Added costs could cripple the tabletop industry and impair the next console hardware cycle.
The Trump administration is escalating the United States’ growing trade war with China, with hobby gaming now caught in the crossfire. A new document published by the Office of the United States Trade Representative lists thousands of goods categories that could be receiving new or revised tariffs in the amount of 25%.
On the list, buried between billiards and Christmas ornaments are a number of categories related to gaming, including video game consoles and machines, coin-operated arcade machines, and parts related to the operation of coin-operated arcade games.
The video game industry has already suffered a 10% tariff that impacts graphics card makers AMD and Nvidia. The Entertainment Software Agency (the lobbying body representing the video game industry) never weighed in publicly on the situation. Since then, the ESA has undergone leadership change, with Stanley Pierre-Louis taking over the president and CEO role after serving in that position on a temporary basis after previous head Mike Gallagher stepped down.
“The video game industry boasts a trade surplus for the American economy,” the organization told GameDaily via email. “Tariffs will hurt the American economy, its industries, and its consumers.”
This is a particularly sensitive time for the game industry, as all signs point to new consoles hitting the market in 2020. Sony has already hinted at its plans for PlayStation 5, and Microsoft is clearly gearing up with its focus on services like Game Pass, xCloud, and Play Anywhere. The two giants also recently announced a team-up for cloud services and AI technology development.
Video game consoles are typically sold as loss leaders (though Nintendo often shoots for break-even or profit pricing). However, an increase of 25% would upend pricing expectations among consumers, as manufacturers would likely look to recoup some of that additional expense.
The video game industry isn’t the only piece of the entertainment sector in the crosshairs. A standout inclusion in the proposal is section 9504.90.60, which covers “chess, checkers, backgammon, darts and table and parlor games played on boards of a special design and parts thereof; poker chips and dice.” The category related to playing cards is also included in the list.
The tabletop industry is experiencing a period of growth, driven in part by a smart marriage with the rise of crowdfunding. Tabletop games are easier than video games to promote via platforms like Kickstarter, because physical prototyping enables reviews and feedback early in the process.
Increased interest and this new sales vehicle has helped the industry grow to approximately $11 billion worldwide, with another 9% growth anticipated by 2023, according to Research and Markets. The proposed 25% tariffs could slam the brakes on that growth according to some players in the industry.
“Tariffs will drive prices up, quality down, or more likely both,” said Matt Aiken, co-owner and CFO of Keymaster Games. “It might come in the form of increased shipping costs—something Europeans and other countries already deal with—or transparent tariff fees. The cost for shipping to places like Switzerland is already 2x those prices and get passed on to the consumers. It will also come from publishers having to find new manufactures who will need to hire new talent to meet demand. And ultimately, the quality coming out of China is, in some cases, better than other countries, including the US.”
Aiken says that this will impact companies of different sizes in different ways. However, every developer and publisher will face the issue and likely see their products sold at higher prices.
“Start-ups don’t have the scale, and will need the revenue to cover the cost of smaller print runs,” he explained. “Small-to-medium sized companies like ours need the margin to cover expanding overhead—conferences, travel, selling costs—and larger companies have financial commitments to meet to stakeholders.”
A tariff of this size will force the entire industry to reorganize, says White Wizard Games chief operating officer Debbie Moynihan. The goal of the tariffs is to disincentivize Chinese manufacturing of goods destined (at least in part) for the United States. White Wizard currently uses a mix of Chinese and North American manufacturing. Currently, the company uses the United States as a distribution hub. If a tariff is enacted, any products printed in China and destined for non-US locations would be routed to regional distributors to avoid passing through the United States as is possible.
“We already ship some of our products to global hubs direct from the manufacturer when shipping from China, and I would expect an increase in shipping direct to distributors from China if these tariffs go into effect,” Moynihan told GameDaily. “This is a massive tariff, so I expect that it would inevitably affect pricing across the board in the tabletop industry.”
Moynihan anticipates that prices would increase “5 to 10%” across the tabletop industry. She posits that this will lead to “reconsideration of the entire supply chain by larger publishers, which could result in disruption for some players in the market.”
Retailers will also have to wrestle with the proposed significant change to costs. Aiken explains that every player in the channel will bear some of the pain, including distributors and small “friendly, local game stores” (small retailers that often support their local board game communities with meetups and in-store play events).
“Retail is also where publishers have much tighter margins,” he said. “We could see publishers play with the MSRP. What’s clear is that brick and mortar need to continue to diversify their revenue stream beyond game sales and into services.”
Small retailers, like David Bower, owner of Time Warp Comics & Games in Cedar Grove, New Jersey is already feeling the pinch of the proposed tariffs. “I am in favor of updating trade policy with China, but I believe the use of tariffs is a bullying strategy and not productive in the long term,” Bower said. “There have already been product delays announced by Games Workshop, a major company. Higher prices will have a very negative impact as I may not be able to pass on the cost to the customers or maintain a healthy profit margin. Product delays will also slow sales and further harm the business.”
Bower believes that tariffs could cause a devastating ripple throughout the tabletop industry, from publishers all the way down to retailers (both small and large).
“Small games companies and individuals that have funded projects through crowdfunding platforms like Kickstarter could be driven completely out of business by delays and additional costs,” he posited. “The industry is entering the summer convention season where shortages, shipping delays and higher costs could be devastating to companies marketing new games and needing convention revenue to offset the costs of exhibiting. A slowdown or increased costs could destabilize the whole product chain, as the games industry relies on front list instead of back list products.”
Kickstarter declined to comment, and additional game publishers asked for their thoughts on the situation either declined to provide a statement or did not get back to us by publication. Additionally, the Game Manufacturers Association (GAMA), the tabletop industry trade organization, has not yet responded to our request for comment.
GAMA executive director John Stacy spoke with Polygon shortly after the tariff proposal was issued. Stacy says his organization’s membership is deeply concerned about the impact a 25% tariff might have. He points to the increased reliance on Chinese manufacturing that has eroded domestic skill in this area.
“The [hobby games] manufacturing infrastructure in the United States has basically collapsed in the last 20 years,” Stacy told Polygon. “The expertise and the specialization is simply not there. Obviously, we still have some big manufacturers in this country, but they can’t do smaller products in the volumes that we’re buying them in — 2,000 copies or whatever — because it’s cost prohibitive to buy that small of a quantity from a U.S. company. So our members have to go overseas to buy them. That’s what allows them to actually keep their doors open, because the margins are so thin in our industry.”
Tariff hearings will begin on June 17, right after the video game industry gathers in Los Angeles for E3 and less than two months before GenCon, the largest tabletop convention in North America. New tariffs could go into effect as early as June 24, which would have a severe impact on both industries in the current fiscal year. Both the ESA and GAMA have their work cut out for them if they hope to protect their membership and a significant piece of the U.S. economy from this latest round of tariffs.
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