Revenue Streams and Drought
There are a lot of articles about how well Kickstarter and other crowdfunding sites are doing. Indeed, in 2012 they raised $320 million but by 2013 the total haul had increased to $480 million, an increase of 50% growth year over year. That’s none too shabby for a website that is a marketplace rather than a creator. 2013 was a good year for a lot of people. The S&P was up almost 30% by comparison.
I maintain however, that the money Kickstarter channels to indie creators must come from somewhere, and this week I have found another data point for that thesis.
Many proponents of Kickstarter are of the opinion that if backers spend three million dollars on a video game, that hurts neither Steam, nor EA, nor anyone else currently raising crops along that particular revenue stream. I disagree. ust look at what online is doing to traditional retail. Netflix has killed Blockbuster. Amazon has killed Borders (and most everyone else in their cross hairs is dead or dying as well.) Even Walmart, the immortal juggernaut of corporate greed has taken a beating in recent months as sales slump. Amazon is widely credited as one of the causes of those fading finances.
My point in a nutshell is that every dollar spent Amazon is one that will not be spent at Walmart.
This week, over at Dakka’s forums, I stumbled on a great thread about Games Workshop. The first thing I learned was that our favorite purveyor of space marines is a publicly traded company. I had no idea. My new plan in life is now to win the lottery, and buy a majority stake of good ole’ GW, but that’s neither here nor there. The second thing I learned was that their profit margins have not been doing so well of late.
Kilkrazy wrote:
- Earnings dropped 12%, profits dropped 38% compared to the same period in 2012.
- The company was still in profit.
- No dividend was declared.
- Share price dropped 25%.
I thought the most interesting part though was that their pre-tax profit has fallen by 3.3 million pounds, and their operating profit was cut in half to just 400,000 pounds. That’s quite the dip.
The top five miniature projects on Kickstarter in 2013 managed to raise just over 10 million dollars by the way. Am I saying that these projects are responsible for Games Workshop’s decline? Not solely, no. I think they contribute though. Every dollar I spent on Kickstarter is one less that I spend at my FLGS, for better or worse. I think it will get worse for GW too. These pressures will increase, not decrease in the near future. Right now 3d printing is in its infancy. In the not to distant future I think that printing minis in high resolution and color will be cheaper than buying them from Games Workshop, and when that happens, it’s game over for them (but it will make the $5 digital rewards of some Kickstarter projects AWESOME, don’t you think?)
So what do all of you think? Am I still off base on this one?
Caffeineforge 
I completely agree with your thesis, David. The average consumer has a limited budget for something like miniatures, and when another source arises, it undoubtedly has impacts on the established players. Hell, when a wargamer says, “I’m tired of Space Marines. That WarMachine game looks really cool. I think I’ll start buying that instead,” that has an obvious impact on a co. like Games Workshop. I can’t imagine why some people resist the idea that Kickstarted projects have the same impact.
I too agree completely, David. And Kickstarter, which seemed like a dream site for indie developers are seeing big budget companies sweep in and big names suck away a lot of potential backer dollars, making it harder for us little, indies to get funded. People only have so much money to go around and so it’s only getting harder for the little guy (and as you said, even for the bigger guys) to get the funding.
Now, having big names in Kickstarter does help bring additional legitimacy to the platform, but when you see projects like Numenera getting 3/4 of a million when they only asked for $20,000 (as cool as the project is), that means you likely have a good number of indie RPG games dying as people throw piles and piles of money after big names.
As for Amazon, they have a stranglehold on the publishing industry and the rest of the world has been stressing out trying to sort out how to make a dime in publishing. It’s caused prices to fluctuate wildly, where sometimes an ebook is the same price and even higher than a hardcover, and at other times the ebook is practically free because they want to sell Kindles (well, it’s more complicated than all that, but it’s a serious problem and has caused much confusion and unease among both publishers and consumers).
Amazon is setting prices worldwide and other companies are struggling to compete, especially brick and mortar stores. I don’t think Walmart has anything to worry about, however – they’ll buy a planet one day and set up a Walmart, but yes, sales are hurting everywhere due to online giants like Amazon and there’s only so much money to throw around. Dropping prices hurts every company from Walmart to the indie publisher who wonders if they’ll ever make a dime when upon or shortly after publication they have to drop prices on their books to crazy low prices.
Oops, sorry that was long! Take it with a grain of salt. I’m no expert. Thanks for the post!
It’s absolutely true that consumers only have a limited amount of disposable income. Of course, competition for those dollars are what drives innovation and ultimately leads to better products on the market (or so one hopes), so naturally when something better comes along, all the “old” options take a hit in profit.
As far as Games Workshop goes, they’ve been committing what I can only call “brand suicide” over the last several years. Sadly, they almost seem like a caricature of an “evil corporation”, as their business plan seems to focus solely on taking gamers’ money rather than contributing to the hobby like so many other companies do. Ultimately, when it comes down to price, GW comes off as extremely overpriced when compared to the many other options available. Why would anyone want to pay twice as much for the same number of figures? I don’t doubt that KS has eaten into hobby dollars that might otherwise have gone to GW products, but I don’t think Kickstarters have done nearly the damage to their earnings as GW’s own policies.
Ok, I digress before I really go off on a tangent… 😉
I agree with you. Look at their ebooks pricing for instance. I hate it so much I wrote a while post on it. GW had great IP, but I think their business practices are driving a lot of fans away. KS is just a piece of the puzzle.
I wonder if GW’s business practices are part of the reason competitors like Warmachine are doing so well. GW is fostering an environment that favors their competitors. I agree about the IP; I love the Warhammer setting (both Fantasy and 40K), but I just can’t justify supporting their business. GW’s prices are *way* outside the budgets of my friends (who play tabletop/board games, but not wargames).
One thing that’s always bothered me about GW (and this goes back to the 90s), was that they seemed to have a very bad sense of game balance. The “latest and greatest” always seemed to be a little more powerful than the existing armies, and it seemed like a “flavor of the month” problem (to use an MMO term). Of course, from a business perspective (trying to sell more figures) that’s a good thing, even though from a gaming perspective it is very bad (and ultimately will undermine the game balance).