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The Gamer Economy

It looks like games aren’t as recession-proof as they’ve seemed to be in the past—at least if you’re a mass-market tabletop games company. According to various reports, Mattel is laying off 1,000 people, 4Kids is still losing millions of dollars, and Topps is closing its WizKids division.

First, my condolences to those employees caught up in all of this. It’s never fun to lose a job, especially when the economy is so rough.

Second, this shows just how big gaming has become. The companies in these reports aren’t five guys working out of a basement. They’re mass-market, publicly traded, multinational giants. Because of that, they expand and contract along with the global economy rather than being able to relay on a small but dedicated base of fans to help them chart their own courses.

Times like this make me glad to be working for myself. Many people fear to make the jump to freelancing because they prefer the security of working for large companies. However, while my income may be varied and sporadic—that’s an inbuilt hazard for any freelancer—at least I never have to worry about being let go.

Comments 32

  1. Too true, Matt. The only real difference between full-time employment and freelance is that a freelancer can hear the wolf outside the door, while the employee is one door removed. The wolf is still there; it’s just harder to hear.

  2. Too true, Matt. The only real difference between full-time employment and freelance is that a freelancer can hear the wolf outside the door, while the employee is one door removed. The wolf is still there; it’s just harder to hear.

  3. Jeff: Good luck!

    Les: It’s a good metaphor, but I’d stretch it even farther. The freelancer gets the chance to go fight the wolf himself, while the employee just gets thrown out there without warning.

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    Jeff: Good luck!

    Les: It’s a good metaphor, but I’d stretch it even farther. The freelancer gets the chance to go fight the wolf himself, while the employee just gets thrown out there without warning.

  5. Agreed. I am an idependent contractor and each month brings new surprises and opportunities. My income is less than it used to be with big institutions, but at least I can chart my own course.

  6. Agreed. I am an idependent contractor and each month brings new surprises and opportunities. My income is less than it used to be with big institutions, but at least I can chart my own course.

  7. Matt,

    I don’t know how much room for doom and gloom in the toy/games market their really is. While Mattel is laying off 1,000 people, their 3rd quarter (which saw a .3% negative growth for the entire economy) was a period where Mattel’s domestic gross sales increased by 4% and international sales increased by 7%. So their sales appear to be relatively unaffected by the economic downturn. Their balance sheet for 2007 lists 800+million in “non current assets” which might include long term investments in other companies more affected by the downturn, as might their listing of “cash and equivalents” which could include liquid investments. So the 1000 jobs might reflect a need to cut costs based on external rather than internal forces. It could also reflect unreported expectations for the 4th quarter, so there’s no need to be Pollyanna-ish either.

    Topps is another story completely. The trading card market is having tough times, look at how upper deck has been behaving. It also seems that WizKids wasn’t reacting to the changing consumer expectations regarding “collectibility” of pre-painted miniatures. The CMG market is pretty saturated with existing product, as minis take up much more space than cards, and I think that they should have been more responsive to the Mechwarrior sales as a Bellweather. It will be interesting to see how removing a department, with skilled employees when it comes to game design, will affect their ability to continue product production. I was just glad that Catalyst is not as affected by this decision as might otherwise be expected when the IP owner is on rough times.

    It also appears that a lot of 4kids problems had to do with television costs, rather than a lack of game revenue.

    Bad news to be sure, but not necessarily a meltdown of the marketplace. I think we will see some consolidation in the coming years between some of the small (but successful) board game companies. Maybe some of the middle range companies like Paizo and FFG will absorb some of them. I don’t know.

    I do know that a game like Agricola by Z-man, which is selling quite well, would sell even better if it had a company who could take advantage of economies of scale with regard to production. I just hope that Z-man will continue to produce games along the lines of the games it has been producing, i.e. highly desirable games (Pandemic, Duel in the Dark, Agricola) and be able to reinvest into larger production runs with resulting lower cost/higher profit games that maintain existing quality.

  8. Matt,

    I don’t know how much room for doom and gloom in the toy/games market their really is. While Mattel is laying off 1,000 people, their 3rd quarter (which saw a .3% negative growth for the entire economy) was a period where Mattel’s domestic gross sales increased by 4% and international sales increased by 7%. So their sales appear to be relatively unaffected by the economic downturn. Their balance sheet for 2007 lists 800+million in “non current assets” which might include long term investments in other companies more affected by the downturn, as might their listing of “cash and equivalents” which could include liquid investments. So the 1000 jobs might reflect a need to cut costs based on external rather than internal forces. It could also reflect unreported expectations for the 4th quarter, so there’s no need to be Pollyanna-ish either.

    Topps is another story completely. The trading card market is having tough times, look at how upper deck has been behaving. It also seems that WizKids wasn’t reacting to the changing consumer expectations regarding “collectibility” of pre-painted miniatures. The CMG market is pretty saturated with existing product, as minis take up much more space than cards, and I think that they should have been more responsive to the Mechwarrior sales as a Bellweather. It will be interesting to see how removing a department, with skilled employees when it comes to game design, will affect their ability to continue product production. I was just glad that Catalyst is not as affected by this decision as might otherwise be expected when the IP owner is on rough times.

    It also appears that a lot of 4kids problems had to do with television costs, rather than a lack of game revenue.

    Bad news to be sure, but not necessarily a meltdown of the marketplace. I think we will see some consolidation in the coming years between some of the small (but successful) board game companies. Maybe some of the middle range companies like Paizo and FFG will absorb some of them. I don’t know.

    I do know that a game like Agricola by Z-man, which is selling quite well, would sell even better if it had a company who could take advantage of economies of scale with regard to production. I just hope that Z-man will continue to produce games along the lines of the games it has been producing, i.e. highly desirable games (Pandemic, Duel in the Dark, Agricola) and be able to reinvest into larger production runs with resulting lower cost/higher profit games that maintain existing quality.

  9. Good points, Christian. I don’t mean to sound like a Cassandra here. The gaming industry isn’t in straits any more dire than the rest of the economy—but that’s not saying much in its favor either. I’m more concerned for the people laid off than I am for the company, but this could very well be a simple cyclical contraction—at least for Mattel.

    For WizKids, I thought the release said they were closing down all production of their games. The folks back east don’t have any real handle on how to make games, and if they try it on their own—without the expertise of the Seattle crew—I wouldn’t have high hopes for them.

    For 4Kids, I see a company that has produced licensable material for incredibly games in the past but doesn’t actually know how to produce games all that well. They wanted a larger piece of the pie and figured they could handle the game production themselves. Their initial rollout for Chaotic had lots of issues, most of which they’ve had to solve on the fly. They are improving, but I worry for them if they’re pinning their hopes on their CCG rather than their TV shows.

    As for consolidation, you historically don’t see too much of that in the industry, especially at the lower levels. This is probably because customers are usually loyal to a game rather than a company, and it’s often cleaner to purchase a single game or suite of games rather than an entire company.

    I agree that economies of scale work against Z-Man. Part of that, though, is because the game doesn’t have a broad enough appeal to become mass market. The guys at Hasbro may love to play the game, but they wouldn’t snatch it up and try to sell it to the wider market.

    Don’t take any of this to mean that I think the game industry is doomed. It’s facing challenges, sure, but the worst-case scenario is only, I think, that the turmoil chases some of the mass-market companies out of the industry. The smaller companies know their own market well and are generally lean and nimble enough to make it. We’ll see some closures at that level, sure, but perhaps not much more than in any other year.

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    Good points, Christian. I don’t mean to sound like a Cassandra here. The gaming industry isn’t in straits any more dire than the rest of the economy—but that’s not saying much in its favor either. I’m more concerned for the people laid off than I am for the company, but this could very well be a simple cyclical contraction—at least for Mattel.

    For WizKids, I thought the release said they were closing down all production of their games. The folks back east don’t have any real handle on how to make games, and if they try it on their own—without the expertise of the Seattle crew—I wouldn’t have high hopes for them.

    For 4Kids, I see a company that has produced licensable material for incredibly games in the past but doesn’t actually know how to produce games all that well. They wanted a larger piece of the pie and figured they could handle the game production themselves. Their initial rollout for Chaotic had lots of issues, most of which they’ve had to solve on the fly. They are improving, but I worry for them if they’re pinning their hopes on their CCG rather than their TV shows.

    As for consolidation, you historically don’t see too much of that in the industry, especially at the lower levels. This is probably because customers are usually loyal to a game rather than a company, and it’s often cleaner to purchase a single game or suite of games rather than an entire company.

    I agree that economies of scale work against Z-Man. Part of that, though, is because the game doesn’t have a broad enough appeal to become mass market. The guys at Hasbro may love to play the game, but they wouldn’t snatch it up and try to sell it to the wider market.

    Don’t take any of this to mean that I think the game industry is doomed. It’s facing challenges, sure, but the worst-case scenario is only, I think, that the turmoil chases some of the mass-market companies out of the industry. The smaller companies know their own market well and are generally lean and nimble enough to make it. We’ll see some closures at that level, sure, but perhaps not much more than in any other year.

  11. I see what you were saying about Topps. We were focusing on different quotes. You were focusing on the, apparently clear, first sentence “The Topps Company announced today that WizKids will immediately cease operations and discontinue its product lines.” While I was focusing on the middle paragraph which states, “Topps will immediately pursue strategic alternatives so that viable brands and properties, including HeroClix, can continue without noticeable disruption.”

    I guess this means that they might be looking to sell off the intellectual property to someone who is willing to manufacture/distribute. Hard to tell what “strategic alternatives” will allow “viable brands and properties” to “continue without noticeable disruption.”

  12. I see what you were saying about Topps. We were focusing on different quotes. You were focusing on the, apparently clear, first sentence “The Topps Company announced today that WizKids will immediately cease operations and discontinue its product lines.” While I was focusing on the middle paragraph which states, “Topps will immediately pursue strategic alternatives so that viable brands and properties, including HeroClix, can continue without noticeable disruption.”

    I guess this means that they might be looking to sell off the intellectual property to someone who is willing to manufacture/distribute. Hard to tell what “strategic alternatives” will allow “viable brands and properties” to “continue without noticeable disruption.”

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  14. Matt,
    I totally agree with what you have said here. Being small and adaptable right now is definitely a boon. I have used the current situation to do something I have wanted to do for years which is expand into new industries. Everyone knows they need to get the word out about their business but how do you do that now especially when times are tight? Real simple you hire a sales and marketing firm who is trying to break into new places and is happy to take a cut in fees due to the learning curve. We have had a lot of fun working with everyone from tattoo to acupuncture studios!

    Lys “Lean and Mean ” Fulda

  15. Matt,
    I totally agree with what you have said here. Being small and adaptable right now is definitely a boon. I have used the current situation to do something I have wanted to do for years which is expand into new industries. Everyone knows they need to get the word out about their business but how do you do that now especially when times are tight? Real simple you hire a sales and marketing firm who is trying to break into new places and is happy to take a cut in fees due to the learning curve. We have had a lot of fun working with everyone from tattoo to acupuncture studios!

    Lys “Lean and Mean ” Fulda

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