Jim Butler said:
I think what you're seeing is the start of a collapse; not consolidation.
You've got a number of small companies that have determined that they can't produce products profitably any more, and they're moving to other companies or forming conglomerations. So, instead of 5 companies releasing 5 products, you've got 1 company releasing 5 products.
I think you're spot-on with this, Jim. We hear all the time about "the d20 market has reached saturation" and so on and so forth. I tend to agree with that sentiment... a quick look at the "Publisher List" in the Reviews section of this very site tells me we have 168 Publishers (of these, 36 have produced 10 or more products, 38 have produced 4 through 9 products, and 94 have produced 3 or fewer). The Reviews pages list a cool 1440 products... and all of this in a span of what, just over three years? That's an average of 40 products per month over the past three years! That's too much!
The problem, as Jim alludes to, is not so much the size of the pie; rather, the problem is that the number of pieces the pie is cut into is so many that any individual piece is small. There are two ways to deal with this... either find a way to get more pieces or cut the pie into fewer pieces to begin with.
No individual company is going to cut back on its own, though - that will not appreciably affect the total number of pieces the pie is getting cut into and has the nasty effect of cutting revenue down considerably. To use the numbers above, it makes little sense for my company to go from 2 products per month to 1 because my take before was (2*1/40) but my take after reducing my products per month would be considerably less (1*1/39).
The cycle has gotten more and more frenzied as time has gone on... in general, publishers have increased their tempo with more releases, less time between products, and so on and so forth... which of course is counter productive because when EVERYONE is doing it, the pie is getting minced faster than you can demand more pieces. I think the acceleration has slowed of late because publishers simply CAN'T put out releases faster than they already do... and because the barrier for entry (cost-wise) has been set fairly high, it's hard now for a "new player" to enter the game.
However, now reality is setting in... publishers were anxious in the past to release more faster because they figured their profits on the size of pie slices remaining more or less the same... and of course, the faster they worked, the more the pie shrank. Now we're at a point where publishers CAN'T really increase the number of slices they grab, and they realize now that what they're getting is not enough... they're starving because the slices are too thin. Of course, you'll always have some "one-shot" publishers, but at least in the print market, those seem to be getting fewer and farther between.
It's a Catch-22... they can't by themselves slow their releases down, because everyone else continues to release stuff... but they can't keep going at the current pace because they're losing money.
So what happens? As Jim said, a collapse. (I think this has been exacerbated by the downturn of the economy in general, but the principle is sound.) We've passed the "critical mass" of products that can be supported... and the only way for a publisher to stop bleeding money is to exit the game entirely - by choice (getting out while they're ahead) or by force (running out of money).
The first of the "big names" to fall won't make much of an impact... there are still too many guys out there splitting the market... the size of the pie slices won't increase appreciably. But as more and more of them start to fall off, the size of the pie slices will start becoming noticeably bigger, and eventually, we'll swing back past the point of equilibrium (we're overextended now). Those that survive will be (a) those with the cash reserves to publish at full speed and "ride out the storm," (b) those with a solid fanbase/sales/revenue stream, and/or (c) the "agile" ones that carefully conserve their resources and slow - but do not stop - their releases as the market begins to collapse, recognizing that once the collapse begins in earnest, it will take fewer slices of the pie to maintain the same profitability level, and scale back their releases at a rate roughly equal to the increase in pie size.
Note that being in the (c) group will require a VERY good feel for the pulse of the d20 economy and it's gonna be DARN hard to be in that group - slow your releases too quickly and you'll pinch your revenue off too fast by taking fewer slices when they're still small and crash... slow your releases too slowly and you'll be one of the companies that is overextended, runs out of money, and crashes... I think maybe one or two companies will manage to pull it off, but even that's not certain. If even one company manages this, I'll be impressed. If *more* than one company pulls this off, I'll be *shocked*.
The collapse will be ugly. And after the collapse, we'll probably overshoot the "sweet spot" and be underextended. Because the slices are so big once the remaining players are fewer, you'll see companies (a) scale back a little bit so they don't overextend themselves or (b - more likely) there will be another grab for more slices of pie, including by startups. This will again overextend the market - though probably not as much as before. This will trigger another collapse, though not as big, and the "sweet spot" won't be missed by as much. And things will roll back and forth, with alternating booms and busts, each smaller than the last in magnitude, until equilibrium is reached.
I also think that during the "Bust" periods, where few companies are around and fewer products are being released, will be periods where back orders will be a little more popular. Any time the market is underextended, since nature abhors a vacuum, something will have to step into the gap and my guess is that this will be in backorders, as backorders are really the only thing that CAN fill an underextension in the RPG market. But I'm certainly not going to advise companies to fill up now so they'll have plenty of back product - you'll crash during the periods of overextension first - the only people who will benefit will be warehouses stuck with older product (and even they won't be happy) and e-bayers.
What happens after all the dust settles and we have a more or less stable market is *very* much dependent upon where the "sweet spot" is for the number of releases that the market can handle. If the "sweet spot" is 10 products per month, for example, I think you'll see the major players who survived the collapse tone down their release schedule - because they'll have had to cut back on staff, etc. just to survive. You'll see 4 companies putting out 2 products per month and a couple of one-shots per month or perhaps a VERY small company or two doing a product every other month. If the "Sweet Spot" is 20, you may have one or two big boys doing 5 per month, another 3 or 4 doing 2 per month, another 3 or 4 doing 1 per month, and the slack taken up by semi-monthly or one-shot publishers.
Regardless, I think Jim is right... the "Golden Years" of d20 - at least from the standpoint of products being thick on the ground and publishers around every corner - are coming to an end, and quickly. And when the dust settles, the questions of "how big" and "how many" publishers will probably be less than what we have today - but the exact answers depend (as mentioned) on the "sweet spot" - and I don't think ANYONE knows exactly where that is. But we'll probably see fewer "big publishers" and they won't be "as big" as they were at their peak (around now).
Or I could be wrong and the market is about to explode due to Christmas purchaes and the reason things have been in a slump of late is everyone waiting to see what's on their local gamer's Christmas list - and gamers, being the procrastinators that they are, will get around to getting those lists done on Dec. 18th - AFTER they've sat through 11 hours of Lord of the Rings.
--The Sigil
