Conversation With A Gaming Innovator #4: David Muta

David Muta is the president of the upstart Board Game Exchange (www.boardgameexchange.com) company, which offers something we, as boardgamers, have never had: the opportunity to rent games in order to see if they're good enough to buy. Asshats like myself get plenty of games on the opinion of others, the look of a game, and the theme, but many times I've been disappointed and have had to spend $15.00 to ship it to someone else to trade for something I actually might like, so the way I see it, this is a great program.

I've heard OCD collectors that have 1200+ games in their collection decry this concept as a bad idea, but realistically, who the hell actually has the room, money, and desire to collect everything? Seriously...if it wasn't a good model, companies like Gamefly would never have adopted it. I'm incredibly pleased that David has started the company, especially as a hard-core gamer who doesn't have 50 bones a month to spend on games that I may not even like.

So, without further delay, let's get to the interview...


SFC: David, welcome to the Circus! It's been about six months since I first heard of your program, and a really good friend of mine is a subscriber. He's raved about it since he runs a game group and he always gets to try newer stuff for his group, which was the main reason I wanted to talk with you. What the hell gave you this idea, and why did you think there'd be a market for it?

DM: I appreciate your enthusiasm about the company. I am glad your friend enjoys the service, we have worked very hard and love to hear that we are keeping our customers happy.

The reason I came up with the idea is that I had always really been a video gamer; a friend of mine told me about a board game; "Ticket to Ride", and being a video gamer, I was skeptical about board games anyway. I had a really hard time finding the game, and found it at a small local game shop in Bloomington, Indiana where I went to college.

The price of the game was about 55 dollars at the time, and I was hesitant to buy it at first. I purchased it, really loved the game and played it for a few weeks; then like most board gamers, wanted to immediately play more and more games.

I got on Board Game Geek, at the time, Agricola was the #1 game rated on their website. So I paid $65 for it. Sure enough, I enjoyed it; I then wanted to keep buying more, and I was spending too much money on the games. I looked all over the internet for places to rent games and really didn't see anywhere. I did a great deal of research and spoke to a friend / now partner and the idea just seemed like a good one, we were on the same page. We both have had previous business experience and the idea really fell into place after many many talks.

People have asked how long we will go or what happens if... we have had such an overwhelming response, and the customers we do have and people that have praised the idea really has been eye-opening.

We are excited to see what the future brings to the customers of Board Game eXchange. BGX plans on being around for quite sometime.

SFC: With my reader base, you may not want to admit that you love Ticket To Ride and Agricola so much; they may storm your warehouse and pelt your employees with Heroscape dice! Seriously, though, it's hard for me not to be excited. This is a great idea. So, give me the short version of how it works if one of my readers is thinking that this might be for them?

DM:I like all sorts of games, those are just the first 2 that really got me into the scene. This really works the same as it sounds. Basically, you sign up for one of our subscription packages:

Bridge (2 Months) : (More for people that want to test our subscription out, or are new to gaming ) - this is a subscription we added for smaller games that we can ship in flat rate envelopes only, and there's over 70 games available for this subscription level.

Silver: 6 Months if you really want to get into trying many different board games and want the option to play and purchase more expensive games.

Gold: 12 Months: For members that really want to have access to many rare games and we also include full games / expansion on there such as "Dominion + All Expansions" and Thunderstone + All Expansions

You pay with your credit card and add the requested information such as "Address, Telephone #, and name" , then you add 5 or more games to your "Request List", then email us what order in which you would like to receive those games. Within 24 hours, we ship the top 2 games from your list to your door step Priority mail so you get them quick.

It really is that simple.

We try to add about 20 or so titles a month to the list and we are slowly growing the Gold Level Only Section, but some of those games are pretty expensive.

SFC: Ok, so it seems pretty simple. So, what's the difference between the selections? What makes Gold and Silver what they are? What are some examples of what kind of games would be in Gold, but not in Silver? I understand that you get game expansions at Gold level, but do you have older games, like Warhammer Quest or Merchant of Venus at that level?

DM: Gold is generally much rarer games and out of print games. We have Antiquity on there, as well as, Civilization / advanced civilization, Evo, Java, Star Wars Epic Duels, Hero Quest and more. We generally are trying to add one or 2 titles a month to this category.

Gold level members usually get free games that we have gotten from publishers, as well as if they have games on their list that other customers do, they get priority for the games that are the same. Gold level is definitely the best option for customers wanting to get their full money's worth for their Board Game eXchange subscription.

SFC: Okay, so let's look at that, then. The Gold subscription is $27.00 a month, for an annual cost of about $324.00. That's a lot of scratch for people, and I can see how some of your detractors would rather spend that money on buying ten or so games that cost about $30.00 each. It appears from your website that Gold level subscribers can try as many games as they want, which I assume means that they can ship back games and get new ones any time they want, right? If that's the case, how many games a month or year do you believe is possible for an average person anywhere in the United States to rent?

DM: Basically the package works like this: If you are a gold level subscriber, you get 2 games at a time on your request list. Usually there is at least one more, sometimes more than that depending on how many games donated by partners we have at any given time.

They arrive at your doorstep and you play them for as long as you would like, then you have the option to buy the game / games at a preferred rate which is usually about 7-8 dollars less than your average online retailer. As the games become played more, it may even be a better discount than that, but that is a good rule to go with.

You ship the games back with the included prepaid postage, then your next couple games come to you.

This service is much better than buying 10 or so games for many reasons, but the number one reason is the fact that there are plenty of games that really just not worth the 30 - 50 dollars you spend on it. They lack the replay value necessary to constitute a 50+ dollar price tag. I look at it like this, the 20 / 50 / 30 theory. 20% of the games you buy you wont like and will trade, 50% of the games you buy you will like and play for a month or so, then it will hit the shelf, 25-30% of the games you buy you will greatly enjoy, keep and play frequently.

In each of these cases instead of trying 10ish games for your $300 dollars. At the minimum, you'll get to try 24 games with our gold level subscription. This being said. Using the 20 / 50 / 30 theory. instead of 2 / 5 / 3 games you buy and dislike, hold onto or shelf, really like. You will get to try and review at least 24 games. on average, 5 of those you wont like immediately, 11 you will kind of like but be happy you didnt purchase because it may not have had the replayability you were looking for, and 8 you would be happy you played and purchase from us or another retailer.

I know this sounds kind of complicated, but you can see what I am saying by renting and trying out the games. It really makes sense and the 300 dollars a year sounds steep, but to play the extra 14 games or more you get to try for the price, the deal really makes sense for anyone that really likes to delve into and try a great deal of games. Even reviewers have signed on because they see the value of the service. and even if you buy the 10 games from us that you would have purchased anyway. You get the games you wanted anyway after trying them for about 8 dollars less each on average and they will all get the replay value you were going to purchase them for in the beginning anyway.

SFC: Hell, I can look at my game shelf and see at least 10 games I wish I hadn't ever purchased and nobody really seems to want to buy or trade from me. Let me ask you this, to continue that train of thought: I understand you take games on trade, and the trade amount is applied as a credit to the account. Can I compound that trade credit towards a purchase of a game from you at the discounted price? It seems to me that it's better than doing a BGG trade because if you give me a credit on 2 games I trade you, I can then get one back from you on a purchase basis without having to spend any money on shipping. Is that accurate, or does the person trading games to you have to pay shipping?

DM: As of now, we accept trades of games for months of credit to our company. This is a great deal as customers can get free months to play all the new games they want to while gettting rid of their games collecting dust. Also, then other customers can play those games that were traded.

SFC: Fair enough. I want to talk about discounts on buying games, as you mentioned earlier. You said that if people wanted to buy a game that they want to, they can do so at a discount. Can you quantify that point, maybe with an example of a game that you have that I may want to buy, and can you then elaborate on how that works? If I'm a subscriber yet I am a collector as well, would this be a good deal because I can save money on boardgames?

DM: People have asked why I dont advertise game prices. The reason being, they fluctuate. Basically, if the game has only been played once, we usually sell the game at a price point about 7-8 dollars lower than anywhere else online.. sometimes that discount is much more, sometimes a hair less.. and you never will pay shipping. If a game has been played a great deal more, the price can be much lower. It really just depends.

I sold a copy of Dominion and an expansion to a customer that hadnt been played before him for $26.50 each / dominion and expansion. But some games I have a harder time reaching that low threshold. It really matters how many times it has been played and what game it is. We send a "Preferred price sheet" with each game with a purchase price.

We have had customers buy a great deal of games from us. I dont know if it is because our prices are very good, or that it is just so convenient for them. But both are great benefits of our service. After the game is purchased, we ship the empty box with the next order and that is all included in the subscription price. Customers never have to pay any shipping for any games they purchased.

SFC: I think that because you have a different model than the “Troll and Toads” of the world who make their profit solely from online sales, you have the opportunity to leverage your subscription-based profits against the competition and really whip their asses. I mean, with subscription-based access to discounts in unison with having what amounts to used game sales and a robust trading program, you could be a huge player in the market. Don’t you think that if you were to publish your prices in a flexible format, for instance stating that a game is between two price points, based on volume of rentals, that you might attract people to subscribe based not just on the service, but for access to your “Sam’s Club” program? Or just get more traffic which could produce subsidies to your cost structure in the form of advertising sales on your site?

DM: We have had many customers and potential customers ask us about our sale prices, and your questions sparked a great deal of discussion amongst our partners. We are all about fulfilling customer demands, and our customers' feedback has sparked a number of improvements to the service and the website...some of which will be announced in March 2011.

Up until recently, we didn't have any good plan of action of listing our Preferred Members' Pricing, but we have come up with a solution based on a tiered pricing system. If you look at our website now, we have begun to add price ranges for games, which our Subscribers will find favorable as compared to other online retailers.

Because we are selling games "slightly used" and we have worked out great deals with publishers and distributors. We are able to drop the prices significantly as compared to competing retailers. For example, we are going to be offering Dominion in the future for around $23.00 to our subscribers.

Dominion (Slightly Used $23.00 - Very Used $15.00) [B1]

You'll see the "[B1]" behind the title, that also means that you can rent this game as part of our Bridge To Gaming subscription for only $13.99 per month. The Bridge To Gaming subscription is a new subscription level which will be launched in the next week.

SFC: What I really want to ask you about is sustainability. I am having a huge issue figuring out how you guys can make money at this. Some people think that your Gold level, at the $27.00 dollar price point, is a bit high, but I can’t see how you guys can afford to do it even at that. First you have to buy the game, then you have to ship it round trip. Even if you amortize a forty dollar game over 10 shipments, that’s still going to cost you two flat rate boxes and four bucks for the original investment. And that’s based only on one game, one round trip shipment a month. If you do it twice, or with two games twice a month, you’re spending $40.00 a month just on freight to that customer. How the heck do you break even at this price point?

DM: Your question assumes two round trip shipments per month. That is incorrect. we allow customers to get 1 shipment a month which contains at least 2 games, usually more; We use a great deal of flat rate shipping as well as working hard with a shipping consolidator to help reduce the price of shipping the packages all over the country. The logistics of this deal has been quite a large learning curve that we are still really working hard to learn everything we can about reducing shipping costs. Trust me, I would love to give the service away for 12.00 dollars a month, but with the value of some of the games and the cost of shipping the games round trip, it is impossible to go any lower than that for our gold level offering. Antiquity for instance is $270+ Dollars and most of the games we offer retail well over $50 each.

As far as sustainability, we have vitually no overhead, no debt, no monthly fixed costs, nor do we have any drop-dead date by which we must reach a certain level of revenue. We knew the heavy upfront costs of board games was going to be the most expensive part of the company and we were prepared for that and are prepared for that in the future.

As we have expanded our library, people have been renting a great variety of games and we continue to grow our library and try to not get stuck with a great deal of inventory that doesn't move.

It is surprising what games people have rented. I thought many games would have overlap, but we have found the exact opposite--there has been minimal overlap of the games requested between our different customers.

SFC: OK, so it's a once monthly shipment program, so the most a person can actually play in a 12-month window is 24 games. That's still cheaper than buying them, so it's still viable for a person in my position who would look at monthly cash flow for things like this over annualized comparison versus purchasing. Well, let's talk about selection now. The "cult of the new" is a big deal on Boardgamegeek, which is the biggest player in board game media by far, and unless you keep up your catalog, you're going to be in deep shit. I was reading a thread on BGG where a user complained that of maybe the 15 games they wanted to play, you only had 2 of them. What is the driving force behind your catalog, and what guarantees a subscriber that you're going to keep a current list? What is it that moves you to pick up a game for the catalog?

DM: The Driving force behind my catalog is based upon 2 variables. 1 - I have a great deal of customers that have requested games from me, I try to bring in about 90% of what is requested. I also try to keep my "fingers on the pulse" when new games are released and work to get in line for the new games. 2 - My distributors and publishers that I purchase games from work to keep me up to date with the current releases.

The post in question on Board Game Geek, immediately after it was written, I made 5 phone calls and had about 8 of the 15 she that I didn't have were immediately on the way to my warehouse.

If it weren't for our customers, we would not have a business at all, therefore we work hard to keep our customers satisfied. We are continually adding new games to our library, while maintaining our inventory. We have already added well over 100 titles since our launch in September and we try to add games about bi-weekly. Without new games, the business will get stale and the customers paying to try our unique service will be upset. We understand this and work hard to keep the titles fresh and new.

SFC: Let me ask you this, then: Based on your subscribers, what kind of games are being rented? Are they primarily "cult of the new" games that have just been released, or are they primarily older, out of print games that are high up on the "charts" so to speak?

DM: We have had such a splattering of board games I was very shocked. I really thought there were going to be only new board games rented, but we have had customers rent everything from Antiquity, Twilight Imperium, to Apples to Apples and even games like Booktastic.

It seems that all customers are very different than we thought, some games that are popular amongst a great deal of players, such as dominion haven't moved as quickly as some of the more obscure games. At one point, Mystery of the Abbey was our most requested games.

Our service really gives customers a chance to try and play games they normally wouldn't have purchased and I feel our request list from our customers has definitely reflected that. I really thought we would see a great deal of overlap, but the spread has been really even and that has really helped us. Although I say this, whenever we bring in newer and hotter games, they are always rented for at least a few months before they sit for a while.

SFC: Will you ever put a “counter” on your site and a blog/comments area or ratings system up so that subscribers can not only see what their peers are renting, but also read about what they had to say about the games?

DM: As of right now, we have a "review" section:

http://www.boardgameexchange.com/referrals__reviews

This is fairly new, and we have just had a few reviews start coming in.

Yes, I would love to have an online community where customers can come, review games, read what other renters have said about the games, and to see what games are trending. We are pushing ourselves and website designers towards that goal, we have many services we would like to offer our customers; but just launching less than 6 months ago it has been a gradual process and everything we have done takes time and strategic planning. We want to make our service user friendly, while not confusing our customers.

First and foremost we are the nation's first subscription rental service for Board Games. The community aspect of the company is all just a bonus for the great service we offer.

SFC: But there is no counter or anything to indicate what other people are renting? No "hotness" chart or something?

DM: As of right now, there is no "hotness" chart, we have been talking to our designers about this and it could be implemented in the next few months, but as of now, we do not have anything like that.

SFC: Getting back to your business model, I'm curious to know what publishers think about the prospect of you renting their games. Have you gotten any feedback from a publisher?

DM: Absolutely, We have had several publishers that see the tremendous value we offer them by getting games in front of a great deal of players and then can be reviewed by them. Small publishers have loved this, and when we get copies of games; we send them to our customers just as an added game. So this is great for the customers and publishers both.

The customers play more games, try new ones, at no risk to them; who doesnt want to try a few brand new board games.I am currently in talks with several large publishers and we are on the edge of a few deals that could be very beneficial for all parties invloved.

SFC: For my last question, I want to ask you about feedback. And I don't want to hear all the bullshit salesmanship that I would expect, I want an honest answer! Seriously, what are your customers saying?

DM: Our feedback has been exceptional. We have customers that have been so happy and thankful for many reasons, also, we have had a surprising amount of customers that have given us many ideas and we encourage that. Our customers know what they want, and we keep working to improve the service based upon their needs.. If you look at the "testimonials" section on the website, you'll see a great deal of positive feedback we have gotten.

Our customers have helped shape and improve the company to where it is today and where it is going to go in the future. For instance, I just got this yesterday:

Hi. My latest game is on it's way back to you. My top choices from my request list right now are A Castle for All Seasons, Thebes, Cluzzle, and Luna.

Thanks!
Tiffany

p.s. We loved Ambit so much we are buying it from you. :-)

SFC: On that note, I'll we'll call this a wrap, and I do so appreciate you taking the time to meet with me!

DM: No problem, and thanks for the opportunity to talk about the company! If anyone wants more information, please check us out at http://www.boardgameexchange.com/!