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.
- 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?