It is impossible not to think about the economy right now. The tariffs and trade wars are the hot topic in the board game world and something we here at Cherry Picked Games are extremely aware of, given the imminent manufacturing of Far Away: Corporate Espionage. But those fees are a single (large) cost in a long and pricey process. There are so many other market considerations that go beyond pure production prices. Inspired by Carla Lalli Music’s excellent Substack piece on the true costs of YouTube videos, I want to share the other real financial concerns I have running a board game business: externalities, inflation, and labor.
We’ll start with crowdfunding, since all board game economics discussions must involve that topic. I’ve already said my piece on why I believe the crowdfunding ecosystem is in a bad state: the cost to run a successful campaign nearly eclipses the cost of making a game. Instead, I want to focus here on why it’s impossible to determine how much profit comes from a successful crowdfunding campaign.
The end goal of a campaign is not purely providing games to backers. It is producing a print run of that game. For Hair of the Dog, we made 2,000 copies. After campaign and pre-order fulfillment, we had about 1,500 copies left. In theory, since we paid for the entire print run with our backer contributions, any money from those 1,500 copies is profit. However, we had to borrow against that future profit in the production. The clearest example of this is for the “add your dog” tier: picking that tier only requires one game while paying the price of four, but extra art assets (meaning extra labor). Those costs are theoretically recouped by selling the three “extra” games later. Basically, the $150 “add content” backer funds the campaign the same amount as three $50 “just the game” backers but only requires us to ship one game instead of three. This is the logic of most high-end tiers: leveraging early costs for more sales down the road.
The challenge with this logic is that there are costs associated with having games in stock. The most obvious cost is storage fees. While we keep some of our games in my attic, we also rent warehouse space from our distributors. That incurs fees and risk. Fees are an obvious side effect. QuarterMaster Logistics charges us about $20 per pallet. It’s a known cost that (hopefully) goes away in time. The risks are not obvious and there is no way to prevent them. Our first major distributor, Funagain Games, went bankrupt right as Hair of the Dog reached their warehouse (hopefully a coincidence). This forced us to ship all the product to a new partner, which cost us about $15,000 and damaged around 200 copies of Far Away and Hair of the Dog (the alternative was destroying the games – an equally unappealing choice). This removed any possibility of profiting from Hair of the Dog.
The non-obvious issue with maintaining an inventory of games is the static nature of a game’s price. A game’s MSRP (the price we ask stores to use and the figure used to calculate our cut of retail and distribution sales) can only go down. Far Away’s MSRP will remain $58 until we release a new edition. In the three years since the game’s reprint, inflation has hit the US and other markets hard. All the infrastructure we need to sell games is more expensive (web services, shipping, promotional materials, convention costs, etc.) This greatly flattens the tail of your sales distribution graph. We could sell them with discounts and bundles, but that gives a different income picture than hoped for (and possibly planned for) during the crowdfunding step. While our older games cost us little in maintenance fees as they rest in the attic, we do need to continuously create new games to keep the whole enterprise in the black.
The deflated value of older games is exacerbated by a lessened demand for older games. There are two parts to this. First, there is a perception that if a game did not sell well, it must not be a good game. While there may be truth to this, it is as much a factor of marketing and luck. If you get caught in a busy media cycle and are up against several big titles, your game may not break through to consumers as it otherwise could. This leads to the second part: there’s only so much marketing you can do. You will saturate your own network quickly. Sending out review copies yields diminishing returns, especially since reviewers are motivated to cover the latest and greatest games. Plus, you will be paying contemporary shipping fees for a game which will have effectively lost value due to inflation.
While global inflation takes the wind out of continued sales, local inflation is a trickier beast. Here in Seattle, minimum wage is $20.76 per hour. That raises the costs of labor (artists, editors, booth staff, etc.). However, games are sold at an international scale and priced accordingly. The same copy of Catan costs the same amount in Seattle, WA and Laramie, WY (where the minimum wage is $7.25 per hour). This makes a $50 game a luxury to some and a nominal purchase for others who would otherwise be considered in the same income bracket. Unfortunately, living in an expensive part of the world does not justify a larger price tag. Even if store prices fluctuate around the world (due to tariffs or what not), the price we set with the distributor is constant.
We acutely felt the labor costs at PAX West. Our booth sold a lot of games, but the staff required to demo two games constantly during a 4-day convention cost about as much as we made. The booths that sold merch and didn’t demo did better, which is frustrating because people definitely had more fun at our booth (plus, we make games, not accessories).
All of this leads to a big question mark after funding a game. What does it mean to have 1,000 games in stock? You have a range for the potential profit. The big influx of cash from FA:CE’s Gamefound campaign was already earmarked before the new tariffs on Chinese goods and whatever fresh hell awaits us in the freight shipping world. The next challenge is to sell the remaining games before they lose value, before people lose interest, and before some external force destroys them.
At year-end, CPG makes a small profit, but not enough for me to take a paycheck. It is the unfortunate reality that most creative endeavors are subsidized by external forces: day jobs, trust funds, or (in countries that care) government stipends. There are ways to grow the business with a focus on more predictable profits, but these won't solely involve game design. For now, we will do our best to produce quality games that give unique experiences. The value in that won’t decrease with inflation.