Trump's War on Board Games
The Elephant in the Room - Tariffs. So let's just get into the tariff conversation. First off, I'm not at all interested in talking about the politics of all this, especially in public. The tariffs create a huge functional cash flow and pricing problem for us, as they do much of the board game industry. Today I'm going to be as transparent as possible as I explain the issues we face, what we intend to do to move forward, and how you can help us. First of all, we hear this question a lot...
"Why Not Just Start Printing in the US?" How we wish we could! Unfortunately, we don't have the option to just "move your printing back to the US" because the quality and precision of manufacturing needed to produce many of the components in our games just does not exist at the scale and pace that we need in the United States. Believe me, we've searched for them and continue to do so (see Kai's more detailed note in her Production section later in the update). Price is, of course, an issue—as the bids we've received from the US-based companies we've asked to bid on projects were 3-4 times what it currently costs to print our games. But the key thing, sadly, is that even at hugely increased costs, the few US companies that can do SOME of the work that we need can't produce anywhere near the quality that we (and you) are used to with mass sophisticated game production in China.
We printed in the US for many years before moving offshore due mostly to quality issues (we were tired of and frustrated with those "bad old days" of paying for 10,000 countersheets and having to throw away 25% of them because they were miscut—often with no refunds or credits). For the few of those companies that still exist today, their machinery is older now and their capability to produce high quality game components has not kept pace with what the game market now expects. And they are very limited in how many projects they can run concurrently; they are certainly not in a position to print 25+ games a year for us, which is what we need financially to make GMT work. Ironically, although we're "too big" for such older companies, there are a couple of pretty high end European companies that have facilities here in the US, but we're "too small" for them (with minimum print runs required of 20-25,000 copies). That leaves us with virtually no viable options to print in the US at high quality and the scale that serves GMT and all of our customers.
We have been exploring, and will continue to explore, alternative arrangements for printing outside of China, but we have not yet found any that are satisfactory. See Kai's production section below if you'd like more details on our "search."
We're in this together. As you'll see from the financial details I'm sharing below, these tariffs and their meteoric rise over just a couple of weeks, have presented a set of huge, potentially fatal problems for us at GMT. What I want you to know is that we are doing everything we can to plan a viable route through the tariff minefields. And I want to tell you that we absolutely cannot do it without all of you, our customers, sticking with us. One of the effects of these tariffs and the dialogue around them is that a lot of people who live outside of the US are angry at the US government right now, some even boycotting US products. I just want to remind you that, although we understand the frustration and anger, this doesn't mean you have to be angry with GMT. We believe that we've done right by our customers over these 35 years, providing quality products and customer service and treating you all with kindness and respect. We've hosted hundreds of you at our various GMT events here in the US over the years, numerous GMT team members have attended your conventions in your countries, and many of us have become friends. But this environment of heightened tensions, frustrations, and anger created by the tariff/trade issues is a challenge to all of us. Will we retain our good relationships and friendships and mutual support amidst the chaos? That's a question that each of us individually has to answer, but what I can do today is tell you how we at GMT are approaching this.
Honestly, our response to this challenge is pretty simple. We will stay true to ourselves and will treat ALL of our customers, employees, and strategic partners—in any country—as friends who are worthy of kindness and respect. Despite what's happening on a national level, that doesn't have to—and will not—change who we are. What's being modeled for all of us at higher levels right now is "Care about yourself. Get your advantage. Don't worry about others. Demonize your opponents." Of course, the "us vs them" vitriol that this kind of approach has ignited between parties and countries is NOT the way we believe in treating people or how we do business here at GMT. Over 35 years, that kind of exclusive, divisive, selfish thinking has just never been part of our company DNA.
I hope, for all of our sakes, that these tariff conditions and trade issues don't last for long. But even if they do, it's not going to shake our commitment to treating our customers as friends and trying our best to create "win-win" scenarios for all of us. You matter to us. And frankly, as we've told you many times over the past 35 years, we can't do what we do without you. This is collectively OUR hobby, not any one company's or any one country's. It's something that many of us are passionate about and that we all enjoy TOGETHER around our game tables and online. So here at GMT, we're going to do everything we possibly can to continue to be transparent with our customers and to show leadership, kindness, and respect to each other and to all of you even through these rough times. We intend to make sure—to the best of our human efforts and abilities—that we can all continue to enjoy this hobby—and the games that we create and produce here at GMT—together for many, many years. I would respectfully and imploringly ask you all to join us in these commitments to each other as we consider how to keep GMT creating great games for you even in the face of the biggest threat to our continued existence as a company in the past 35 years. As you'll see in what follows, we absolutely need your support in order to survive this and to someday thrive together again.
Now Let's Look at The Big Financial and Operational Issues Created by the Tariffs.
Issue #1. Cash Flow. This isn't the one you hear about as much as you do "game prices" when you hear game companies talk about the tariff impacts, but it's definitely the one most likely to kill us. Because of the 145% tariff, those batches of games that we have currently printing in China (and any subsequent batches) are going to cost us EXORBITANTLY more cash than we planned for when we were told that tariffs would be 10% (we had a plan for that, and even for 20-40%). For example, we currently have 14 games at the printer. The cost to print all of those titles is right around $500,000. It looks right now like they'll be coming in three separate shipments, but that's still in normal times a $500,000 cash commitment from us to pay for all the games. And FYI, P500 charges are designed to provide us with the funds to pay the printers, while other sales to distributors and longer-term direct sales to customers pay for our overhead and create some profits. So right now, as long as a lot of customers don't cancel orders before we charge and ship for those games, we can expect about 500K in P500 income that would in normal times pay for those games.
With the 145% tariff, though, those games will now cost over 1.2 MILLION dollars to get to our warehouse. That's $700,000+ extra for.....basically nothing. So how we price the games (the next issue) isn't the biggest problem we have at all. Rather, it's how to pay for the games at the scale and frequency that we print them with a 145% tariff (in this case, $700K) tagged on. As a business model, with that level of tariffs, printing at a pace we need to in order to cover our overhead, it's unsustainable. Basically that group of three shipments alone, unless we make some big operational changes quickly, will eat up all of our cash reserves and leave us with no funds to pay our employees and other expenses.
You can read the rest of the email here.
This is what happens when economic illiterates elect an economically illiterate president. I am sure it is only one tale amongst many thousands. Think about that: vast numbers of cottage mom-and-pop shops are being put out of business because of one man and his cabinet of clowns. What will the American business landscape look like in four years? Will one even remain? Despite FOX News and talk radio's message to the contrary, politics is not a game. Policy has real consequences, and bad policy has destructive consequences.
To paraphrase Ann Coulter, the modern Republican Party resembles a voting bloc formed by all the brain-damaged people in America.
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