The Economics of the Dollar

For those of you that don't know me, I'm a graduate student in statistics at the University of Chicago. I am a Product Champion for Decipher, but I received no guidance on talking points or things in this article. Also, I'm going to use American currency figures. I know that's an issue, but I have easy access to US rents and costs, and very limited access to other figures. Sorry.

Let me summarize: Decipher's new system can be good because it forces an improvement in the economics of the CCG industry, attempts to assign costs more directly and thus appropriately, and is not unrealistically costed.
You can now scroll down, or tune out, or keep reading as I write about it.

Who's involved with the money from a CCG?
This is a straightforward presentation, which a lot of you likely know. But I need to mention it so I can talk about funds distribution later.
First are the designers of the game, who get paid for the licence fee, art department, designers, developers, webmaster, and the like. Second are the people that physically sell cards. Those are both online and retail stores, along with the occasional Borders or 7-11. Next are the people who keep ratings. A sanctioned tournament system costs money. Dan and Trevor need to be paid. The programmers, website costs, and the like need to be paid. I haven't even talked about the few prize foils, which each cost 40 cents or more to mail.
Beyond that, there's the Tournament Director. There's a decent amount of effort for the tournament director: arrange a time and place, post and advertise, review the rules, have the scoresheets, show up 30 minutes in advance, actually run the tourney, perhaps squeezing in a game with the otherwise bye, then spend 3 minutes per head entering the results. Right now, as a Product Champion, I get compensated from Decipher for that, but non-PC TDs get nothing.
Finally, there's the store. Keeping a tournament space available costs money. Talking to one retailer recently, his store rent is about $1500 a month. Without gaming space, his space would be half as large, meaning the tables are $750 a month. On a straight allocation basis, if a LotR tournament takes the space for a day, he needs to make $25 profit from the players to just break even on the space, let alone eat or pay a phone bill.

In Summary, there are five hands in the tournament pie:
0) Game Designer (Decipher)
1) Card Sellers (Online and Retail Stores)
2) Ratings Keeper (DGMA)
3) Tournament Directors (Product Champions)
4) Space Providers (Retail Stores)
To look at another game, in Scrabble, for instance, 0) is Hasbro / Mattel, and places like toys R us fulfill 1). 2) are nonprofit national associations. 4) are hotels and rental spaces, arranged for by 3).

How do we pay them?
Right now, basically all the money entering the CCG system comes through one gate: selling product. 4) and 1) keep some of that money. Lots of it goes to 0), which pays 2) and gives a little to 3).
This is a very poor system, for both economic and equity issues. I'd like to see it changed. Decipher's latest proposal is a step in the right direction is that it begins to break apart the hands and compensate them from the right places.
Well, there's the thesis statement. Wow, eh?

Let's begin with the equity argument. Every time a fan of Tolkien's books buys a Fellowship Anthology to get Tengwar cards, or a movie fan gets 11 pictures, or someone who only plays at home with two buddies buys three boosters, that subsidizes the sanctioned tournament system. What's right about that? Nevertheless, most of the people reading this article are not collectors, and you're probably saying "sure, subsidize me!"
Let's look at you then. Having just one source makes it difficult to properly allocate costs, making it inefficient for everyone. If you look online, you can find retailers selling boxes of boosters for about $2 per pack. A retail storefront is likely a little more expensive; for argument's sake, let's say $2.75 for the cost of cards that makes a fair profit for Decipher, the distributors, and card sellers. That pays groups 0) and 1), leaving 2), 3), and 4). The current system pays that by increasing booster prices, and using convoluted mechanisms to get the money to the other groups.
Why should you pay for the opportunity to play other players by buying surcharged booster packs? Why should you pay for the judge through booster packs? Why should you pay the people that keep your rating by buying booster packs? From the store's perspective, why should they sell you booster packs to pay for the room and the judge, instead of asking you to pay directly?
It just makes no sense. Furthermore, since many people buy through internet retailers, or just purchase singles, that cuts off the Space Providers' profit entirely. Yes, often a store collects $5, then returns the $5 in store credit or packs. That means they really make about $2 from markup, per person. Remember the $25 needed to keep the space? That's 13 people, just to break even. A local LotR tourney might make that one Saturday, but the retailer needs that every day.
The best solution is not to make the retailer sell you surcharged packs, and you buy them; it's to separate the costs. Then, people good at organizing and hosting can charge and make fair value for their work, while others, well, I guess they'll get fair value too.

Comparisons to Other Games
Say I want to join a basketball league. I go to Target and buy a Spalding basketball for $20. I then pay $5 to the Hyde Park Neighborhood Club to play refereed basketball on their court. Do I instead pay $25 to Spalding, and Spalding gives $5 to the Club? No, but that's the way CCGs currently work.
Perhaps basketball's too different. Let's look at bridge, chess, and Scrabble. In these hobbies, I can play the game with my friends for free, and I can organize events for free. But to be rated, I have to pay the sanctioning body a yearly fee. Bridge: $32. Chess: adult $39, scholastic $19. Scrabble: $18. Space and organizers aren't free either. It costs about $7 to play an afternoon tournament at a Chicago bridge club. Some comes back in prizes, but pieces go to the TD, the club, and the sanctioning organization. Scrabble Club 56 in New York costs $11 per evening. Again, some goes to prizes, and the organizer volunteers, but a fair amount is for space. These hobbies have finances in proper order.
Moving closer to home, let's look at other games like Yu-gi-oh and Dragonball Z. The local tournaments I see cost $3 to $5 per head. The kids easily pay that, even for single elmination Yu-gi-oh. They don't get all their fees back in prize support. They, or at least their parents, understand the costs of space and time.
Lastly, since it's come up in the discussion, let's look at Magic. At least for higher level events, Magic has managed to separate 3) and 4). If I go to a Pro Tour Qualifier, there's a Tournament Organizer - Moy Events, Professional Event Services, and the like. It's not a small fee either; $20 for constructed and $25 for sealed. The prize pool is nowhere near that. At Magic States in Illinois, the listed prize pool is 8 booster boxes, one for each of the top 8. That's it, for about a 100 player tournament at $20 each. My best guess is that the Organizer clears about $8 per head for their expenses. Some of that goes to the DCI, which sends out those vaunted "Player Rewards tokens" every four months. The players pay, and willingly. Here's a thought question: Why do we need to subsidize our tournaments? Others don't.

Some Possible Complaints
<1> Why should I pay to play with my cards? Why doesn't Decipher bundle it under "marketing"? First, you're not paying to play with your cards, you're paying for ratings, space, and organization. See above, and <3> below. As regards bundling, because the money comes from somewhere, it's better economics to allocate costs directly. Note here that I am NOT including big showy events like Premier Series and World Championships. Getting press coverage is a legitimate marketing tactic; for instance, I'd like to see a "Decipher games special" on ESPN2, like poker has and Scrabble is getting. Putting more cash there, nice new peach $20s, is fine.

<2> But Ophidian / Wizkids / whoever doesn't charge me! Well, is it Decipher's fault that they have bad fundamental systems? The true competitor of Decipher is not Fantasy Flight Games. It's Poker, and Bridge, and Playstation 2, all things that charge for tournaments. Stealing from other CCG companies does little good for the industry in the long run.

<3> My playgroup doesn't care about ratings. Why should I pay the ratings fee? Well, Dan posted a message from Warren Holland about this to the DGMA/Tournaments Message Board, which says something remarkably similar to The Judge in this excerpt (and I'm sure both of them will like that comparison):
-----
I played Magic years ago. We played because we liked to play. I played before DCI and when I registered, I was one of the first 1200 or so players to get a card. No one cared about ratings or prizes because their weren't any! We played to play.

-----
Play to play! Not everybody wants the rigor of sanctioned events; from my work in Chicagoland, I'd guess that a majority of local players don't care about ratings. The majority of bridge, chess, or even Magic purchasers never play in a sanctioned event. The Judge suggests that a TD, in conjunction with a Space Provider, schedule an event, collect entry fees, and cover costs that way. For less rigorous play, the inexpensive League kits are quite nice as well. At one store I support, I haven't run a sanctioned event in at least four months. We have "league days", where we can play normally, by league rules, or interesting variants like multiplayer. That's what the folks wanted.

<4> Decipher's making money off the fines! Let's take the worst case, that you one day receive an email "Based on incident such-and-such, we have decided to fine you $20." You appeal. At least one Decipher employee spends a few minutes talking to you, then has to avoid your phone calls. The mailroom has to deliver your letters of protest, a meeting is called, three people condemn you, and then someone has to write you a letter and process the credit card charge by hand. Given the amount of people's time involved, at even minimum wage is that a profit center?
That scenario doesn't assume honorable inquiry, and it doesn't include the costs involved in investigating non-malicious events. If anything, given the costs involved and the concept of deterrence, the fine should be higher.

<5> Given past instance X, why should I ever trust Decipher? I have a suspicion this is the real reason behind a lot of complaints. Let me give my testimony. I initially heard of Decipher in October 2001, when I wanted to enter the CCG hobby, had tried Magic and found the community very lacking, and was looking at other games. I saw online stuff for this new Lord of the Rings game, found out that I could make an opening night demo because I didn't have class or homework, went, and two years later here I am.
I might have a different position than you, because I don't carry any baggage over past events; I'm more business than bitterness. I'm not in a position to judge that kind of stuff. After considering the changed people, stated policies, and contract law, if you don't feel you can trust Decipher, then a formal relationship with Decipher might not be for you. Sad, but reasonable. But I don't like hearing malicious assumptions or blanket condemnations either. For me, I play my small role justly; I do error sometimes, but not because of secret hatred - I'm fallible, like you.

Conclusion
I got back from work early last Thursday, flipped on the TV, and saw that Game Show Network had two hours devoted just to video games. Twenty years ago, such a show would either be a human interest story, or a scare tactic like "Playing Space Invaders destroys your kids' social abilities!" Now, it's scheduled programming. The CCG market is about ten years old. In ten more years, I'd like to see "Card Game TV". I want the respectibility of chess, or video games, or poker. For that matter, I want the CCG market to survive - something I'm not entirely sure about. The current system of convoluted back channel funding will not get us there. The new system is short-run very annoying, but the economic intelligence will get the market moving on the long march. It's not a panacea, but it might be a catalyst.
My mail address is easily available (on the Decipher Volunteer pages, for instance) for comments, flames, and the like. Good luck in all your journeys.

Read the Reviews | Back to List

You must be a member to contribute to Decktech.

Please become a registered member