Well, it has been a long time since I have had the time to sit down and write something. You see we are releasing many games in the coming months - we just released two new ones, Salvo! and The Falklands War: 1982 - and have another 8 scheduled for before the year ends. It takes up alot of my time, and our staffs time, to get these games into the market. So, that is why I have been visibly absent from the BLOG.

Origins 2005

We just returned from Origins last week. It is the first time we haven’t exhibited in two years. Our reasoning was simple, with the economy the way it is, especially gas prices, and with many of our new releases just missing the Origins date, we thought we would take a year off and go and enjoy the show in a different way. We were glad we didn’t exhibit. The show just seemed dead. The number of exhibitors appeared to be way down, the lines were much shorter and the exhibit hall less crowded. Our retail consultant was there, and she even said we should be glad we weren’t exhibiting, that traffic was way down. Why?

Gas. Does Anyone Feel Bloated?

Maybe one reason is that it fell this year over the 4th of July holiday. Although I think that is just a small part of it, as I have a theory as to why gaming sems to be down across the board this year. It has to do with the outrageous gas prices. I read somewhere that the average consumer is now spending an additional $60.00 per month on gas. Hey, that’s the price of a game! Interesting, huh. Does that mean that your average gamer is buying once less game a month so that they can afford to get to work each day? I think this may be a huge part in the drop off at Origins as well as the industry drop in sales as well.

Vaporware, Not Just for Computer Games

This year at Origins, in addition to meeting with developers and some of our fans (Annette and Mindi said, “Thanks for the gifts, Mac!”) we hoped to spend alot of time in the exhibit hall, specifically to see some the new offerings announced for Origins. How disappointing that a number of board games, as well as a new magazine weren’t there as promised. Between the vapor products and the fewer exhibitors, our time in the exhibit hall was shorter than anticipated. How a company can miss delivering a game or magazine to Origins that was announced to be there only a month or so before the show is a mystery to me. Maybe if they had announced it three months in advance, I could see this, but with the short announcement time, they should have known that it wouldn’t be ready. Especially when the gave us shipping date over a month away. It wasn’t lie they missed by a day or two. A month! I guess it happens to the best though, but I can’t understand it.

The Developer as Publisher

This year at Origins, we saw two games that we would have loved to put our name on. Unfortunately they were self published by the developer of the game. Doing this almost always makes the game unpublishable by us, as they undervalue their offering, thinking the way to sell more is to lower the price. It has been proven that price has very little to do with the success of a game. In fact pricing a game too low, can make it unappealing to the reseller markets, as they must have enough in their margins to make it worth stocking and handling. If I could just say to those devleopers with great ideas who are thinking of self publishing, please speak with us first. We have contact information on our website here. You can always self publish after talking to us. Hell, we may even be able to offer you some valuable help with self publishing, if that is the route you choose. After all, we are all in this business together, and I don’t believe for a minute that your game(s) being successful will hurt sales of our games. If anything, making this industry bigger and better will help us all to succeed.

Shrapnel Games Gets Weird!

And finally, we have heard from a number of you regarding our latest product announcement, Werid Worlds: Return to Infinite Space. Most of the e-mails we received praised our unique press release on this announcement. It was a little different, even for the warped minds behind Shrapnel Games. I wish I could take credit for it, but praise should go to Scott Krol who writes almost all of our press releases. I say almost all, because sometimes I will write one, so if it you read any lacking in style and flair, blame me for those.

Until next time,

Tim Brooks
President, Shrapnel Games, Inc.

Part One

In my blog of 02/24/2005, I talked about my definition of a niche game, a recap of the retail market in 2004 and why a niche developer will never get rich at retail. I will not go through that discussion again, since you can go to Why Traditional Retail and Niche Games Don’t Work and get all the details there. What I do want to discuss in this second, and final part, is why the Shrapnel Games model can and does work.

Six Years and Going Strong

Shrapnel Games was formed in June of 1999 and started operations on July 9, 1999. In that time we have published 27 games and varied expansion packs. We have signed three new developers this year, and expect to have six new developers on board before the end of 2005. We have developers who have been with us since 1999 and have developed a number of products that have been published under the Shrapnel Games name.

It Works, It Really Works

“So why are you telling me this,” you ask? Well, I am telling you this information to let you know that there are alternatives to trying to take a niche product into traditional retail, where you will be lucky to make $40,000. Our model works. We were one of the first and by far one of the most successful non-traditional publishers, bringing niche market games to the fans through online and catalog sales (and in recent years through nontraditional retail outlets such as game and hobby shops). We have had several companies copy our model with varying degrees of success. The ones that haven’t been successful are the ones that sign title after title with no regard to the product’s uniqueness and integrity of gameplay.

We are very exclusive in the products we release and work hard with our developers to make the game as playable and enjoyable as possible. In fact, we think this is the number one service we offer our developers. That and our knowledge of the marketplace. You won’t find us jumping from market to market like some of our competitors, because we understand how and where to get the audience niche games need.

Our results speak to our success. For instance, we know that a top selling niche game, marketed by us, can reach unit sales in the mid 5 figures (we believe we can take that number to the upper 5 figures in the coming years). We also know the average price point of our games is almost double what it would be at traditional retail and that we offer one thing that a developer will never see at retail: longevity. In traditional retail, a developer is lucky if his game remains at its original price point for three months while we have products that have been in the market for 5 years that are still at their original price points.

The Good News

The good news is the market is still growing! Almost 75% of our customers at the Gamers Front are making their first purchase of a Shrapnel Game! Let me say that again, after six years in business, ¾ of our monthly sales are to first time purchasers.

We see a bright future for nontraditional publishers and developers. If you are a developer in the niche game marketplace, look for this industry to continue growing as the large traditional publishers move more and more to the consoles, leaving the PC Gaming market an afterthought. With these publishers being forced to put out more and more ‘clones’ of hit titles as the production budgets edge toward the $10+ million mark, the new, truly unique products will all be published in the nontraditional market. And as this market grows, as the fans start looking for alternatives to the ‘clones’, the production values of these niche games will slowly edge towards a level that will bring even more gamers to the niche games marketplace.

Happy Niche Gaming!

Well, our annual Spring Sales Event has kicked off. Running now through March 29th, the sale covers selected products in the Shrapnel Games’ lineup. We hope there are one or two titles that interest you. Follow this link for more info:

‘Game Up’ for Spring

Also, as many of you know, we are closing out Space Empires IV Gold and Space Empires: Starfury. SEIV Gold has less than 100 units left in stock and Starfury less than 200. Order while you have time!

Well wishes for Easter also.

Tim Brooks

As some of you who follow us pretty closely may have already surmised, Malfador Machinations has chosen not to publish Space Empires V with Shrapnel Games, opting instead to publish through Strategy First and go after the retail market. Although we regret Aaron Hall’s decision, we respect his motivation and wish him the best of luck at retail with a niche product. We only hope he makes enough changes in his game to allow for a broader audience. All of us here at Shrapnel Games wish him a great deal of success.

We will continue to sell Space Empires IV Gold and Space Empires: Starfury until current inventories are exhausted. We want to thank everyone who has supported Shrapnel Games and Malfador Machinations with their purchases of these excellent games.

We have grown to love the Space Empires IV forum community and want to extend an invitation to these rowdy, crazy, and somewhat warped individuals. We would like you to stay with us, and to that end, we will install a Space Empires V forum for you to populate and enjoy! You are always welcome at Shrapnel Games.

Thanks to all who made Space Empires IV a roaring success.

Well, I sure opened a can of worms with my blog of 2/24/2005, Why Traditional Retail and Niche Games Don’t Work. The newsgroups have been posting about it and e-mails have been coming in and even forums have been buzzing. So, I thought I would take a few moments, and talk a little about my take on this, answer some of the questions, and generally set some things straight.

The Newsgroups

Comp.sys.ibm.pc.games.war-historical has a long set of posts on my blog, although it quickly deteriorates into a discussion over e-books (go figure?). One vocal poster there first doubts the validity of the average price point of games at retail of “$25.00” saying that is a fantasy number because he is at Walmart bi-weekly (poor fella) and finds games priced at $39 -$50. Okay, let’s do the math. No doubt new releases are priced in that range. But, and here’s the kicker, most games remain at that price for weeks (okay sometimes months), not years. In fact it is rare anymore for a AAA, solid selling title to be at the original price for 6 months. So what happens to a title after the initial sales period? It goes to half price, and then very quickly to around 25% of the original price point. So lets see… $45 game initially, then $22.50, then $11.25. Average those and you have $26.25. And that is assuming that each price point sells the same unit volumes. Guess what? About 20% of units sold are sold at the sell in (higher) price point. The other 80% are sold at reduced pricing. So there you have it - $25.00.

This same gentleman makes other statements that show a lack of knowledge of the industry such as: “…retail loading brings in big orders up-front while web sales are one unit at a time with inventory funding on the developer/publisher, not the retailers’ dime.” What he doesn’t understand here is that the retailer pays the publisher quarterly for what sells, not what is on their shelf, and the reality is that that quarterly payment schedule, easily and almost always turns into a 6-month schedule. With some companies, like EB, the publisher is lucky to see money once a year. So it is the publisher funding the stock, not the retailers.

Anyway, there is more good discussion on retail and niche games in this posting, if you can wade through the e-book discussions.

E-mails

Many of you have sent me e-mails asking some very pertinent questions. I am sorry I haven’t been able to answer each individually, but I thought I would answer a couple of the more prevalent ones here.

Q. Where did you get your figures?
A. This question was also asked and answered in the comments section of the original blog, but based on the number of e-mails a lot of folks don’t read the comments. So here is my answer: Check out the Entertainment Software Association, the NPD group, and Gamasutra. Some of these numbers require the purchase of reports, others are readily available, most through the above sites. Some info came from sources at the major publishers I mentioned in the article and I promised anonymity. You should be able to find most of the info though.

Q. Only 6% of PC games make money? Then how do the publishers stay in business?
A. The large publishers have no problems. You have to remember that one top seller cures a lot of ills from the other titles. And all the top publishers have franchise titles. These almost always make the top 20 list for the year in which they are released. Also, not only do you have the PC version, you have the consoles as well. Rarely does a PC only title get released by major publishers anymore. In fact, on internal development projects, almost all games are first developed for a console and then ported to the PC.

Now, the smaller publisher does have trouble staying in business. The most recent case of this is the bankruptcy woes of Strategy First. And it is our understanding that they are still in trouble. For a first hand account of this, go here:

www.ideal-games.com

(And before we are chastised for putting a link like this up about a competitor, we came across this link on Strategy First’s website, so we don’t feel it is out of line).

I was all set to cite another recent example, a smaller competitor’s forum post describing their venture into retail as being a disaster with their games ending up in the bargain bins very quickly. This publisher then went back to a web-based model. But now they seem to be giving retail another try, so who knows what their real story is?

Anyway, you really don’t have to look far into the past to see that there are far fewer small publishers today than even five years ago (go back 10 years and the difference is truly amazing!). There are fewer small publishers at retail because they can’t compete with the big boys - especially when so few titles are actually profitable.

My Take

My original post, Why Traditional Retail and Niche Games Don’t Work, is nothing new, this has been the trend since the mid-90s. I had a feeling though, that the post would garner some attention. We know through the feedback of customers, potential customers, and potential developers at Shrapnel Games that the gaming public, as a whole, was unaware of many of these trends. It is why I started Shrapnel Games to begin with and why we are still in business 5 ½ years later. Either the retail industry will have to change, or more of the niche developers will have to come around to the reality of the times. It is why I posted the blog, to get the reality out there in the open for all to see.

My next blog will talk about why the Shrapnel Games model works, and I will try to give you some interesting statistics on what kind of sales can be done through us, another prevalent question asked in those e-mails.

Happy Gaming!

As those who frequent our site are aware, Shrapnel Games offers monthly specials
through their online store, The Gamers Front. This months specials feature a pair of popular titles, one wargame and one strategy tile in the action rpg genre.  You can order these games at The Gamers Front.

BCT Commander - Save $5.00 through March 31, 2005
One of the most hyper realistic wargames available, BCT Commander is a real time
strategy game that examines the complexities of fighting on the modern
battlefield. Developed by Patrick Proctor and his team at ProSim, BCT Commander
is real enough to be in use as a senior commander training tool for armies
around the world. If you’ve ever bemoaned the lack of realism found in most
wargames here’s your chance to step up to the plate and see how well you would
do in command. In use by militaries around the world as a training tool!

Space Empires: Starfury - Save $9.00 through March 31, 2005
Charting a bold new course, Malfador Machinations’ Space Empires: Starfury takes
players on a wild intergalactic ride through the Space Empires universe. An
exhilarating science-fiction action RPG, players take on the role of a starship
captain. Danger lurks in the cold void of space, but so does fabulous wealth and
power. Will you get a chance to hang up your spacesuit and retire to a life of
luxury or will your frozen carcass drift forevermore amongst the endless
stars?  If you are a Space Empires fan, you’ll want this!

Defining Niche Games

The place to start with an article with the above title is to make sure everyone understands what a niche game is. Niche games can be broken down into three categories for the purpose of this essay.

The first category of niche games would be any product genre that a traditional publisher rarely publishes within due to the small fan base. This includes such genres as wargames, turn based strategy games, text based games, well… you get the idea.

The second category that would be considered niche games would be any genre of game that a traditional publisher would be interested in, but that the product in question has a production budget under $1.0 million.

And the third category would be a traditional product genre, where the developer has added influences from other genres. A 4x game for instance that had wargaming turn based elements to it, or an RTS that tried to depict in detail the elements of war. In other words, originality!

While I am on a defining kick, I might as well add an explanation of traditional retail. For Computer Games, this would be e-stores such as Electronics Boutique, CompuMart, etc., or mass merchandisers such as WalMart, Target, etc.

The Big Picture – 2004

Okay now for all those numbers… Last year, sales of Computer Games (and I am not including Video Games – the Console Game Market) was down $100 million dollars from the $1.2 billion mark in 2003. There were two, count ‘em, two games that had sales of 500,000 units and 18 games that had sales of 250,000 units or more. It is projected that less than 6% of all Computer Games made a profit. Based on the varying definitions of what is a new release, it is hard to know for sure how many products were released in 2004, but a number that I can live with is 1100 titles (in 1999 that figure was over 2200 titles). The average budget for development of a computer game is now over $2 million per title. And the average breakeven point in unit sales is around 110,000 units. The average retail price point is $24.45. And the average game at retail sales under 5,000 units!

And I got it all into one paragraph!

Now what do those figures really mean to the developer? It means that if you want to go into traditional retail with your new shiny niche market computer game because you will get rich, well, it just isn’t going to happen. The mainstream titles have a hard time turning a profit for the publisher and that means a hard time turning a profit for the developer. And these are products with development budgets in the millions, marketing budgets in the $1 million range and depth of distribution only attainable from the likes of EA, Ubisoft, and their peers. These corporate giants aren’t going to be interested in your game, and the smaller traditional publishers will have a hard time getting you market penetration, both from a marketing budget standpoint as well as from a distribution standpoint.

So You Don’t Believe Me?

Now you ask, what makes you an expert on all of this? Well, I’m not an expert, the experts aren’t even experts. What I do have to back this up is 3 titles with my name on them that were in retail with major publishers. And that equates to first hand knowledge of what type of sales to expect.
Look at the reality for a minute. If the average price point of a game is $24.45 at retail, then the average price the publisher makes is $15.89. Let’s say you negotiate a generous retail contract and get 50% of that. On an average offering selling 5,000 units that means you will make $39, 725.

Oh, but you say, my game isn’t average. Oh, that’s right your game is niche. I know AAA title games with $2 million plus budgets that did less than 1,000 units worldwide at retail. So how will your game really perform? Who’s to say, but it is a safe bet that it will come in under these numbers.

So What Does this Mean?

I don’t know what it means to you. I think each of us have to look inside ourselves and honestly decide what we are after from this business. If it’s to make money, well there are better avenues than traditional retail. If it is to see your game on the shelf of your local Electronics Boutique all I can say is hurry there once it enters distribution. Because as a niche game, it won’t be there for long. You may however find it in the bargain bins.