Because they're a publicly traded company, we have the privilege of digging through Games Workshop's financial reports every six months. As such, we all have a reasonable idea of how well or badly GW is doing each year. But what about the other major miniature game manufacturers, like Battlefront, Wyrd, or FFG? Are they doing better than GW? About the same? Worse? Unless some scandal breaks and airs some dirty laundry, we generally have no idea.
Well, some laundry is now being aired in regards to Battlefront, Dust Studios, and their latest Kickstarter. We're mostly hearing from a very mad Dust Studios, who have not yet been fully paid from the nearly $470,000 that was raised for Operation Babylon. Battlefront isn't saying much, but their actions indicate that they may be experiencing some severe cash-flow problems, and have used that money to pay old debts instead paying for the completion of the Kickstarter.
Here's a rundown of what we know:
1) In May of 2013, FFG sold the rights to distribute Dust Studios' games (Tactics & Warfare) to Battlefront. BF is best known for its 'Flames of War' WWII wargame, and the very successful "Sparticus" and "Firefly" boardgames.
2) According to multiple sources, there was some kind of clause in the FFG/BF contract that BF could not sell any sets that FFG still had in stock. FFG has not been in any rush to ship their stock out, which has forced BF to create entirely new army box sets instead of being able to sell individual troop/vehicle kits.
Why BF didn't just buy FFG's stock outright is a very good question. But they needed some new kits to sell, so...
3) On June 19th, a Battlefront Kickstarter for "Operation Babylon" was successfully funded for $469,313, or 939% over what they asked for. Supposedly all the design and modeling work was done, so they'd be able to manufacture and then ship to backers immediately.
To quote the KS page:
"We have every confidence that we can deliver Operation Babylon without trouble.
Because the production and distribution of this project will happen in an accelerated timeframe, (that’s the main reason for doing it!) there is the unlikely possibility of unexpected delays. Production will rely on third-party manufacturers for casting, printing and packaging. Of course, we have a proven history of working with these businesses, and have found them to be very reliable. However, an unanticipated problem with any stage of production could delay delivery for some items.
Dust Studio are working with Battlefront to bring this project to completion. Battlefront will handle the fulfillment of the pledges, shipping the rewards to backers through their worldwide distribution network. Whenever you try to transport large volumes of goods around the world, there is always the potential for customs delays and other shipping headaches.
But we have worked carefully to plan our delivery estimates, and we do expect to be able to meet them. Theoretically, If it should transpire that most of the project is completed and ready to ship, with just a few late items holding things up, we intend to consult with our backers about the best way to proceed; if people preferred for us to ship items in ‘waves’, rather than waiting for the last few items, we would try to proceed accordingly. But honestly, we do not expect this to be a concern, and we look forward to completing Operation Babylon on schedule."4) The Kickstarter was supposed to ship in August of last year, but instead BF decided to separate its shipments into two "waves" to backers. Wave one didn't start shipping until early December, and as of January 30th it was still not complete. Slow shipping times have been repeatedly blamed for the delays.
5) On February 1rst, Paolo (The owner of Dust Studios), dropped a bombshell in an interview, saying that DS has still not received a purchase order for the sets required to fulfill the 2nd wave of the Kickstarter. Nor have they received any money from the KS for its manufacture. So they have no idea how many sets, and of what kind, are needed. Nor do they have the funds to pay for them.
In addition, he released a copy of his contract with BF for the KS project, which specifies that immediately upon receipt of their KS funds, BF was supposed to pay DS in full for all of their manufacturing costs, plus another $220,009 that DS didn't receive for 3 other releases. If Dust Studios cannot manufacture the goods, then all refunds to backers come from them, and not BF (very dumb, by the way).
6) Battlefront released a zero-information statement to address all this. The lack of any direct statement on Paolo's allegations is kind of damning.
And Now For What All This Implies
David Galdasz, on the Kickstarter comment page, lays out a pretty good theory of what's going on.
"And now for my much longer "angry biased viewpoint". (Now with 100% more half-assed guessing! :))
There is some evidence that the relationship between Dust Studios and Battlefront was somewhat rocky even before the KS. As noted in the contract Paolo posted, Battlefront owed Dust Studios a not insignificant amount of money for the production related to "Operation Achilles".
Now - normally that would be minor information, except that over the last year, Battlefront has had a MAJOR release and many product releases for their own lines. (Note - "Fate of Nations" was published last year - approximately a year after Operation Achilles was released.) There is a chance that Battlefront ignored their fiduciary duties of paying their business partner in order to forward their own products.
Now, here's where the "half assed guessing” comes into play. My guess is that Battlefront WAY overestimated their ability to sell and distribute the "Operation Achilles" related Wave 9 materials - thus running up a large bill and a large stockpile of merchandise (Hence the giveaways and sales as part of the KS. It clears the stock off the books.). This probably pushed distributing Dust Tactics over the line into "unprofitable" - thus making Battlefront somewhat unwilling to spend more money distributing the line when they could manufacture and sell their own product at a greater profit. Battlefront - being a small game company - logically made the choice to follow the better money. But they still owed Dust Studios a debt that needed to be paid.
This is where things start getting really fuzzy. Judging by the contract Paolo posted, one of the unadvertised purposes of the Kickstarter was apparently to help Battlefront get out of the weeds in regards to Dust. Basically - the money (after KS's cut) was to go to Battlefront, who would do the logistical work related with the project. Dust Studios was to be paid on a "per model" price point - first for any Operation Babylon minis, and then - if any money was left over – the rest would go towards the outstanding debt relating with Achilles.
The problem is - the Kickstarter has been both a greater success and disaster at the same time. A large number of stretch goals were posted and unlocked - increasing the production costs of the Kickstarter. Battlefront aggravated those problems with: poor communication - generating expectations that could only be fulfilled with heroic efforts, poor decisions regarding swaps adding complexity to the pledges, and poor execution on the pledge manager, which greatly slowed the processing of orders. The increasing number of "waves” and “corrections" have probably increased shipping costs across the board as well. I also think that Battlefront may have decided to give away the excess "Achilles" stock as a bonus in the Kickstarter so they could charge it against the initial portions of the KS total too, instead of keeping it as a separate debt that would only be serviced AFTER the KS production.
According to Paolo, mediation requested by Battlefront apparently broke down when BF demanded greater price reductions on the per piece nature - effectively saying that they've paid all they can for the Kickstarter and effectively wanting the remaining models "Wave 2" free or at such a low cost they are effectively free. As that is where the majority of Paolo's costs are right now (new dies, as opposed to producing off paid off dies) - that is not really a negotiable point.
So – the real result is that the Kickstarter is having the exact opposite effect to what the original intentions were. Higher production and distribution costs are demolishing all the "leftover" money that Battlefront was going to pocket or use to pay off the Achilles debt. In comparison to their "owned" product lines – distributing Dust Tactics is effectively a pit in which to throw money into. Odds are, the only thing they are going to get out of completing this Kickstarter properly is *possibly* salvaging their reputation. Still - they may consider 1500 angry backers as "Acceptable losses" - especially if their other product lines are going strong.
Meanwhile - Dust Studios is slowly being "starved" by Battlefront as well. I can't imagine the long delayed payment for "Operation Achilles" did good things to the company bottom line. (Slightly indicated by the limited releases produced by Dust Studios over the last year in comparison to the year before.) The long delays in getting the Pledge Manager together prevented a timely turnaround on Wave 1, and Battlefront has not given any information on Wave 2 to Dust Studios. Thus Paolo can either sit idle or try guessing what his production quantities should be.
Now - I will admit that some of this is guesswork based off Paolo's information and looking at schedules. I could be very wrong, and if I am, I apologize. But the given information hangs together in a fairly plausible kinda way. Your opinion may vary..."
And My Take...
Paolo is an artist, and I can imagine that he's not exactly the easiest guy to work with. I also know that similar problems with model production caused problems even when FFG was distributing Dust. I get the impression that Dust Studios only produces models, not rules. So FFG (and later Battlefront) were responsible for taking DS's models and building proper games around them. This supposedly caused friction when Paolo didn't like the rules for Dust Warfare.
That said...
If Battlefront is losing money on Dust, then it needs to pay what is owed and amicably sever their distribution deal with Dust Studios once this Kickstarter has been fulfilled. A healthy company should be able to write off the loss and move on. After all, Battlefront did say the following last May:
"We generate more revenue in a single boardgame release or month of FOW sales than DUST is worth all year so this project is all about the DUST Studio and their needs and we as partners are doing our part to help" Battlefront, May 22, 2014
The fact that BF won't (or can't) pay for the production of wave 2 makes me wonder what their cash flow situation is, and the wording of that contract (putting all the responsibility for delivery on Dust Studios) says that they're not being totally above board.
So let's speculate a bit more...
1) Ill-Advised Purchases?
Shortly after the release of 3rd Edition Flames, Battlefront spent much of their extra cash by purchasing the failing Wargames Illustrated. This prevented the magazine from going out of business, but to many, it didn't make much business sense. Battlefront gained a magazine in which it could highlight its own products, but who in their target demographics actually reads magazines anymore? I've seen them at my local shop, and flipped through a couple. But I've never bought them, nor seen anyone reading them at events. Battlefront's website is a much more interesting place to go for Flames of War specific content.
So it's hard to imagine that Wargames Illustrated is doing anything but losing money for them. Sucking money out of their Flames sales.
2) Low-Cost Plastics Competition
Then along came The Plastic Soldier Company. A little 2-man shop that started producing and selling VERY nice plastic tank and infantry kits for less than half of what BF charges for its Resin/Metal models.
Battlefront should have immediately swiveled to face this new threat head-on (like Microsoft did with the internet) with high-quality digitally designed/machined kits of their own. But they dragged their feet for over a year before timidly producing a few track and barrel sets for existing resin models. It was a good 2 years before they did any sort of real effort to release plastics (as a starter set), and these were not digitally designed or machined. Instead, they are still using decades old plastics manufacturing tech that reproduces hand-sculpted models (in a bobble-head style which many customers don't like).
But Still, 3 years on now, Battlefront is not offering plastics en masse. The vast majority of their kits are still resin-cast models. Some have plastic barrels and treads, but most still come with metal parts.
(Mind you, Games Workshop has had digital design and tooling for over 10 years now.)
Is this failure to meet the digital plastics challenge due to ignorance/arrogance? Or was BF simply not in a financial position (after acquiring Wargames Illustrated) to invest in changes to their manufacturing pipeline? When they finally were able to make the switch, did the higher up-front (but lower long-term) costs of switching to digital design and tooling cause them to go with older, less efficient technology that still can't compete with the quality and low cost of PSC plastics? Has even that investment paid off for them?
3) The Focus Shift To Board Games
It's been interesting to watch how BF has approached Gencon over the last 3 years.
In 2012, their huge booth was entirely devoted to Flames of War and Gale Force Nine products.
In 2013, Flames was relegated to one small shelf (with a special order form for everything else), and all of the focus was on their Dust, Sparticus, and Firefly games. The board games were selling like hotcakes, and BF was obviously chasing the money.
This last year, 2014, saw them ditch Flames completely. In favor of nothing but Dust, Firefly (with special add-ons), Sparticus, and their new 'Sons of Anarchy' game.
This speaks well to Battlefront's foresight in developing good boardgames (a growth market right now), but if Flames was selling well, they would have had that on display too. To me, that implies that Flames has become (due to new model competition and a general wargaming decline) a marginally profitable line for them. Possibly even a money loser. Which, when added to the almost certainly money-losing Wargames Illustrated (and under-performing Dust), becomes a big problem.
It might even be the case that Battlefront's boardgame sales are all that's keeping them afloat financially, and that their cash flow is so poor that paying off Dust Studios would break them. Or prevent them from developing and distributing their next licensed board game, which would eventually break them.
Whatever the truth of it, healthy companies don't act this way. I'll be very interested in seeing how all this plays out.
Oh, and CaulynDarr wrote a post last June about how Battlefront shouldn't be using Kickstarter. He decided that it was too mean-spirited, and deleted it. But now it looks like he was right all along. Maybe he should rewrite it in the light of what's actually happened?
So let's speculate a bit more...
1) Ill-Advised Purchases?
Shortly after the release of 3rd Edition Flames, Battlefront spent much of their extra cash by purchasing the failing Wargames Illustrated. This prevented the magazine from going out of business, but to many, it didn't make much business sense. Battlefront gained a magazine in which it could highlight its own products, but who in their target demographics actually reads magazines anymore? I've seen them at my local shop, and flipped through a couple. But I've never bought them, nor seen anyone reading them at events. Battlefront's website is a much more interesting place to go for Flames of War specific content.
So it's hard to imagine that Wargames Illustrated is doing anything but losing money for them. Sucking money out of their Flames sales.
2) Low-Cost Plastics Competition
Then along came The Plastic Soldier Company. A little 2-man shop that started producing and selling VERY nice plastic tank and infantry kits for less than half of what BF charges for its Resin/Metal models.
Battlefront should have immediately swiveled to face this new threat head-on (like Microsoft did with the internet) with high-quality digitally designed/machined kits of their own. But they dragged their feet for over a year before timidly producing a few track and barrel sets for existing resin models. It was a good 2 years before they did any sort of real effort to release plastics (as a starter set), and these were not digitally designed or machined. Instead, they are still using decades old plastics manufacturing tech that reproduces hand-sculpted models (in a bobble-head style which many customers don't like).
But Still, 3 years on now, Battlefront is not offering plastics en masse. The vast majority of their kits are still resin-cast models. Some have plastic barrels and treads, but most still come with metal parts.
(Mind you, Games Workshop has had digital design and tooling for over 10 years now.)
Is this failure to meet the digital plastics challenge due to ignorance/arrogance? Or was BF simply not in a financial position (after acquiring Wargames Illustrated) to invest in changes to their manufacturing pipeline? When they finally were able to make the switch, did the higher up-front (but lower long-term) costs of switching to digital design and tooling cause them to go with older, less efficient technology that still can't compete with the quality and low cost of PSC plastics? Has even that investment paid off for them?
3) The Focus Shift To Board Games
It's been interesting to watch how BF has approached Gencon over the last 3 years.
In 2012, their huge booth was entirely devoted to Flames of War and Gale Force Nine products.
In 2013, Flames was relegated to one small shelf (with a special order form for everything else), and all of the focus was on their Dust, Sparticus, and Firefly games. The board games were selling like hotcakes, and BF was obviously chasing the money.
This last year, 2014, saw them ditch Flames completely. In favor of nothing but Dust, Firefly (with special add-ons), Sparticus, and their new 'Sons of Anarchy' game.
This speaks well to Battlefront's foresight in developing good boardgames (a growth market right now), but if Flames was selling well, they would have had that on display too. To me, that implies that Flames has become (due to new model competition and a general wargaming decline) a marginally profitable line for them. Possibly even a money loser. Which, when added to the almost certainly money-losing Wargames Illustrated (and under-performing Dust), becomes a big problem.
It might even be the case that Battlefront's boardgame sales are all that's keeping them afloat financially, and that their cash flow is so poor that paying off Dust Studios would break them. Or prevent them from developing and distributing their next licensed board game, which would eventually break them.
Whatever the truth of it, healthy companies don't act this way. I'll be very interested in seeing how all this plays out.
Oh, and CaulynDarr wrote a post last June about how Battlefront shouldn't be using Kickstarter. He decided that it was too mean-spirited, and deleted it. But now it looks like he was right all along. Maybe he should rewrite it in the light of what's actually happened?