Stories

Hobby World: How Merger Helps Two Companies Survive

The founders of Fantasy World, who invented the popular Berserk collectible card game, wanted to do business on one product. The plan did not work, and in order to diversify the risks, they took up the production of board games. In a new market for them, they began to compete.

with the company "Smart". That, in turn, has long been eyeing the market for collectible card games, but did not have enough experience to deal with them. Competition weakened the position of both companies in the market. To save the situation, they decided to unite and did not lose.

Field of activity:

Board and collectible games

date of merger:

2010 year

company:

Smart and Fantasy World

Site:

hobbyworld.ru

Ivan Popov and Mikhail Akulov

Hobby World Partners

History of Fantasy World

Ivan Popov:

My future business partner, Maxim Istomin, and I were in high school when he brought Magic: The Gathering cards from the trip to America. In order to play, they were not enough. Then Maxim and I decided to come up with our own game, called it “Berserk”, independently drew cards with a marker and played it for several years in a small group of friends. The game was gradually modified, complicated, the cards were redrawn not by hand, but on a computer, and once, when we were already in graduate school, it occurred to me to sell the rights to this game to serious publishing companies. We talked with several of them, offering them to buy a Berserker, but they all, of course, refused.

Then we decided to do everything ourselves. They announced a competition for artists to develop a new design, created a website and, most importantly, decided to turn to science fiction writer Nick Perumov for help. Perumov, oddly enough, agreed - not only wrote the starting legend about what the Berserk universe is, but he also allowed his name to be indicated on the box with the game. We were very lucky with the release of the game: then the Lord of the Rings just appeared on the screens - the theme of fantasy became popular, and the market was almost empty. Unlike the English version of MTG, which was played in specialized clubs, Berserk fit perfectly into the mass market because it was cheaper in Russian too. In addition, schoolchildren throughout Russia began to collect cards "just for beauty."

Our first print run was a million cards, which we had to pack in 40,000 boosters on our own. We distributed them through bookstores and music stores, our own website, and gaming clubs. Three years later, “Berserk” outperformed MTG in terms of sales, the game began to bring us so much that we quit our main jobs. When we created the Fantasy World company, we thought that we would be able to build a business on one game. They thought the Berserk would conquer the world, just like MTG. Only later did we find out that there are more than 60 well-known collectible card games (CCI) in the world, some of which strongly resemble ours.

At the first stage, ignorance of reality was our strength, otherwise we would not have taken it. Collecting games is very difficult. On the one hand, KKI has a unique super-profitable model - selling cards at tournaments. Before each tournament, a player must buy several new boosters with cards; he cannot use his regular deck. On the other hand, an essential condition for success is the need to constantly maintain club and tournament activity. There are large clubs that organize tournaments for 300 participants, but the vast majority of clubs are companies of ten students who play with someone in the apartment.

The board game market is simpler and requires less attention. In order to diversify our risks, we began to purchase the rights to localize foreign board games, made several of our own, of which the Svintus game was truly successful. So we began to compete with Smart.

The history of Smart

Mikhail Akulov:

In 2000, we created the Labyrinth game club. They brought from abroad the English-speaking Magic: The Gathering, Warhammer and played. Anyone could come - in fact, it was the first anti-cafe in Russia. We tried to earn money at the club in different ways, held tournaments, took entrance fees, at some point even opened a bar. Unlike the West, in Russia there was a strange situation with board games. In addition to "Monopoly", in the early 2000s, the only running board games were the "hardcore" class: MTG and Warhammer. In the West, people learned about "hardcore" games after family games, which are incredibly popular there. Watching visitors to the Labyrinth, we thought that board games can be truly successful outside of clubs. We went to a large exhibition of board games in Germany and became the first Russian company that agreed with a Western publisher to produce their board game in Russia. The successful “Colonizers” were followed by other global bestsellers — Munchkin and Carcassonne. We began to actively expand our portfolio.

Our first circulation amounted to 1 million cards, which
we had to pack on our own in 40,000 boosters

For localization, we need to translate the game into Russian, redraw the box and sometimes the cards themselves, all of this print and sell in high quality. Depending on the popularity of the game, the royalty rate can vary from 6 to 15% of sales. Usually you have to watch over 200 games a month, and only 1% of them we decide to publish. Gradually, we have grown to create our own games. Now in the united company the ratio of localized and own is 80/20. With our own games, we are already entering foreign markets.

Initially, bookstores were the main distribution channel - they accounted for about 70% of sales. Then we thought it was too risky. Then we decided to diversify our sales markets: we opened our own retail store and organized the Ykrokon festival. A real explosion of interest in board games and the growth of the company paradoxically occurred in 2008. While everyone was in crisis, we grew by more than 100% and continued to grow. Compared to restaurants and cinemas, board games are a very affordable way to spend time. On average, a game is like going to the movies, and you can play it many times. It turned out to be a typical situation for the board games market: now, despite the crisis, we are also seeing a steady 50% increase in sales in the Ukrainian market compared to last year.

Merger

Mikhail Akulov:

Until 2010, both companies developed more or less in parallel, without entering foreign territory. But then it became clear that to develop only one direction is impractical. We tried to do CCI, "World of Fantasy" took up the desktops. On the one hand, we began to interfere with each other, on the other - everyone began to do what he was not very good at. The first thing I did was offer them to buy their business, which caused a storm of indignation on their part, and they refused.


We continued to compete, we even had one game - World of Warcraft - which we sold in parallel. Against the backdrop of our confrontation, which took a lot of effort, our other competitors grew rapidly. We needed to work together. Realizing this, the guys from Fantasy World came to us and offered to unite, but not in the form of absorption, but in the form of a merger. We valued the assets on both sides and distributed in the new company. It is very important that the entrepreneurs who headed the companies at the start continue to work in the combined company. They are the motive power. Since I was always more universal, I headed the general company, and the partners took upon themselves the finances, production and development. The merger gave us a very serious impetus for growth, reduced costs - from the small business we abruptly moved to the medium level.

Ivan Popov:

Merging is a complex and lengthy process. When Michael came to us for the first time with an offer to buy a company, it caused exclusively aggression on our part, since we considered us equal companies. Then we proposed to unite. The whole merger process took 2-3 years. The most difficult thing was to adequately assess everything, because usually each side is inclined to overestimate the existing assets, focusing on the prospects for rapid growth. We kept returning to past discussions, clarifying the real figures of turnover. Sometimes they quarreled, along the way we had several moments when we could scatter in different directions. Unification is such a complicated process that our competitors were very surprised to learn that we did it all the same. But we were protected from hasty and rash decisions by the idea that the merger of the two structures would lead to a sharp increase in business profitability.

Hobby world

Mikhail Sharks:

Now we sell more than half a million games a year and release about 50 new ones. The price range varies from 300 to 4,000 rubles. The average cost of a box is 700-900 rubles. More than 7,000 people gather for the Ykrokon festival every six months. After the merger, we became the first Russian company to launch a board game on the western market. It was a Metro 2033 game. It was followed by the English-language “Berserker”, which quickly raised money on Kickstarter and thereby attracted the attention of Western distributors. We want Hobby World to become a truly recognizable brand in the USA, Germany and other countries that are fond of board and collectible games. As for Russia, we plan to try to enter related markets: start publishing "party games", which our competitors are now mainly engaged in.

 

Photos: Alexander Karnyukhin

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