I listened to board game industry commentators largely gloss over the recent acquisitions of Days of Wonder and Fantasy Flight by Asmodee Group with interest.
The vast majority of responses seemed to be, “Well that’s good huh?” with very little actual thought put into the topic. Naysayers tended to be brushed off as fear mongers, seemingly due to the fact Asmodee is seen in the industry as a good egg.
On a superficial level, you can simply read the press release and agree with the publishers that this is purely a US/EU buyer/gamer win/win – everyone will benefit from increased resources, distribution channels etc etc on their opposite side of the pond.
Now I’m no expert, but I’d like to put a few things out there for debate. I don’t think this is something we should just accept and move along from without digging a little deeper into the possible ramifications.
Euraze-who?
While everyone and his meeple announced this as the gaming news story of 2014, very few spoke about the fact 2014 also saw French private equity firm Eurazeo buy an 83.5% stake in Asmodee for €98m – making it just another portfolio company in its €6bn stable of assets. While we were innocently talking about the possibility of slightly cheaper Star Wars minis on our local games store, the business press were talking about a possible new contender on the high street for Hasbro and Mattel.
I recently read an old article from the Harvard Business Review titled The Consolidation Curve. It looks at new or deregulated industries and how they have a “clear consolidation life cycle” with your average successful industry taking around 25 years to move through it fully. And this is every every industry, so there is no reason to suggest board (or should I say hobby) games will be any different.
Very briefly (I’m no business grad), this curve moves through four stages:
- Opening: After one or a few companies start the industry, their market share quickly drops to between 10-30% of the market as competitors arise – start-ups and spin-offs, plus consolidating companies from other industries.
- Scale: Major players emerge and buy competitors. The top three grow back to 15-45% market share as the industry consolidates. It’s all about protecting a core culture while taking and keeping the best people and products in the industry.
- Focus: Aggressive expansion sees the top three empires grow to control 35-70% of the industry, while there will generally be 5-12 players in the market. It’s now about global deals, profitability and the eradication of under performers.
- Balance and alliance: The big three now have 70-90% of the profit and concentrate on alliances, as there’s nothing left to grow into. It’s about defending their position, while looking for areas to branch out into – while avoiding regulation.
I think there’s an argument that says we have just moved into phase 2, ‘Scale’, and that our third industry ‘major player’ has begun to put its stall out.
Is it fair to say we now have Mattel, Hasbro and Asmodee?
The wrinkle point in these four stages, in terms of hobby games, is it was very much a cottage industry – but it has always been a little brother to a giant: high street toys and games. But now we can see the rising tide in terms of sales, boosted by a mainstream media softening towards nerds thanks to smartphones and tablets. It was only a matter of time before a big investment firm took a punt on the industry – and is it any surprise 2014 was also the year we saw Mattel dipping its toe back into euros at Essen with Bania?
Using the UK as an example, where Mattel and Hasbro had things sewn up was the high street; but even this has started to change. Non-traditional stores such as book shops have started to take hobby games seriously, while board game cafes and bars are starting to appear – let alone booming online sales. So where are people getting these games from? Well the UK hobby games distribution market has been sewn up by Esdevium, but don’t worry – it’s in safe hands of its owner, Asmodee.
The quote you hear all the time from the board game media is “you don’t go into the board game industry to make money” – but what they don’t add on the end is, “unless you’re going into manufacturing or distribution”. These firms employ creative people, of course, but they’re first and foremost businesses: just like film studios or record companies, they rely on exploiting (as in – making full use of) the talents they sign to make profit.
Mattel and Hasbro work in the same way. Designers are employees, not people worthy of having their names on game boxes. They work within the confines of a business remit for a product, rather than having total creative control, and work to deadlines. None of these things are intrinsically bad; they’re just not ideal for free spirited hobbyists, or people doing these things for the love rather than to pay the mortgage.
When will me move from ‘scale’ to ‘focus’?
There are so many questions. Will Asmodee work towards a similar structure to compete with these two gaming behemoths on an even footing? Will other conglomerates of gaming companies form to try and compete with them on a global distribution scale, creating the 5-12 ‘focus’ stage players? Is the upward trend of hobby games too slow to see this happen in the next five years – or is it actually a blip, that will see sales decline and enthusiasm wane from such big investors (which could of course have its own ramifications)?
From both a designer and customer perspective, these will be interesting times. An obvious move would be to see a smaller range of games being released each year from a shrinking number of players, but these games being released in bigger volumes as the popularity of the hobby increases.
This would drive price-per-unit down and force games on lower print runs into niches or bankruptcy – which, judging on the quality of many one-and-done Kickstarter projects, wouldn’t be a problem and will probably happen anyway as people come to their senses. But then of course there is the rise of the digital space and the possible love-love relationship that should blossom between 3D printing and print-and-play. There are just so many possibilities!
Of course I’m sure this article will be labelled naive, and I’ve already admitted I’m no expert – but if helps create a bit of debate on the subject that goes beyond giving this news a ‘Story of the Year’ award then I’m happy with that. I’m keen to learn more on the topic, and about the industry, so here’s to healthy debate.
Go Play Listen 
‘ Well the UK hobby games distribution market has been sewn up by Esdevium, but don’t worry – it’s in safe hands of its owner, Asmodee.’
: ) Who have just put up the prices to the majority of their customers on the majority of their lines without a commensurate RRP increase that retailers can pass on to gamers. This preserves their margin (and returns fed back to Asmodee) , but devastates that of UK retailers. From my perspective i’d like to go back to ‘Stage one’
I wouldn’t worry too much about it. I’ll use your analogy with the music industry as I know it well. Independent labels have, since recorded music began, been sucked up by the Majors. Sometimes these are large companies (A&M, Island Records, Virgin Records etc etc), and sometimes they are small Indies (Creation records, Mute, Heavenly, Kitchenware etc etc). The Majors sometimes allow the ‘indie’ ethos to continue (eg Creation within Sony, Mute within EMI) but invariably the maverick entrepreneurs who created these companies cannot function within a Major corporation and they leave. Or the label stops having hits, starts losing money, and so the Major reins it in and subsumes it completely.
The copyrights owned by these Indie labels then rapidly get amassed into the Major whilst the indie label name is either dropped completely or is used as a label ‘imprint’ to impress young impressionable bands.
Two important things here: (1) some significant labels never fold into a Major (Beggars Banguet/XL, Matador, Sub Pop, Cooking Vinyl etc etc); and (2) new labels spring up thereby replacing the disappearing old labels (Hyperdub, PPMR, Soundway etc etc). Why do new labels appear? Usually it is to give an outlet to a genre of music or an artist who can’t get a major deal, and sometimes it is because the A&R guru running the outfit doesn’t want to work inside a Major corporation.
So how does this relate to games? There are three major games publishers, just like in Music. Hasbro and Mattel operate like the Major music companies. Asmodee is currently a little different in that it is more like a collection of Indies under a single corporate distribution holding company. The closest we have in Music is company called PIAS which operates similarly though it doesn’t own the Indies. Built as a distribution company PIAS offers sales, marketing, and distribution services to Indie labels. In a sense this is really where Asmodee are at at present, although in this instance Asmodee also own a lot of the companies they manage the services for.
Currently Asmodee seems to allow them all to operate as Independent companies within its control. Will that change? I suspect it will. I suspect that Asmodee will slowly develop a more centralised function to allow these companies to be more fully integrated. When one of its companies goes off the boil, starts to lose money, Asmodee will simply close the operation down, save overhead, and retain the catalogue as the owner/manufacturer/distributer. The downside of this is that the small publisher will cease to create games. Take Days of Wonder as an example. Currently the revenues from Small World and Ticket to Ride back-catalogue sales (ie sales of existing titles) allows DOW to launch new titles. They probably make a loss on many of these, as Record companies do on most of their new signings, but the sales of the back-catalogue titles funds these losses and hopefully a major new reveue generator will come along once every few years. Under Asmodee I suspect that DOW will be given less leeway. Asmodee may (I am speculating now but this is based on observation of the music industry) simply absorb the back-catalogue revenues from DOW into their P&L and demand that the new releases from DOW become more profitable. This will be doomed to failure since without the back-catalogue revenues to support its overhead DOW will look highly unprofitable. Same in music. Take away the back-catalogue and New signings looks like a stupid business to be in.
So, in summary: I expect Asmodee to allow its various acquired businesses to exist independently for the short term, before effectively being closed down in the medium term. But in parallel I expect new Independent Board Game publishers to continue to thrive and to pop up seemingly from nowhere. The most successful of these will be absorbed into Asmodee without a doubt, or possibly Mattel or Hasbro as they try and compete in this area. But from the ashes new companies will come.
In other words: fear not, this is just natural selection in progress. It is, as you originally said, a feature of an evolving industry. But it is not to be feared. We will lament the passing of DOW and its ilk with their quality productions but, as long as the market remains buoyant, new publishers will fill these places.
Just on another matter regarding Paul’s comment. I don’t get why (Paul please explain if you know) manufacturers even have RRP. What is the point of RRP? A retailer can sell a product for whatever it chooses, why should the publisher determine what is ’recommended’? If the wholesale price goes up the retailer should be able to put its prices up without fear of going over any ‘recommended’ price. It doesn’t make any sense.
It’s easy for you to say, “Don’t worry” Peter – you work for ‘the man’ :p
But in seriousness, you’re dismissing some of the best loved music labels of all time, who broke some of the most important bands of all time, and saying we shouldn’t worry that they were swallowed up and destroyed – and it was OK because others took their places. I think you’ll find the people involved with those original labels would disagree. I wouldn’t so easily disregard the human element behind these business moves, especially in an industry such as gaming where the people are very much who help make it so special. The period you’re talking about (early 90s) was, in many respects, a dark time in terms of music.
Music labels have been swallowed up for many years, I don’t think that the 90s was any more or less a time of Indie labels selling out. From the 60s onwards great labels such as Immediate, United Artists, Atlantic, Stax, Asylum, Sire, Magnet, Charisma, A&M, Stiff, and so on and so on all got taken over, just like Creation, Kitchenware, Mute, Heavenly and so on did in the 90s. You asked what will change from a designer and customer basis. I say probably not a lot will change. If a small games publisher sells out and new publishers fill the vacuum created who loses? Not the customer since the new small publishers will publish games if Asmodee leave a gap; not the games designer, unless the designer has an exclusive deal with said taken-over publisher, or a relationship with the owner that is hard to re-create; not the owner of the small publisher as he/she will have pocketed a tidy sum; but yes the staff of the small publisher will lose out. But this is part of life: I have been in labels which were taken over 4 times in 20 years and seen many great friends lose their job, and in the last takeover I lost mine, but that does not affect the customer or the designer. So yes, there is a human element cost to a rampaging takeover beast like Asmodee and that is the cost of losing jobs. But your point was, will it affect the customer and the designer. To that I was maintaining that I doubt if it will.
Good debate.
I agree that RRP is a load of old nonsense. However, if its set (my understanding is that the RRP is set by some magic between publisher and distributor) then customers expect brick n’ mortars to adhere to it and discounters to discount it.
I was just letting off a bit of steam in my post.
More fuel for the discussion: http://boardgamegeek.com/blogpost/38140/more-asmodee-ystari-pearl-games-connection-asmodee