The Business of the Game Business

by Rick Hoogendoorn

    Some businesses sound like they're such great places to work !

    On November 13, 2003, the Times Colonist newspaper featured an article on Victoria's Outset Media, "North America's Greatest Little Board Game Company", because some of the company's products have just received honours from the Canadian Toy Testing Council.

     Outset Media was started 7 years ago by David Manga, as he was graduating from UVIC with a degree in commerce. Manga had enjoyed playing Trivial Pursuit, and came up with the idea for a trivia game with 100% Canadian content. Since then, 100,000 copies of the All Canadian Trivia Board Game have been sold, and now the firm is receiving prestigious accolades for two other board games they've invented, Telepaths and Similarius. 

    In reading the article, I was intrigued by the idea of a company that survives and thrives in such a creative field, so I looked up David Manga and arranged to interview him about his business. In the process, I learned a few unexpected things.

    How it started

Rick: How did you start out in this business?

David: I always knew I wanted to start my own business. I always worked for small businesses going through university and knew I didn’t want to work for somebody else, so I wanted to start my own business after graduating. I didn’t really know what to do. I had actually a lot of ideas. Most were very capital intensive so I decided to do this because, relatively speaking, it’s actually not that hard to get into the game industry, financially.

Rick: In my brain it sounds like it would be tough. I must be making something up.

David: Ya, sort of. I mean, you have to build your inventory.

Rick: Okay. So first of all you have to create something.

David: Creating the game though is essentially almost no cost, right? It’s your time.

Rick: So you just created a game.

David: I created a game.

Rick: Did you create the idea for the game company first and then the game, or did you create the game first and then the idea for the game company

David: The game first.

    The first game

Rick: How did you come up with the idea?

David: Playing Trivial Pursuit. Thought it was a neat idea, but not enough Canadian content.

Rick: Even though it (Trivial Pursuit) was invented by Canadians. Wasn’t it?

David: Ya. I wanted one that would have 100% Canadian content. So that’s what we did. I mean the company was created at the same time as the game, but the idea at that time was to have one game, not a whole bunch of games. Just do one game, get some experience and start a bigger business or a real business.

Rick: Weren’t you thinking game business?

David: At that time, no. That’s why the name is Outset Media. In case you were wondering why we have such a bad name for a game company. It was something that would allow me to do whatever I wanted to do.

Rick: Fair enough. And you may yet need that.

David: May…be. But not right now!

    No experience necessary

Rick: When you were doing the game did you have any idea how games sold or what you were facing? I’m just trying to picture somebody who has an idea for a game now but having no clue as to how the thing works. How did you deal with that aspect of it? Or did you just go in blind, create the game and deal with it later?

David: Pretty much went in blind. I mean I knew, I did enough research to know how much games sell for. I knew which types of games sold better than others. I knew who sold them but I really didn’t investigate how much more difficult it is for an independent game to get on the store shelves than it is for somebody with an existing product line. Hasbro, which owns Parker Brothers and Milton Bradley controls about 70% of all games sold on any store shelf anywhere. If you look at the majors (major retailers) it’s 90% of their stuff. I mean, if you go to Sears they have two suppliers for their games section, that’s it. That’s all they take.

Rick: And they won’t even talk to you?

David: Oh, they’ll talk to you...and say ‘no’.

Rick: Pardon the pun. Is that a monopoly?

David: Only in certain types of stores, and it takes time to get into them too, right? I mean we now sell to Great Canadian SuperStore. We have sold to Zellers and we do sell to Toys "R" Us. It’s a gradual thing. It’s not easy to do.

Rick: So you have to prove yourself first.

David: That’s right.

Rick: So how did you prove yourself in the initial stages?

David: You start off with just independents and if it does well there you can move up to the mid-sized chains and then move up from there.

    Initial financing

Rick: Okay. Here you are at the beginning, fresh out of university with a Bachelor of Commerce. Did you have the game completed by that time?

David: No.

Rick: So you were still in the process. So you had to work other places in order to survive and get it going or did you get seed capital or how did that work?

David: No, I was working on it full time. 100%. All the financing I raised to do the production of the first one was through family. Banks said ‘no’, and justifiably so now that I look back on it. We’ve seen a lot of game inventors come and make games and they all have garages full of games. It’s probably more risky than restaurants. So, in reality, the bank was right to say ‘no’. In this case they were wrong but, 99% of the time with games they were right. I raised it all from family.

   What!?

Rick: What part of your business do you like the best? Is it the invention part of it?

David: No, no. Not at all. It's the sales portion of it.

    Huh!?

Rick: Really? I would think, looking at your business, it would be the inventing part of it.

David: Yep. I think most people would assume that. If you ever want to start your own business make sure you focus on sales because without sales you've got nothing. A lot of people, and I know they'll never succeed because their first criteria is 'well, where are we gonna meet? Let's meet at Starbuck's. And what is the letterhead gonna look like and what are we gonna call you? We'll call you the president of blah blah blah.' If that's the kind of stuff you're worried about, you're screwed.

Rick: Right.

David: If you've got a great product but nobody's selling it, you've got nothing. If you have a lousy product but somebody's selling it, at least you've got something. Now, our product is very, very good. We have very high end products, that's not what I'm saying. But the focus from day one has always been 'is it saleable?' Focus on sales.

Rick: Which means your business is viable.

David: On the other hand, if you don't have revenue, you're not selling product, you have nothing. I enjoy the sales aspect the most.

    Outset Media is now in its 7th year and has grown to the point where there are 6 full-time employees and 2 part-timers. The company is profitable and growing very fast. Sales are up 140% over last year! And sales is what this company is all about. Before I went to interview David, I 'imagined' a Disney-like environment with creative ideas flying around and cool projects on the go everywhere. But sales don't go up by 140% when all you're doing is being 'clever'. Instead, Manga has taken the clever ideas and been smart about them. Of the 6 full-time employees, 4 are salespeople. And he also considers himself a salesperson. There is also a full-time publicist on staff and, finally, a full-time graphic designer. The two part-timers do clerical work.

    It's about profit, stupid

Rick: How long did it take you to make money?

David: Well we made money our first year that we sold games. Almost all the money you spend initially is on inventory. I was working out of my house. I had a phone line. How much fixed expenditures did I have? Nothing. Almost nothing.

Rick: You had a product and a phone.

David: That's right.

Rick: And a car?

David: Ah, you don't need a car. And you don't need letterhead. I just used white paper. You don't have overhead. You have a fax machine. The overhead is so small, as long as you're selling product I mean, you're gonna have profit. 

    Turning crisis into opportunity

David: "We had one year of losses. We only had one year where we lost money and we lost a lot of money, like a huge, huge amount of money because we dealt with a distributor who owed us a lot of money and they wouldn't pay us so we sued them and they went out of business. The day after we won, of course. So we lost a whack of cash but the opportunity there was that they used to distribute the Opoly games (ie. Cat-Opoly, Cat-in-the-Hat-Opoly) so we started doing them. So we'll make our money back by distributing the Opoly games. So there's always opportunities and if you see one you go for it. Just make sure that when you say you can sell a product, you can. 

    It's about sales but it's not about the money?

David: On our 10 year anniversary I'd like to be doing $10 million a year in business. We're a long way off but I don't think it's impossible to do, so in our tenth year I'd like to do $10 million that year. (3-4 years from now) I think I'll take a week off if we reach $10 million. I'll take a week off, regroup, and think of the next thing to do. I'm kidding by the way.

Rick: Is it fun?

David: Oh ya. People spend hours and hours playing a video game, building a civilization. I think it's called Civilization. How is that any different from what I'm doing? Except that mine's a little bit more realistic.

Rick: You're building a business.

David: Ya.

Rick: And it's more financially rewarding.

David: That's not why I do it.

Rick: Why do you do it?

David: I dunno. But it's not for financial reasons. Because I also do know that because I am a good salesperson I would make more money working for somebody else in sales. I would have up until now.

Rick: So, if it's not about the money, what is it about?

David: Dunno. Because it's not necessarily about the freedom because in reality I work more hours than I would if I didn't own the business. I really don't know the reason but I can't tell you the reasons it's not. It's not the financial reason and it's not the freedom thing.

Rick: Are you doing what you love?

David: I'm having fun. I like games but I don't like games any more than books. I don't like games any more than I like comfortable mattresses. I've played games more than the average person, that's probably safe to say, but I was not a game nut. It's just something to do.

Rick: On the surface it looks really cool.

David: Oh it is really cool. But that's not the reason.

    Unexpected pragmatism

    I simply didn't expect David Manga to be such a pragmatic guy, but he's 31 years old, made money his first year in the game business, and now sells games and puzzles all over North America. He is becoming one of the great Canadian success stories in the game game.

David: Now we have our distribution network set up which is what makes our company valuable. It's not necessarily the products we have because if you want to make your own Canadian trivia game I can't stop you. So our games aren't, we don't own Trivial Pursuit. Trivial Pursuit has certain brand recognition. All Canadian Trivia does but not to the same extent as Trivial Pursuit. So what makes us more valuable is our distribution network. Once the relationship has been built up with the retailer we become more valuable because we can take other products and sell to that retailer.

Pictionary was created by a Canadian. Done by Hasbro now. Trivial Pursuit, licensed by Hasbro. Canadians once again. Did it themselves for the first few years. Balderdash. Invented by a Canadian. He did it himself for the first few years until it got popular and then licensed it off.

    What about you?

Manga gets over 5 calls a week from people who have invented some kind of game or other, but says if somebody has their own game idea they should do it themselves. The reason? Only the inventor will do their new product justice.

David: If we added a new product to a line and instead of selling 60 products we’ve got 61 we’re not going to focus on that one. All we want is for our retailers to reorder this amount of dollars worth. We want them to take enough stuff overall. Nobody takes everything we have. So if they don’t order your new game, I don’t care. So at the beginning if you really want to focus on your game you’ve got to do it yourself. Nobody would put that emphasis that you would.

    Lessons from the game game

Rick: What are some of the things you've learned?

David: Nothing ever goes as quickly as you think it will.

Nothing ever goes into the same budget as you think it will, but I'm getting pretty good at that.

Maybe the big thing is: Nothing is ever as easy as you think it will be. 'Oh, we have a great game. I'll just phone people up and they'll say 'YA, you should send it to me.' It's not that easy. It's a lot of hard work. It's a lot of leg work. But I mean you can have the best board game in the world and retailers can still say 'no'. No. Because they're busy. I mean, they've got 400 other venders they're dealing with, and it's a lot more work than I thought it would be to get people to take the game.

Rick: Any other lessons?

David: Don't rely on one customer, because if they don't pay you you're in big trouble. We learned that the hard way. Try and diversify your source of revenue.

    Business planning

Manga says he never created a formal business plan, but has always had the financial portion down. And says his business planning is a constant work in progress. Now Outset Media is looking at how to grow through internal products with higher margins, while simultaneously looking for companies with entire lines Outset can distribute. This, because an entire line has the same paperwork, yet there might be 48 products in all, instead of one. He is a rarity. A pragmatic creator who describes himself as a business owner who is a salesperson, and in his interview with me...he didn't play up his creations at all! (Although, I'll bet he does that enough when he's selling.)

David: I don't get paid unless we make money. I don't get paid if I create games. I only get paid if we make money. Our games are fairly easy to create. Canadian trivia game. Well the idea's right there so all we need is content. Ya I'm still involved with it but it's not a difficult as people think it is.

Rick: Any big games you're working on? 

David: Primarily just building lines out. Considering adding something other than puzzles and games but what it will be, I don't know. We're trying to get more product within the industry we're in right now which is games and puzzles.

    If you are thinking about starting your own business, regardless of the industry, you would do well to note David Manga's 'success based on sales' approach. It's stupidly simple, really. Yet many people create businesses or products thinking the public will come a-running.

    If you would like to see the full range of Outset Media's products, visit their website at: www.outsetmedia.com

    Incidentally, Rick DID NOT wear that silly hat and trenchcoat during this interview. And no animals were harmed during the creation of this article.

Thanks David!

Financial planning, estate planning, retirement planning, insurance planning, tax planning, insurance products, segregated funds, and tax preparation services mentioned herein are offered through Cheri Crause & Associates Inc.  .