By the time you read this, you should have gotten your 1995 Christmas mailing. With the "now-traditional" (as your editor put it ... ) Christmas countersheet, there was a selection of special deals and an announcement of the changes I have made in the way we are doing things. It is my purpose here to give you more information regarding these changes.

The Way-Back Machine...

First, direct your attention back about a year and a half. At that point, things were going exceptionally well. We had added two employees to help us expand. The production schedule was poised to jump to a bi-monthly rate. It looked as though we would be able to transition to a higher level of volume. I rearranged the internal workings of the company to do so.

I dropped the traditional pre-pubs in response to dealer suggestions that they would sell more games if we weren't grabbing them out from under them. The new vendors allowed us to get the full 5,000 of our print runs (instead of the 4,000 good ones out of a 5,000 printing we used to get), and (having just watched numerous games go out of print) we went with the full run to keep the games in print longer.

Sara initiated an ambitious (and expensive) program of retailer and distributor support. She sent maps and box wraps to dealers to assist them in their efforts to sell and monthly informational updates to distributors (not to mention regular reminder phone calls). Finally, we got the development of games to the point where everyother-month production was possible.

Here is what happened...

Those were the plans. In reality, doubling new releases from 1994 to 1995 generated almost the same total number of unit sales. Distributor initial orders climbed briefly then reverted back to the way they were. Some might blame card games for this, but I am not sure they can be identified as anything more than one of a number of contributing causes.

Sara's program (at the cost of well over $ 1,000 per game) initially seemed to make minor progress, but then produced little (if any) good. The expense of the full print runs accumulated. The money coming in from pre-orders disappeared as we no longer solicited it. The two employees created more problems than benefits by adding to my workload the development of games they had signed off as "finished." Both were let go at the expense to the company of almost $50,000 in wasted wages.

In short, while sales flattened, expenses rose, and an accumulated cash flow problem emerged. We made our mistakes.

What we can do about it

There have been a number of changes. Apparently, we were not "stealing" sales from the retail network, therefore we must regain the direct sales we had before and offer incentives for pre-order sales. These discounts include 20% on pre-pubs, 10% after the game comes out (for 4 weeks) and an additional 5% to all you loyal Operations subscribers (making these two figures 25% and 15% respectively). Regular shipping in the US and Canada is free. We will be going back to one-game/one-mailing pre-pubs and offer substantially discounted sales on older games from time to time. I will be expanding our online presence to America On-Line and our World Wide Web site will be expanded to contain an Electronic Mall allowing easy direct access as well as up to the minute information on sales and specials. (I owe many thanks to Stephen Graham for setting this up for me.)

Since we actually net only $8.95 on a $39 game sold through distribution (after paying to make the game, paying to sell it to them, and paying to ship to them), the only way we can make it over the current cash crunch is to encourage direct participation from all of you (this would jump the net from $8.95 to $34.20 on the same $39 game). Simply said, we cannot pay all our bills making $8.95 per game.

One might say "why can't you just raise the prices?" The unfortunate fact is that to raise the amount we actually make by $ 1, we must push the game's price up by no less than $3. In order to actually make a difference by raising prices, we would have to add upwards of $20 to the price of each game. That is not acceptable. The only way the machine will fly is to obtain more of the thousands of games we sell each year as direct sales. In this, you-our purchasers- have complete control over the ability of this company to get past these short term issues.

To further trim costs we will be cutting print-runs down from 5,000to 3,000. Lastly, since the bimonthly production of games showed no ability to increase overall sales, we will be cutting the number of releases per year from 6 to 4.

That is where we stand. Rather than wait until the last one leaving must turn out the lights and lock the door, I have chosen to take all of you into confidence regarding the problems we are currently undergoing. These things are perfectly correctable and easily solved provided everyone knows what is going on and what needs to be done about it. I will not to beam out the "everything's fine" smile until we were to hit a brick wall as has happened to so many game companies in the past. I rather think you would prefer to know the whole story and know you are in a position to help-and to do so while there is still enough time to get the job done. This company needs your help--together we can make it work.

Internal Business Report Operating Year 1995