Hyper-capitalism in gaming: a case stuy

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Some of you may be aware that I'm an avid player of the miniature games "X-Wing" and "Armada", both set in the Star Wars universe, produced by Fantasy Flight Games, and a lot of the board games of the same company as well. The company, founded by Christian T. Petersen in the late 90s, is one of the big success stories of the hobby market and grew into a multi-branched, highly polished operation that brought out great games, had a widely famed consumer service and boosted the hobby market by giving special deals to brick-and-mortar stores at the expense of online distribution and to foster a healthy community and tournament scene. Accordingly, it grew to fascinating size. 

However, in 2014, Petersen sold the company to Asmodee. In case the name doesn't ring any bells, Asmodee is for board games what Electronic Arts is for video games: A giant publisher, gobbling up practically any smaller studio with some promise they can get their hands on, making use of the economies of scale and the monopoly they're slowly creating to increase profit margins. 

FFG perfectly fit their formula. Not only did the company produce games in great numbers (for the hobby market, mind you!) already, they also had a great reputation and, even more important, access to some of the most lucrative licensing deals out there, most noteworthy the one for the Star Wars IP, which had become the mainstay of the company in the 2010s. The Lord of the Rings IP as well as Game of Thrones is also a cornerstone of the company's success, however, and has been for nearly 20 years now. 

The acquisition didn't change all that much in the beginning. The company became a little bit more "professional", but it still worked much like it did before, which may or may not have to do with Petersen formally staying on board as company head for some years. One of the last hurrahs of the "old" Fantasy Flight Games was the release of the fourth edition of "Twilight Imperium", the objectively best board game ever made.

Its design process has been well recorded for posterity in the "Shut Up & Sit Down" documentary titled "Space Lions", which is available on Youtube. In it, Petersen talks about the past of the company, and you can get a vivid image of a man going out of the door and leaving his baby behind in the hands of a gigantic company. A friend of mine described the whole interview as the gigantic realization of a man having made the greatest mistake of his life. 

Without reading too much into Petersen - who I met once, but couldn't even begin to claim to know -, it's obvious that his departure from the company for good in December 2018 changed company policy. This change may or may not have to do with said departure and Petersen's waning influence in the company; it for sure is directly attributable to the acquisition of Asmodee by the the Private Equity firm PAI Partners for the sum of 1.4 billion dollars. 

Now, looking at PAI's portfolio, there is nothing in there suggesting any knowledge of or interest in gaming. With Asmodee, the company might have been mainly interested in the bottom line, but at least, they knew what they were dealing with. The Private Equity buccaneers for sure don't. 

It's not like we don't have blueprints for what happens when these kinds of companies come in. They usually search for undervalued companies (given the IPs Asmodee held, from the aforementioned FFG inventory to legends such as "Settlers of Catan", this is very much the case), buy them with a lot of leverage and then try to recuperate their investment as quickly as possible by loading the external debt onto the company itself and slashing cost to push profit margins at the cost of long-term viability, which they don't care about. Usually, companies are broken up, with the profitable parts kept or sold, and the unprofitable ones closed, despite this often dooming the entire enterprise because companies are complicated and interconnected institutions. At least from what I hear. 

This is exactly what happened. Only this month, the closure of Fantasy Flight Games' RPG section and the shuttering of Fantasy Flight Interactive were announced, Both sections were profitable and highly succesful, but likely didn't produce the margins PAI Partners were looking for. The RPG sector has never been one that was famous for profits, and while it may have been good enough for a company to sustain itself and make enough to go on, it certainly wasn't enough to generate tens of millions in a span of three to five years, which is the usual operational horizon for Private Equity firms. 

Directly on the heels of this announcement came the news that Fantasy Flight Games would stop to reprint its products for the X-Wing Miniatures Game (the biggest miniature game in the world even before the famous Warhammer properties, mind you!) and instead concentrating on new content to come out every two to three months. 

To understand what that actually means, you need to know a bit about production lines in the hobby market. So let me indulge you. 

Development of games and accessories happens in the US or in Europe, but the production is concentrated in China, for obvious reasons. The models are painted by hand, after all, and for that to work, you need a cheap labor force. Plastic, packaging etc. also are much cheaper in Asia; when FFG moved its production there from the US in the early 2000s, this was a major factor in its rise to prominence in the sector, as Petersen described in a podcast interview recently. 

However, there's the economy of scale to consider. So, the more copies you order, the cheaper the individual copy gets. Reprinting previous copies therefore cuts into the margins. This is the major reason so many board games and roleplaying games are unavailable today: their first print-run sold out, and despite a great demand, basic economics make a reduced print run for said demand nonviable. FFG escaped this harsh logic only because of its size: If you print the biggest miniature game with the Star Wars IP attached to it, even reprints make enough money to justify their existence. 

It's also not a solution to produce bigger print runs, because storage space comes at a premium, and no distributor will want any more copies than they can sell in a reasonable time frame. The same is true of FFG itself, obviously. 

So, it's fairly reasonable to connect the takeover of Asmodee by the Private Equity kraken of PAI Partners with these business decisions. However, you might now rightly ask where the problem lies. If I get new stuff every two to three months, where's the problem with not being able to get the old? 

See, in miniature gaming, you bring to the table whatever you want to combine into an army or list, and that is dependent on what you actually physically own. A lot of the fun is in finding out synergies that no one else has thought of. But if I can't get to the back catalogue, this leads to two consequences. 

On the one hand, new players will be unable to jump into the game any more, atrophying the player base in the long run and starting a spiral of doom. In the hobby market, every game that doesn't constantly recruit new players inevitably dies. 

On the other hand, old players need to be coaxed into buying the new stuff in ever increasing pace to offset these losses. So the temptation of gearing the game towards the new things becomes quickly irresistible, creating a power dynamic that makes the old things obsolete. 

In the case of X-Wing, the basic infrastructure for this is already in place. There are two game formats supported by FFG, Hyperspace and Extended. In Extended, all ships and upgrades ever published are legal. In Hyperspace, a rotating selection only can be selected. 

Now, the introduction of Hyperspace was a massively healthy intervention, because it allows the company to create an ever-shifting meta and to incentivize players to create new combinations and become creative with limited resources. It also levels the playing field with newer players and brings in ships that don't see play in Extended because they can't compete in terms of efficiency. 

However, in the hands of an irresponsible leadership, it's easy to imagine how they make the new things more efficient and rotate out all of the old stuff, essentially creating a power inflation. This is a mechanism well known to game developers; you may want to check out this Extra Credits video explaining the thing (here's also one with an example, Blizzard Entertainment's Hearthstone).    

Once this spiral begins, it's hard to stop. Old players will drop out, unhappy that their collections become unplayable and despairing of the ever-increasing cost of keeping in the game with the new releases. New players are becoming rare because it's difficult to get in the game at all, since so many of the old releases are hard to come by. Print runs become smaller, prices increase, business schemes become more desperate, the fixes more obvious, and more players leave. It has happened before often enough. 

Now, the good news is that we're at the beginning of this cycle, and there is no guarantee that Asmodee will share in this fate. Maybe what we're seeing is just enough to satisfy the suites at PAI Partners, and the company and the beloved games will survive. I am, however, deeply troubled by what I'm seeing.

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Side Note: Sorry for the essay and BLAP to drop so soon after each other, but this is current news, so I thought I'd put it out there quickly. :)