt their business models to the new circumstances or face extinction.
There are several reasons explaining this phenomenon. The challenge starts with the designers, i.e. the people coming up with the original creative idea for a game. Famous designers such as Uwe Rosenberg (Agricola), Reiner Knizia (Euphrates & Tigris), Stefan Feld (Burgundy) or Vlaada Chvatil (Codenames) cannot operate in the lonely vacuums of their homes. Unlike creative work such as painting a picture or writing a novel, the design of a game requires plenty of human interaction to play test a game again and again to find design shortcomings. This is crucial to balance and refine the original game idea. While there are technological platforms such as “Tabletopia” that allow designers and playtesters to meet virtually to play test, the truth is that the face to face experience which customers crave is almost impossible to recreate through a Zoom call and a virtual version of the game. Thus, instead of enhancing the quantity of games designed throughout the lockdown period, the virus has had the opposite impact.
Secondly, margins in the board game industry are tight for the designers or publishers and only start to widen out at the end of the value chain for retail distributors. Similar to other creative artists, most designers are in it less for the financial reward and more for the satisfaction of seeing their idea come to fruition. The game publishers, just like movie producers or book publishers, need to select their projects carefully from among thousands of ideas. Each project is a drain on their limited resources of time and money. Large firms such as Ravensburger, Hasbro and Asmodee might have the financial and project management means to continue operating in lockdown with little loss to productivity. However, leading up to 2020, the industry has been fragmenting into ever-smaller firms similar to market trends observed in other creative industries. Operating under a lockdown business model has become increasingly difficult for these firms. In addition, publishers typically work with a manufacturer in China or other foreign manufacturing countries. Trips abroad to deepen relationships with the outsourcing partner have become almost impossible, while costs of shipping end products from the manufacturing countries to distributors has followed global shipping rates, increasing tremendously, thus eating into thin margins. A number of firms are likely to leave the field as a result of Covid-19.
Marketing new game ideas has also gone through radical changes. Traditionally, publishers could rely on a number of global Game Conferences which brought them together with designers, distributors, the press and retail clients. In 2020, Essen Spiel, by far the largest such conference with close to 200.000 attendees, was cancelled and GenCon, in Indianapolis, with an estimated 75.000 attendees followed suit. Instead, the use of the online “Kickstarter model” to raise funds and awareness for a product has taken off. Kickstarter is a successful crowd-funding platform, which focuses on raising money for creative projects ranging from film, music, and publications to video and board games. By the end of 2019, it had secured almost USD5 billion for 450,000 projects. Those who have embraced it successfully have savoured its advantages while some of the more traditional companies are running the risk of falling behind. The skill-set to raise retail and distribution interest online with a game concept is certainly different from presenting a prototype at a game conference. The “Kickstarter”crowdfunding model is also a two edged sword. While designers and publishers can reach out to retail clients directly, they are cutting into the once lucrative retail distribution network. Publishers need to carefully balance the interests of retail clients supporting a game on Kickstarter early and thus gaining access to free Stretch Goals, versus distributors who typically brought in the most money. While there have been many successful Kickstarter launches like Exploding Kittens or the Zombicide-series, many designers and their publishers need to change their operation model to accommodate this growing distribution channel.
This brings us to the next radical change, which Covid-19 has accelerated – the retail distribution channel. The days of people wandering into their local toy-shop to select a game among 50 products on the shelf including last year’s “Spiel des Jahres” are long gone. The model was already under pressure as the sheer volume of new games overwhelmed most shop’s inventory capacity. Last year a staggering 7000+ new board games hit the market. Distributors and shop owners struggled to keep up with finding marketing budgets and shelf space to accommodate the latest products. While in the past a game could be a top seller for 9 months or more, nowadays this has dropped to barely 5 weeks. Customers demand the latest and when the distributors have a choice between selecting to restock a recently successful game or the latest product, they inevitably choose the latter thus reducing the sales of individual games tremendously. This in turn is forcing game publishers to ensure that they can be profitable with a project during the first wave of selling when the game is still considered novel and “hot”.
Additionally, online discount sites started to undercut the bricks and mortar competition with lower prices, broader selection and convenient home deliveries. Covid-19 could be the final nail in the coffin of the traditional distribution channel.
Many shops attempted to counter this trend by converting part of their office space into a “play area” thus enticing customers play and buy during a number of evening or week-end gaming sessions. Similarly, some cafes started to cash in on the explosive trend of playing games by becoming board game cafes. Needless to say that these board game cafes and shops have struggled during the last months of lockdown. People preferred or were forced to stay at home playing with family and close friends.
With closed shops and a lack of people strolling around downtown, retail customers have learned to increasingly order online or directly from Kickstarter. Unfortunately, distribution through shops was also a profitable sales channel for publishers and, with its reduced importance, they will have to concentrate on restructuring their businesses to begin marketing and selling directly to the end users online through Kickstater, Amazon or their own websites. The old school model of needing distributors and stores to sell their products is quickly fading away. While in the past these middlemen were needed to connect with end customers, technology has made them almost superfluous. This trend is nothing new and can be observed throughout the economy. One only needs to think about the book publishing industry and the revolutionary changes brought about by Amazon. This new reality of direct distribution and faster, more numerous, product launches has a broad and profound impact on the cost and revenue model of each company in the value chain, forcing them to adapt accordingly.
In times of change, the need to rethink your entire business model can lead to some very unusual new opportunities. While all companies in the industry need to fundamentally adapt to the obvious changes in technology and customer behaviour, some have discovered that the revolutionary trends, which impacted their industry, have also changed other sectors of our economy. Linking the new technologies and customer behavior together in a constructive and novel way can lead to unique business strategies and should become an active strategic step forward rather than a passive reaction to the challenges of the future.
Academy Games is one such firm that is well on its way to explore these opportunities in the educational and gaming industry. Long before “Black Lives Matter” became a household expression, the firm published a game called “Freedom: The Underground Railroad”. In the game players take on the rolls of abolitionists to help bring an end to slavery in the United States. The game features historic figures and events spanning from the early independence period until the Civil War. As players cooperate in the game, they learn not only to balance financial needs with benevolent behaviour but are also introduced to enlightening historical facts. This hits a soft spot in the education industry where teachers at high schools and Universities are increasingly stressing the fact that teaching requires more than pre-recorded YouTube videos or Zoom calls. Sitting down and exploring in a group the historic dilemmas, which people faced in the past, is a unique and in-depth learning experience. Building on their early success, Academy Games has launched an equally popular game series called – “Birth of America”, which features games about the French-Indian war, the American Revolution, and the War of 1812. Yet they are not content with just bringing new educational methods to the American school rooms. Last year they launched “Birth of Europe” with a game about the Viking Invasion of England in 878. It is even rumoured that a game about the 1936 Spanish Civil War is in the works pitting armed militia from the Republican, Communist and Anarchist side against the forces of a dictator and his fascist allies. Is it just coincidence or Business Model Academy Games, Birth of America Uwe Eickert is the CEO and Co-Founder of Academy Games. Uwe built up and sold several successful businesses before he figured out that game designing and publishing is the path to riches and fame. Since then he has appeared on the Oprah show, been offered the position of Secretary of State, acted in a major motion picture with Brad Pitt, and is in a think tank with Ernest T. Bass, among other notables. He has a degree in Mechanical Engineering and an MBA specializing in corporate finance and strategy. His hobbies include soccer, playing the violin, martial arts, painting, sailing and is an amature plum pit spitter, under the tutelage of Master Spitter Brian Bennett (Note, plum pits have more mass than cherry pits and are thus classified in a different competitive category.) Boris Liedtke is a Distinguished Executive Fellow at INSEAD Emerging Markets Institute and has over twenty years experience in the financial sector. He was the CEO of international banks around the world and has served on the boards of directors for companies throughout Asia, the US and Europe. are they pre-empting history while America is facing a pending struggle between moderate Democrats, progressive Democrats, and AntiFa on one side and moderate Republicans and loyal Trump supporters on the other?
Perhaps board games can teach us not only about the past but give us warnings about the future too. Either way, one thing is for sure, the booming board game industry has long abandoned the innocence of “just” driving your competition into financial bankruptcy through a real estate MONOPOLY or of “just” taking a RISK to destroy your opponent’s army and conquer the world. Covid-19 has only accelerated this trend.
About the Authors
Uwe Eickert is the CEO and Co-Founder of Academy Games. Uwe built up and sold several successful businesses before he figured out that game designing and publishing is the path to riches and fame. Since then he has appeared on the Oprah show, been offered the position of Secretary of State, acted in a major motion picture with Brad Pitt, and is in a think tank with Ernest T. Bass, among other notables. He has a degree in Mechanical Engineering and an MBA specializing in corporate finance and strategy. His hobbies include soccer, playing the violin, martial arts, painting, sailing and is an amature plum pit spitter, under the tutelage of Master Spitter Brian Bennett (Note, plum pits have more mass than cherry pits and are thus classified in a different competitive category.)
Boris Liedtke is a Distinguished Executive Fellow at INSEAD Emerging Markets Institute and has over twenty years experience in the financial sector. He was the CEO of international banks around the world and has served on the boards of directors for companies throughout Asia, the US and Europe.