The End of the “Game Company”?

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A six hour flight gives one plenty of time to think. Game tombstone

And on the way back from New York week before last, the thought that kept tugging at me was this: “What is the future of the traditional ‘Game Company’?”  Or better yet:  IS there a future?

This particular meeting in New York may have been a glimpse into what could be a very different future for the traditional game industry.  We met with a company that has absolutely no ties to our industry whatsoever.  No Toyfair presence.  No ASTRA membership.  They aren’t even a product company.  What they do, however, is bring over 1 million visitors to their site each month.  And they want to sell those visitors games – among other things.

So while the average “Game Company” struggles to sell 5,000 units of any new title in its first year, these folks could sell 10,000 units or more with very little effort.  And they have a great Brand, along with a very loyal consumer base.

All of which makes me wonder:  Will the next great game company not even be a “Game Company”, but a great Brandthat just happens to develop games?  After all, the most-played online games right now aren’t marketed by Hasbro or Mattel.  They’re brought to you by Facebook.   And Facebook is definitely not a game company.

The Games part of our industry presents a few major challenges to entry.  First off, it’s hugely capital intensive.  Hire a designer, developer, warehouse, and an admin, and you’re already in for $200 – $300k before selling one unit.  Add to that the cost of molds, tooling, and actual product, and you’ve got to have pretty deep pockets.

The second issue lies with the incumbents – Hasbro, Mattel, Spinmaster, etc.  Cranium was the last real effort at creating a new Brand to compete with the big guys.  It teetered at $60 million or so in sales, then virtually imploded under the weight of trying to be the third largest Game Company in the world.  Small companies just can’t compete when it boils right down to the scale and resource base that the big guys possess.

Finally, the retail funnel continues to get smaller.  Target and WalMart have both decreased their sku count in the game aisle, and other majors are rumored to follow suit.  With less retail space in traditional channels, it becomes even harder at retail to displace the safe bet offered by heavily promoted or licensed products.

And yet, families still play games and consumers still want to buy them.  Which means that someone will still make and sell them.  And who that will be in the years to come, will be anyone’s guess…

8 thoughts

  1. Hey Brian,
    Great article! I know it’s been awhile since you posted this but I just now came across it. I think you’re definitely onto something. Can you tell me, in the article above are you refering to this company selling digital games or analog (physical) games? Thanks. Hope to run into sometime soon.

  2. “Hire a designer, developer, warehouse, and an admin, and you’re already in for $200 – $300k before selling one unit.”
    I am a freelance game designer. Most publishers license work from people like me because paying a royalty on something I developed on my own time is much more cost effective than paying someone an hourly fee to develop a game that might only sell 3-5K copies. The other upside is you don’t need to pay anything upfront unless I’m charging a fee, which is relatively small, so you can retain the rights while it’s in development.
    I also do custom development for those that need something specific but I and most freelance designers have several products to offer at any given time. As a publisher you can contact the designer for a list of games and then review and test the ones you are interested in which cost you very little.

  3. I am a UK based Independent games manufacturer and I am totally aware of my limitations versus my aspirations.
    I have tried to get in with the incumbents, as you call them, to no avail. Letters, emails, phone calls, they are all unanswered, as though I never existed to them.
    I have approached the independent toy retailers and their views are all the same; “Who are you? We have never heard of your board game. Why would I give valuable shelf space to something with no track record?” As a onetime retailer myself I cannot blame them.
    Retailers are in between a rock and a hard place, I fully sympathise with them but as you say families still want board games; so what does the Independent do? He finds another route to his customers and that could be setting up his own online shop, doing deals with other online stores and using the likes of Facebook, Amazon, and E-Bay, put simply, the Internet.
    I am happy to grow slowly, as I am presently doing , and not fall into the very appealing but deadly “overtrading” trap.
    As usual a thought provoking read, thanks.
    Tom Lennett
    http://www.numenko.com
    It’s the player that counts.

  4. Although I’m fairly new to this industry – this makes a lot of sense. Wish I had a crystal ball, now, that’s a toy that would sell anywhere!
    Thanks for the article Brian.
    Kerri Neubek
    Games for Dames

  5. Note from Brian:
    We are under a Nondisclosure with the company mentioned in this post, so will “protect the names of the innocent”. However, the company is in fact very real, and owned by one of the most successful publishers around the globe. The purpose of the blog was not to raise controversy, but rather to illustrate the point that “Traditional” game companies will most likely have to adapt to a whole new competitive set in order to survive. No fiction here.

  6. Who’s the “mystery company” that can sell 10,000 units of a game “easily” and has a great brand with loyal followers. Really? Or, is that made up?

  7. It seems obvious to me that digital marketing can solve the diminishing funnel problem, at least. Develop a board game, develop a digital demo version of the game, distribute the first through an online retailer like Amazon and spread the second as far and wide as possible through every channel you can think of, for free.

  8. Somebody still has to create new games for this mystery company to sell, no?
    True, it’s tough to compete with the big guys, but the big guys are also slow to respond and don’t necessarily innovate like those little scrappy game companies/independent inventors that are pretty much everywhere(go take a look at all the game projects on http://www.Kickstarter.com).
    Potentially, a company with a great brand, but no actual product, could take advantage of the fact that there are lots of indie inventors and small game companies looking for a good place to sell their products. This model impacts the traditional game company and also the game/toy retailer, but it also provides a new venue for these game companies to sell their products…and it raises awareness of new products which one could argue winds up having a positive impact on the local retailers…
    Thanks for the thought provoking post!
    Andrew Innes
    AnomiaPress.com

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