Report to the Stakeholders for 2016

by Phil Reed

Steve Jackson Games has one stockholder: Steve. But many people have a stake in our success. Our STAKEholders are our employees, our distributors and retailers, and, of course, the people who play our games . . . as well as the freelance artists and designers who create the finished product, the volunteers who demonstrate our games at conventions and retail stores, and the folks who run game conventions.

Overview

We are, I assume the reader knows, a publisher of games. We have been in business since 1980. At the end of 2016, we had 46 full-time staff and contractors, plus a few part-timers. Most of our line consists of card games, boardgames, dice games, and RPGs. We sell through hobby distribution, the mass market, and direct sales – both physical products and digital downloads.

2016: Executive Summary

2016 was a challenging time for many of us in the office. It was our second year in decline, with gross income just over $6 million. Additionally, this was the first year in over a decade that we showed a loss. Our insistence on perfection resulted in our two biggest planned releases -- the Munchkin Collectible Card Game and Car Wars Sixth Edition -- being pushed back (keep reading for more information on both of these games). That meant our time invested in both games did not benefit the bottom line in 2016, and that led to lower than expected revenue. Fortunately, our management team saw early enough in the year that these games would miss 2016 that we kept our cash flow stable and avoided potential cash crunches. Our cash flow report -- first mentioned by Steve in the 2010 report -- continues to protect us from unexpected harm.

The good news is that the work we put into our Munchkin Guest Artist Edition series back in 2015 paid off in 2016. Having so many games completed and at print before 2016 even started meant that we were able to devote more time to future releases; the less we scramble to meet deadlines, the better our long-term plans and schedules become. At this point, many of the 2017 Munchkin game releases are already at print, and a few titles are in our warehouse and ready to ship to distributors on schedule. Delays are painful, but working ahead and getting games into the warehouse early is an excellent thing.

At the moment, it looks as if 2017 will also be a difficult year for our team. We took on some larger projects at the end of last year (and early in 2017), in addition to the Munchkin CCG and Car Wars, and those new projects have not proceeded as planned.

• Dungeon Fantasy - Our Kickstarter project to create a GURPS introductory box set has run into more troubles and derailments than we would like. A game that was meant to go to the printer before the end of 2016 is still clogging our pipeline and causing constant distractions. The project was not as far along in the process as it should have been, and miscommunication regarding the game components ballooned our costs. At the moment, barring a miracle, what would have been a profitable project is rapidly turning into a loss. This is becoming an ongoing problem for GURPS projects (see Discworld and Mars Attacks, below, under Failures).
• Ogre Miniatures Set One - This expansion to the new Ogre Sixth Edition game was another Kickstarter project last year, and we've again caused delays that have pushed the release back later than we had planned. The problems here are less disruptive to our schedule than Dungeon Fantasy's ongoing "Destroy all deadlines" crawl to the finish line, but the lateness of the project is a source of frustration and many sleepless nights. Lesson learned: Finish all CAD work and miniatures tooling before launching any more Kickstarter projects involving minis. This is risky -- what if a project fails to fund? -- but it is worth taking the risk.

2016: The High Points

Munchkin

Most of our work with Munchkin in 2016 was focused on reprints and supporting our licensees, but there were a few new Munchkin titles that deserve special mention:

• Guest Artist Editions - 2016 was the 15th anniversary of Munchkin, and to celebrate we invited some of our favorite artists to provide their take on classic Munchkin games. These sets gave us a chance to experiment, and several of the artists have contributed to other projects, including the Munchkin CCG.
• Moop's Monster Mashup - We're always looking to try new things, and last year we stepped outside of the standard Munchkin format and released a Munchkin game without the word "Munchkin" in the title. The set sold well, and has already been reprinted in a new format, but confusion at retail makes it unlikely that we'll try this naming experiment again.
• Grimm Tidings - Our very first game at Walgreens, Munchkin Grimm Tidings was consistently one of the top selling games at the pharmacy chain after it reached shelves in September of last year. We are allowing it to go out of print for now and have finished something new for Walgreens later this year (it's on the boat as of this writing).
• Munchkin in general - We are now working far enough ahead of schedule on most of our Munchkin games that Steve has already started working on our big 2018 Munchkin project, and Andrew will be shifting to 2018 projects as soon as the Munchkin Shakespeare Kickstarter games and accessories go to print.

New Games

We launched five new games last year. Producing five very different games in such a short time took time away from Car Wars and the Munchkin CCG (keep reading for the status of those games), which was unfortunate, but our sales and marketing team asked for some new designs to sell alongside our ongoing Munchkin support. Our design and development teams learned a lot on these smaller games and have brought these lessons back to the larger projects.

The five new games published in 2016 were:

• Ogre: Objective 218 - This is a version of The Battle for Hill 218, published by Your Move Games. Sam and Randy played the original game and then adapted the mechanics to the Ogre setting. We packaged the game in an attractive point-of-purchase display, and this made a great first step in bringing Ogre back to retail shelves.
• Simon's Cat - Partnering with the popular YouTube series meant that we had access to a lot of adorable art and a shot at tapping into an audience of millions. Selling over 40,000 copies in the first six months of release demonstrated that we were right about one thing: People love cats and fast-playing card games.
• I Hate Zombies - This Kevin Wilson design was first published by Board Game Geek. When they approached us and asked us to take the game to market for them, we said "Yes!" Hey, a chance to work with the fun folks at BGG and Kevin Wilson is not something you wanna say "no" to.
• Bill & Ted's Excellent Boardgame - Sam and Randy designed this insane programmed movement game. The chaotic gameplay fits perfectly with the movie's storyline. Excellent! Len Peralta was a pro every step of the way as he produced the game's artwork, and I'm calling this one my favorite of our 2016 games. (I lose a lot, but I have fun losing.)
• Batman: The Animated Series Dice Game - We get to make a Batman game? Awesome! Once the contract details were nailed down, our team hit the ground running. The game came out late last year and we're working hard to place it in as many sales channels as we can reach. Keep watching the Daily Illuminator for more places you can buy this fun little dice game!

Other Great Things

• The Munchkin Book, from BenBella's "Smart Pop" imprint, finally reached stores. This collection of essays about Munchkin gave all of us a look at the game from different perspectives, and the book turned out just as fun as we had hoped it would. Plus, it has game rules!
• Zombie Dice keeps right on selling! As of this writing, we're again racing to reprint the game because of unexpected demand during the fourth quarter. A game from 2010 that keeps outselling our forecast is good and bad, but we'll take this situation over the opposite problem any day.
• We announced an Ogre video game, in partnership with Auroch Digital. So far, the game is proceeding on schedule and looks remarkable!

Staff

We shuffled the business around last summer, redefining Sam's role from Chief Operating Officer to Chief Creative Officer and drawing a hard line between making games and selling games. Sam and his team are now responsible for taking games all of the way from concept up through finished products on the boat for the long ride from China to our Georgia warehouse.

Ehhhhh . . .

These were places where we wanted a win and didn't quite get one, or where success and failure were mixed.

Marketing

We have been getting by with a small marketing team for many years now – seven years ago, Paul Chapman handled 99% of our marketing efforts as we were breaking into larger markets – and we have realized we need a larger team to handle the marketing needs of a larger company. Last year, we added several new staff to the marketing department. They are continuing to learn to work together and, while we didn't hit all of our marketing objectives in 2016, we should improve our marketing win ratio in 2017.

"Calculated Sloppiness" Catches Up to Us

In the 2013 report, Steve wrote:

"It's often not worthwhile to be perfect at everything; sometimes it's more cost-effective overall to do some things just any old way and save the effort and brainpower for Munchkin."

Steve was right, and I'm glad that we spent a few years devoting our efforts to Munchkin and allowing some stupid spending to happen. With 2016 being a down year, there were times where "spend our way out of the hole" resulted in more bad than good. This goes back to the "get our processes in order!" priority of 2015 (see below), which is still true. We're going to take a few extra minutes each time a strange obstacle comes up in 2017 and try to find a solution that doesn't default to "throw money at the problem!" In many cases, it will be along the lines of "throw Randy at the problem." Randy is an excellent troubleshooter and fireman, which is why he's our Operations Manager and an invaluable asset to our entire team.

We Need More Closers

With so many people relying on the business these days, we need more staff capable of taking projects to the finish line. This means we need at least one more closer on our team, and two more would be fantastic. As anyone who has ever managed a business will understand, closers are harder to find than you might expect. A talented closer keeps a project on track and thinks of every task involved in going from "I have an idea!" to "Now in stores!" If we could find just one more experienced closer to add to our team then some of us -- Steve, Andrew, Sam, Randy -- would feel a lot less stressed most days.

Failures

• Discworld and Mars Attacks - We published two new GURPS hardcover books late last year. GURPS fans celebrated, and the books turned out well, but their disappointing performance further supported the unfortunate realization that sales are no longer strong enough to make traditional distribution work for GURPS hardcovers. Today's cluttered market, combined with our insistence on getting it right, made both books expensive experiments that tell us one thing: Do not produce more GURPS hardcovers until we have guaranteed that the sales are there. Does this mean more crowdfunding for GURPS? Maybe! But until we see the retail sales of Dungeon Fantasy, we're holding off on any more printed GURPS releases. PDFs will continue, and we'll revisit the question of "print GURPS?" later this year.
• The 2012 Ogre Kickstarter project is still not completed. We made big steps forward on all of the various commitments, but we're coming up on five years after the project closed, and we are still sinking time into the project. The good news, though, is that we're seeing real progress; several outstanding pieces of the project are finally coming to a close. Whew.
• Our Munchkin kits, intended as quarterly promotional packages for hobby game retailers, didn't quite hit the quarterly schedule. What was even worse, we discovered that some of the kit contents didn't make it into the hands of Munchkin players, which defeats the purpose of doing these in the first place. We're looking at how we distribute the kits and trying to decide whether we should make changes to the program or let it go another year and try to correct course as each new box is prepared and shipped to retailers.
• Checklists and procedures continue to be out of date and incomplete. Some effort has gone into modernizing our ancient documentation and making the written processes reflect reality, but far too often work stops on administrative tasks in favor of pushing projects off to print.

State of the Industry

• In 2015, F2Z Entertainment purchased Plaid Hat Games, and in 2016 Asmodee acquired F2Z Entertainment. Carcassonne . . . Ticket to Ride . . . Catan . . . Pandemic . . . Yes, all of these games are under one home now.
• CMoN was listed on the Hong Kong Stock Exchange GEM (Growth Enterprise Market).
• Cards Against Humanity appeared on Target shelves (and reportedly dominated the games category at Target). And Target commissioned and manufactured their own version of the most popular new party game, Codenames: Deep Undercover.
• Kickstarter continued to be the place for games. Okay, world, please tell me: Just how many plastic minis do we need? (More. The answer is clearly "More.")

Shared Goals and Partners

The game business is a network, and the healthier it is, the better for all of us. SJ Games continues to value, and rely on, its hobby-industry partners. These include:

• the hobby-game retailers, who provide gamers with space to play our games;
• PSI, our fulfillment agent for most distributor sales;
• Surge, our licensing agent;
• the many overseas publishers who are translating Munchkin and other games;
• Adventure Retail, which represents us at San Diego Comic Con, Gen Con, and other major conventions;
• the convention organizers who showcase our work, and the dedicated hobbyists who serve as Men in Black to demonstrate our games at retail stores and conventions;
• GPI, which does most of our manufacturing;
• and the publishers, small and large, who distribute their digital products through Warehouse 23.

Priorities: 2016 Report Card

We set five priorities for 2016:

1. Get all 15 of the Munchkin Guest Artist Edition titles completed and shipped to stores. Yes, 15. We have already announced several Guest Artist Edition games, but not all of them! We have big enough hands to create plenty of other goodies that are going to make this a great year. Partial success. All of the games were completed, but we adjusted the schedule, and the last two releases -- Lar deSouza's Super Munchkin and Tom Siddell's Munchkin Booty -- are set for release later this year. We also trimmed the number of total Guest Artist Edition games slightly.
2. Successfully launch Car Wars Sixth Edition. This requires that many things go right – completion of the game's basic sets, a focused and profitable Kickstarter project, shipping the game to distributors before Black Friday (which means the game must go to print before July 2) – but I believe that we have the team to pull this off. Failure. We shared Car Wars updates a few times last year (here and here), but the cause of our failure here is an insistence on making the game exactly the way we want it. We would rather not ship the game than ship a game that doesn't meet our standards.
3. Continue supporting Munchkin with new expansions (a handful of which are already at print), ship at least one new core game, and improve our communications with distributors, retailers, licensing partners, and Munchkin fans. This includes finally launching a Munchkin email newsletter so that we can communicate directly with the tens of thousands of Munchkin players across the world. Partial success. We managed to complete several new Munchkin releases -- including sending games to print in 2016 that are set for release later in 2017 -- but our newsletter efforts have been less than we hoped. We did launch a newsletter for gamers, but we have failed to properly promote it, and we continue to neglect the updates the newsletter needs.
4. Improve and document our internal processes so that we lighten Steve's load. Transferring decades of Steve and Monica's experience into a readily accessible format will make everyone's job a little easier. This should also give Steve even more time at home to do as he wishes, whether that's play with trains or games. Mostly a failure, though we did see the first pieces of a reworked employee manual early in 2017.
5. Hammer at the remaining Ogre commitments. This will require hiring a new Ogre line editor, but that cannot happen until we transfer more of Steve's expectations and experiences to a line document that staff can consult before reaching out to Steve for assistance. While the project may not be 100% completed, the weight of Ogre has lifted a little as we continue to accomplish tasks. I'm calling this one a partial success, if only because fewer incomplete Ogre commitments – thanks to the work of Steve and our new Ogre Line Editor, Drew Metzger – means we're all sleeping just a little easier.

Priorities for 2017

We often set ourselves five priorities, but last year's disappointing performance shows that's a bit too ambitious. So, this year we're setting only two priorities:

1. Complete the commitments we have made through three different Kickstarters. That means wrapping up Dungeon Fantasy (no matter what it takes), finalizing the Ogre Miniatures Set 1 project, and shipping Munchkin Shakespeare to Kickstarter backers on schedule. These projects override everything else.
2. Put the Munchkin Collectible Card Game to bed by sending the core game and first expansion to print before the end of the year. Please note that this is not "place the game in stores" before the end of the year. That would be an unrealistic goal, so we're instead planning for something that we believe we can accomplish.

Everything else is a non-priority, something to do after the priorities are under control.

A Brutal Year

We expect 2017 to be a difficult time for our team. We must complete our Kickstarter commitments; every day that the Dungeon Fantasy and Ogre projects run late is another day of stress for all of us in the office. (Fortunately, our team has the Munchkin Shakespeare project humming along wonderfully, and there's a strong chance that the project will deliver on schedule.) We will get through the year, we will complete the projects that are weighing us down, and we will do all we can to close 2017 on a high note and set everything up to make 2018 a year that makes us proud.

Keep your eyes on the Daily Illuminator and join us on Facebook, Twitter, and our forums; 2017 is going to be a interesting year.

– Phil Reed

Top 40 Products by Dollar Volume
1.	Munchkin Deluxe	21.	Super Munchkin Guest Artist Edition (Art Baltazar)
2.	Munchkin	22.	Munchkin Steampunk Deluxe
3.	Zombie Dice	23.	Munchkin Cthulhu Guest Artist Edition (Katie Cook)
4.	Munchkin Legends Guest Artist Edition (Mike Luckas)	24.	Munchkin Fu Guest Artist Edition (John Kovalic)
5.	Munchkin Mass Market Edition	25.	Munchkin Oz
6.	Munchkin 2 – Unnatural Axe	26.	Munchkin 5 – De-Ranged
7.	Simon's Cat Card Game	27.	Munchkin Pathfinder Deluxe
8.	Munchkin Grimm Tidings	28.	Munchkin Zombies Deluxe
9.	Munchkin Zombies	29.	Ogre Sixth Edition
10.	Munchkin 3 – Clerical Errors	30.	Star Munchkin Deluxe
11.	Munchkin Steampunk	31.	Munchkin 8 – Half Horse, Will Travel
12.	Munchkin Pathfinder	32.	Bill & Ted's Excellent Boardgame
13.	Munchkin Cthulhu	33.	Munchkin Zombies Guest Artist Edition (Greg Hyland)
14.	Munchkin 4 – The Need for Steed	34.	Munchkin Apocalypse Guest Artist Edition (Len Peralta)
15.	Munchkin Guest Artist Edition (Ian McGinty)	35.	Moop's Monster Mashup: A Munchkin Game
16.	Munchkin Quest	36.	Munchkin 7 – Cheat With Both Hands
17.	Munchkin Apocalypse	37.	Munchkin Puppies
18.	Munchkin Legends	38.	Munchkin Monster Box
19.	Illuminati	39.	Munchkin 6.5 – Terrible Tombs
20.	Star Munchkin Guest Artist Edition (Len Peralta)	40.	Super Munchkin

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