An economists point of view

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An economists point of view

Post  Shadowhunter483 on Fri Feb 01, 2008 8:38 am

I am a college student currently getting a B.A in economics. After looking at the current situation and analyzing some facts, I think I might have come to a conclusion as to why the pro tour was shortened to three. I personally think that this was a bad idea as that is seems to hurt casual players like me who hope to go to a Pro tour one day.

1. In order to make money, Hasbro and wizards charges people to go to PTQs. My guess is that, this is where the bulk of the revenue of the pro tour comes from is the PTQs. The logical thought process would be to add more Pro tours, and as such add more PTQs thus netting more revenue. But since adding more pro tours would cost more as now you would have to pay for more air plane tickets and more on locations, international expenses, and the like. Also adding more pro tours may cause less people to attend PTQs as there are now more opportunities to go to a pro tour. This also goes with the new pro players club as that invites are now given right at the end of the qualifier season. This means that more players will attend the PTQs since certain players only get plane tickets for free. This causes them to go to a PTQ in order to get said plane ticket. By going they give wizards money. Since plane tickets are also expensive, with the rising cost of fuel and the hazards of air travel being more pronounced, spending less money on plane tickets would allow them to save more money in the face of diminishing profit.

2. Card sales have been falling. That is the physical selling of packs has been falling. Cards like Tarmogoyf and Thoughtsieze sell for huge amounts of money, and, while I don't know if wizards physically sells these cards as individuals, I doubt that wizards gains a huge profit off of specific cards. Magic Online as also contributed to this as version 3.0 has completely underwhelmed us. If people do not use Magic Online, then Wizards and Hasbro will not make any money as a large portion of their revenue does come from the online circut. Hasbro has also seen a steady fall in its stock. Starting with a somewhat high fall in July of 2007 there has been a slow and steady negative correlation in Hasbro stock since last July. This probably caused them to either lower the amount of money they give to their subsidiaries, or force their subsidiaries to raise their prices. This then causes demand for boosters to fall and thus lowers the profit they gain. This might also explain the banner ads for Magicthegathering.com. Personally I think that this is just Hasbro being paranoid. Since the whole China Lead paint scandal, toy sales have begun to fall. As such Hasbro is putting more money into advertising and safety in order to get these sales back up. Since Wizards doesn't make actual toys, they get dropped by the wayside.

3. There are now dozens of card games floating around all attempting to gain a player base. Within the last year, I saw a Stargate game, a 24 game, and the new PS3 virtual card game. All of these games, some made by wizards, are asking for tournament play and a player base. This causes people to move to other games. While I doubt the Magic player base has shifted dramatically, gamers who play multiple games now have to allocate more of their income to other games. This causes them to spend less on Magic and more on another game from another company. This then drops the demand for Magic and thus drops the revenue.

Now this is based on the assumption that registering at a Pro Tour does not cost anything. I also did not take into account the other products that wizards sells, books, dice, shirts, as these are not needed or there are substitutions that keep these products for having any real impact on Wizards profit. Again I completely disagree with Wizards on their decision to drop a pro tour and the MSS. As players, we will have to buy cards if we hope to win and this means that our demand for cards may drop slightly with a price increase, but it will not go away completely. Hasbro stock has been on a five year rise and I doubt that just because you find that profits are down slightly, doesn't mean that they are on a cataclysmic fall.

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Re: An economists point of view

Post  TrickJarrett on Fri Feb 01, 2008 9:55 pm

Some clarifications as I understand them.

1) I'm 99% that organizers play a flat fee for PTQs, it might be flat depending on turnout, but I am pretty sure the entry fee to PTQs is going to the organizers and not Wizards. Just a clarification on it, doesn't really change your point.

1b) Wizards adjusted how tournaments are setup this year too. I don't know details but some organizers paid higher fees for the ability to run more PTQs, something I learned before discovering the loss of the fourth PT. It was told to me that this was an experimental system.

2) Dreamblade was a massive disappointment and moneysink for them. They thought they had set it up to be the next big thing and it's turned out to be horribly attended. As many have suggested, because of this Wizards is reallocating funds to try and right the ship. Also the sale of cards has been through a few major fluxes. Initially Richard Garfield never realized that people would spend hundreds of dollars on cards, he thought you would buy a few packs, build 1 deck, play friends and occasionally someone new wherein the long forgotten ante rules would exchange cards and change the flow of the game. Then when the Internet took off, online card sales changed the metric again removing the bulk of sales of boosters from individuals to stores who then created the secondary market for cards.

3) Wizards has always faced a catch-22. Accrue more players by providing different games, but they also lose players who quit one game to pick up another. I loved Hecatomb but it got cancelled after less than a year. I loved Netrunner for that matter too! The competing games have been around for a long time, the difference is that some are finally making a push for competitive play. VS was the first one to really affect Magic. Sure there was Pokemon and Yugioh, but they were peripherals. VS, WoW and Spoils are all competing for the same tier of game play and competitive play.

I'm no economics student, I just know the game and its history. I think this was a poor choice executed extremely poorly and it may save them money in the long run, but it is also going to cost them some profit for the time being. I think that we'll see more PTs pop up again once they have their finances straightened out, but for the time being we must let them know that the way they announced the changes was wrong.

-- Trick

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