Fact or Fiction... Publishing Board Games Is Good Finance?

Posted by Michael Mindes on February 22, 2010

This is another question that comes from a reader that I really liked.

From a financial perspective, do you believe publishing board games was a good decision (obviously money is far from the only reason you choose to do it, but it's interesting to know)?

I like this question because by day I am a financial advisor.  Helping people manage their savings and investments to bring them through a successful retirement.  As a result I am very familiar with the risk/reward profiles of numerous investments.  For example, the return on "risk-free" money (short-term U.S. Treasuries) right now is approximately zero.  Also, the future returns on a diverse portfolio of publicly traded stocks (such as the S&P 500 index) are likely to average 8-10% per year depending on who you ask.  Many of us have became painfully aware of how much downside risk there is associated with that 8-10% starting in October of 2007.

Risk/Reward Profile Estimation

Before beginning publishing, I needed to weigh a number of different things.  One of the most important for me was attempting to determine without experiential knowledge what the risk and reward potential were.  I only did a back of the envelope analysis and it went something like this (these are not my actual numbers or estimations).  The risk estimation:

• Estimation of a total cost to produce, including artwork, manufacturing, shipping, and marketing = $32,000 for 4,000 copies of 2 games.  This would leave me with 2,000 copies of each Terra Prime and Homesteaders.
• Assuming a worst case scenario of selling 0 games and liquidating all inventory so it could be sold through retailers at 50% discount...  Which means I would only be getting 18% of the MSRP back in revenue.  Revenue = $28,764
• Add in an additional 20% loss of revenue from various mistakes.  Revenue = $28,764 x 80% = $23,011
• This would amount to a total loss of 28%

Based on this calculation the risk was acceptable.  Of course, if either game were to become hits within the niche of hobby board games, then I would be looking at an impressive return.  From a purely financial perspective it looked like an attractive investment.  However, that is not the whole story.

Logistical Mistakes = Very Expensive

I had two logistical issues regarding Homesteaders and Terra Prime that were expensive.

1. Timely delivery to BGG.con, which is where the games were to be officially released.
2. Mis-directed shipments.

Due to some different delays and starting on manufacturing later than desired, the games would need to be sent via air freight to BGG.con.  Air Freight from China to the United States is not cheap, especially when you are in the peak holiday season.  To make a long and frustrating story short, air freight cost about $2,500 more than the ocean and truck freight would have cost to the same destination.  Additionally, my cargo kept getting bumped by American Airlines for various reasons (one of which was a China to Japan customs/security issue).  So despite starting the air freight 2 weeks in advance of BGG.con, the cargo did not arrive until we were already 5 hours into the show, which had a bigger effect than you might imagine.

I also through my own ignorance and misunderstanding had my ocean freight sent to Los Angeles.  Given that fulfillment for my games happens in Georgia, I would have saved approximately $2,000 by booking the freight directly from China to Atlanta.  I was thinking that I would send pre-orders from my home in Tucson, that I would send games to BGG.con, etc.  Whoops.  To top things off, we knew there were manufacturing issues with the games that would need to be resolved.  It is expensive to ship something across the USA by truck.  Since the issues needed to be resolved so distribution could start I needed to use a truck rather than the less expensive rail line.

Ouch, two logistical mistakes were equal to my assumed 20%.  Maybe this isn't looking to be as good as I thought, are there too many "what-ifs" and expensive hiccups?

Manufacturing Issues and Caveat Emptor

I used a manufacturer which gave me VERY good pricing on manufacturing Homesteaders and Terra Prime.  Without the exceptional pricing, I don't know if Tasty Minstrel Games would have ever been started.  So in a sense, I suppose all of my frustrating learning curve has been an expensive necessity.  However, along with that exceptional pricing came the issues.  Moisture in the games which we were assured would not be a problem.  Quality control issues.  Miscollation of punchboards.  Improper distribution of pieces in each game box.  Incorrect pieces in the game box, the best example being the pink plastic cubes in Terra Prime.

Add in timely delivery issues (may had led to needing air freight), and the very good pricing that they provided has been paid back in both real dollars and labor.  For the trip to PSI, I needed to buy 2 plane tickets (since Seth decided to come with me), a hotel, rental car, and temp labor assistance.  Also, due to the timing the flights needed to be booked last minute and I had to pay approximately $330 per ticket.  It was very tempting to let the games go out without dealing with any of the issues, but I am exceedingly glad that I made the hard choice.  The goodwill gained and reduced back-end labor for fixing things has been worth the effort and money.  One thing I didn't consider at the time was the fact that PSI and my marketing strategy would result in decent international distribution.  The postage for fixing problems internationally is considerably MORE expensive.

The bottom line is that this cost at least $2,000 (plus lost inventory) and I am still feeling the effects of it.  Additionally it is incredibly frustrating to see on Board Game Geek such a large percentage of posts and photos relating to many of the manufacturing issues.  It is however very pleasing to see so many people defending and applauding Tasty Minstrel Games who have are independent of us. 

It Is Not Just An Investment Of Money

It is also an investment of time.  I estimate that I have spent approximately 2-4 hours per day, 6 days a week, for the past 10 months working on various Tasty Minstrel projects.  Promoting, marketing, searching for new games, looking for manufacturers, researching various service providers, blogging, etc.  I certainly could have spent less time doing these supplementary things, but then the chance of failure would go up significantly.

Granted some of that time was spent at game conventions, playing, and discussing prototypes so it did not feel like work.  The blogging has also not felt like work.  That is the advantage of working at something you are passionate about.

The Actual Tasty Minstrel Results

I just aggregated all of the Tasty Minstrel expenses for 2009, which can all be attributed to the startup of the publishing house.  Thus far, Tasty Minstrel has received just under $25,000 in revenues (pre-order and 1 month of distribution).   All it took to generate that revenue was $50,000 of investment and approximately 500-1000 hours of work. Also, once I sell out of the initial print run, I should have recovered the entirety of my initial investment.  That does not seem like a very good investment on the surface.  However for me, it absolutely has made sense and continues to make sense.

I think that every successful business crosses a line where things look promising and semi-discouraging at the same time.  The eventually successful businesses are led by somebody that decides to concentrate on the promising and ignore the discouragement.  Tasty Minstrel is at that point now, and it is time to press forward.

What do YOU think? I look forward to reading your commentary]]>

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