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Cryptum Board Games

Cryptum Board Games

Cryptum Board Games is our games design and publishing project, with currently announced 4 own games and 5 expansions for them. Our aim is to design and develop as many high quality in-house games as we can, but also to publish games from other designers from the region or from emerging markets around the world, helping them reach the ever-expanding board games market without giving up their games to corporate business. The Cryptum ICO is funding this project with 65% of the raised funds, and we will distribute 20 to 40% of the profits generated back to token owners.

By funding directly a new studio project instead of using the established per-game funding, we are avoiding the risks of unsuccessful game ruining the line of production. Our plan is to use the existing crowdfunding sources as they are used by the big companies – as a marketing tool and a pre-order system, instead of initial source of the funds needed to manufacture the games, thus generating revenue from the initial amount of pre-sales through Kickctarter, Indiegogo and other platforms, and then any wholesale and direct sales. As participants in many campaigns both as end users and retailers, we have intrinsic knowledge of specifics that contribute to games pre-sales, and, on top of that, we can work well within the boundaries of the established distribution system, as we have been part of it for many years now.

The board games project does not scale proportionally to the amount of funds invested, as any single game could raise a nearly fixed (within expected borders) amount that barely scales with the funds invested. This might not be entirely true for every game, but this is a common pattern. But the games development cost and manufacturing specifics allow us to operate with funds as low as $20 000 (requiring additional investments by our company and just a trickle of games, each new one funding another in the line) to over $4 million, funding simultaneously not only the games we are already developing (which would speed the process, but not expand the profits by much for the number of titles), but also new titles from external authors, all contributing to the grand project.

 

Understanding the Tabletop Game Industry

Design – most tabletop game companies don’t have a staff of inventors creating new games. It’s usually more cost effective for them to buy or license game designs from independent inventors. Inventors drive the whole creative process. They take the germ of an idea and play around with it until it’s a working game. That means adding a set of mechanics, which work for the specific purpose. After cleaning the mechanics of the game, they create a basic prototype, and test it out with players, collect feedback, and make numerous revisions until it’s ready to pitch.

Pitching – the designer’s next step is to convince a publisher to risk his money getting the game manufactured. Just like with movies, books, and music, the game industry is full of people who overestimate their own talent, even including people that have no experience with any type of board game, yet claiming some original or interesting design. For that reason publishers have to screen out numerous projects that are not worth the effort.

Here is when things changed with the emergence of the crowdfunding platforms. Instead of submitting a game to a studio, designers can now proceed to fund their idea by pre-selling it through one of the platforms. But that also created another paradigm – the game has to be in nearly ready to be published state in order to attract backers in Kickstarter, and this is often expensive process, especially if you aim at creating high-quality game: hiring in-house top artists ($700-$1500 for a piece of art, or a single 3D model, if your game has miniatures) is almost out of the question, as such people are usually working independently as freelancers. Then, you also need a 2D designer to create layouts, icons, and convert the freelancer’s work to final files, ready to be sent to the printer. More often, games are often created by unknown or at least not so popular artists, which lowers the prices significantly. But in any case, self publishing games is a huge problem.

Manufacturing – when a publisher gives the go-ahead to publish a new game, he hands it off to his art department. When the art and graphic design are finished, the rules are edited, and all the final touch-ups are complete, the game goes to production. The production people select what kind of paper and plastic are going to be used for each component and convert the artwork from computer files to films, which are fed into the printing machines at the factory. The presses churn out boxes, boards, and cards, the molds spit out the pieces, and a workers put them all together and shrink-wrap each game. When the entire print run is complete, it goes into a shipping container. Most publishers have their manufacturing done in China these days. Self publishing a game is a similar process (apart from having different departments working on the game), but requires much more involvement from the creator, and is usually a bit more cost effective.

Distribution – when the game is on a truck, it needs to get to stores. The very largest publishers can call up the large chain retailers and ask how many copies they want, but what about all the small publishers and small retailers? There are over over 7 500 hobby shops in the world that aren’t part of any chain. This is where the distributors come in. Distributors buy games from publishers, store them in a warehouse, mark them up about 50%, and send the retailers a catalog from which to order.

Retailing – tabletop game retailers fall into two major categories: mass market retailers and specialty/hobby shops. Mass market retailers are mostly composed of big department stores like Amazon, Wal-Mart, Toys “R” Us. Hobby shops, on the other hand, are usually small stores privately owned and run by dedicated people who love games (and/or comic books). Online stores emerged as a third category of game retailers, especially with hobby games, and their volume exploded in the last few years.

 

Market explained

Up until recently the tabletop market was a niche market that didn’t saw much growth. Then, just a few years ago, it simply exploded. One of the reasons for this expansion was the crowdfunding – not by simply allowing more funding, but by making the games more and more popular, and allowing the creators a way to fund their manufacturing, which in turn leads to more and more games released on the market.

Currently it’s a high profit margin market, where:

  • Average printing cost is around 25-35% MSRP shipped. Some games are more expensive (especially those with plastic miniatures), other are very cheap to manufacture, selling at 500+ % their cost.
  • Average wholesale price is 50-65% of the retail price, offered by well established distribution network.
  • Kickstarter prices are 90-95% of the retail prices, but there is also the Kickstarter fee. Still, selling directly to customers in this way is much more profitable than selling games to distributors around the globe.

In 2015, the US & Canada market was at $1.2 billion, with a steady growth rate over 20% year-to-year, and these were the most advanced markets (so far). But games are also popular in Europe, especially UK and Germany, and they gradually spread around the world, raising the global market cap to nearly $5 billion in 2016.

According to a recent research, the global market is heading to capitalization of $8.12 billion in 2021. And then – there is the Kickstarter expansion. Looking at the figures – in 2015 and 2016 Kickstarter funding amounted for over $134 million and over $123 million respectively, which was amazing growth compared to $75 million back in 2014. What is more important, the amount of projects raising over $500 000 continues to grow each year, following the trend for consolidating larger funding for a smaller number of high quality projects:

Kickstarter basics

Kickstarter became a dominant funding platform for independent games, with tabletop category selling nearly triple the amount of video games in 2016, with a clear trend to create even bigger disparity in favor of the tabletop games in the future. Furthermore, it is the dominant marketing platform, together with BoardGamesGeek database, and campaigns are now even used as a pre-order system for small retailers. Marketing of new games mostly related to making Facebook campaigns, notifying major board gaming groups, adding a game to the BoardGameGeek database, and running some advertisement there or releasing items that are sold only in the BGG store.

It allows any individual to fund his creation by pre-selling it, and while it also created an initial rush of lower quality games (similar to the current ICO market state), eventually people started recognizing and funding only high quality games. And often this is also the expensive ones. The amount of money to be raised there by 2020 is staggering, considering we are still talking about products with fairly low popularity and very low penetration, and it’s only limited by the number of people using the platform, But this number grows daily, because it’s in everyone interest to make it more popular. The more people pledge in a game development, the more stretch goals are unlocked, and the game receives a chance for better quality of the print, which helps promote the game easily in the social networks and the few websites starving for more games news.

 

Cryptum Board Games and Kickstarter

The idea of creating an ICO for a board games studio is a step over another basic idea, used by one of the big game publishers of our time – Cool Mini or Not. The said publisher has a game released in Kickcstarter every few months, and while rumors tell that they pay the manufacturing of each new game with the funds from the next campaign, the company started to run campaigns that raise no less than $1 million per game, often rasing more than $2 million for some of their games. Sadly, the emergence of such corporate interests in Kickstarter also led to a form of inflation of the expectations towards quality of the game components (mostly plastic miniatures, but also cardstock quality, etc.), and art direction, and this alone made it harder for the smaller studios – unless they offered very good, high quality games, their funding campaigns remained on the low side.

People also started recognizing the quality work even from small teams. The famous game Gloomhaven first Kickstarter campaign was under-costed (less than $70 for the biggest game ever made) and while it was backed by 4900 people, it raised only $386 000. At the same time, just for few months, retailer pre-orders amounted 25 000 orders, and, since the author didn’t have enough funds to manufacture enough games, only 2000 were served. The Second Printing of the game had 40 642 backers at a higher price, rising just shy of $4 million. And the retail pre-orders became even more, with demand again exceeding the printing numbers and reservation queue.

This is where we came with the idea of pitching higher-quality games able to collect more funds in Kickstarter, which in turn leads to more people knowing about them, and higher sales in the retail channels. For that to happen, we need to step up from the usual process of releasing the game and then funding another one with the collected funds. As we have been in the crypto world for years, we came up with the idea of funding the studio with ICO, offering share of the profits back to the token owners AND, because this allows us much better cost optimization, we would also offer free games to the token owners.

We also have many great ideas regarding the cost optimization, as this is integral part of the game creation business, but please don’t expect us to share all the know-how in detail.

 

Board games base cost-optimization explained

If you go back through the text explaining the board game industry and imagine there is a shortcut between Manufacturing and your customers, you will find that this way you clearly cut out the distribution channel and the retail businesses, which alone boosts the profit by nearly 50%. Games are usually pre-sold on Kickstarter at a price that is slightly reduced in comparison to the SRP (Suggested Retail Price), and the platform has a fee (currently 5%), yet the difference is not even partially closing the huge gap to distribution prices.

Back on the manufacturing: most games require a print run for at least 1500 boxes, with games with miniatures being prone to higher requirements if the goal is to optimize the price due to the process of manufacturing plastic pieces. Independent publishers usually don’t have pre-orders from distribution channels, and they rarely sell to small retailers (less than 5% or all games have a “retail pledge”). This means they have to cover the development expenses and the manufacturing from Kickstarter revenues, and often underprint the game, not satisfying the distribution channel or completely ignoring it.

As we intend to use the Kickstarter platform (and any smaller platforms as well) to generate initial amount of pre-sales to customers, we would also offer the so called “retail pledges” that allow small stores from all over the world to get the game at the time of the campaign fulfillment instead of waiting for it in the distribution channel, at a reduced price, which would also limit some of the distribution sales at highly reduced price. This is a trend that already worked well for few major campaigns, and it allows the retailers to anticipate games much earlier and generate pre-orders by the time the pledge managers (the part of the campaign when you confirm the number of games, expansions and add-ons you want, usually 3-4 months after a campaign) are open, which leads to even more sales.

As we are already part of the current distribution chain, we will also generate pre-orders from it, and, in addition, some manufacturers also offer their own channels for sales. This will allow us to generate prints well over the basic mark required by the manufacturer, and maximize the profits as much as possible. The basic reason to be able to do it is the fact we will have the funds to pay the manufacturer because we are not funding on “per-game” basis, waiting for the Kickstarter funds to be release (60 days after closing a campaign) – instead we are using the Cryptum Sale to start the process.

 

Basic expenses in game development

Our goal is not to create a studio with in-house designers and artists. Outsourcing the work to freelancers has some risks attached (see below), but it is much more cost-effective solution, and it also allows greater variety in the art direction, while it transfers part of te project management to contracted artists, lowering the requirement for in-house staff. Using contacts we already have, as well as seeking new artists that would want to take part in larger projects is what we would do.

This turns our work into a a project management (with subcontracts when needed, we are not omnipotent), and this is very inexpensive solution – there is not a single person hired or a regular salary paid in our board games project. Instead, all of the work would be done at industry standard or lower rates, basically making us “undercosted” compared to normal studio expenses. for in-house staff. In fact – nearly all of the sale funds will be invested in direct payments to contractors and freelancers.

Working with freelancers bears some risks. For example, while working on the game Primewarp: Genesis, the main 2D artist decided to stop any work until further notice. At nearly 90% of the work done, this created quite a turmoil, as finding another artist with the same personal style is nearly impossible. Luckily for us, he agreed to finish the job, and now all of the required art for the game is ready.

 

Cryptum games, Estimated Profitability

We are approaching a profitable market with a sound business plan. Even looking at only the 4 games we announced and their expansions, it is possible to generate over $2 million of revenues, and with that it is easy to get the train rolling faster, developing more games, and that’s not even considering the growing retail market. There are plenty of games selling over 30 000 copies, and this is where we want to go, instead of climbing the market tree slowly by printing small quantities.

We have 4 games in development, and a total of 5 expansions planned for them. If you are not familiar with the games design process, please refer to the “Understanding the Tabletop Game Industry” section above – this will give you better understanding of the process. The board games creation doesn’t follow the same formula as video game creation, and adding graphics, or even creating a pre-production copy, is something that happens nearly at the end of the development stages.

For more details for all of the games, please visit the links below:

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