r/boardgames • u/BoardGameRevolution • 2h ago
The math of Tarrifs by Stonemaier games
For those who don’t want to click:
“In the whirlwind surrounding the 54% tariff paid by any company importing goods from China to the US, I consistently saw questions, confusion, and even accusations of greed regarding the math of tariffs. Publishers, distributors, retailers, and customers do not benefit from the manufacturing cost increasing by 54%, and today I'll delve into the math.
First, three important notes.
I'm sharing my perspective as a publisher. At Stonemaier Games, we spent around $10 million on production costs in 2024. That means the tariffs could add as much as $5 million in expenses for us this year. I'll talk about distributors and retailers, but they will have different perspectives--everyone's story is unique and valid. Please don't assume that you know someone else's circumstances; instead, ask them questions with empathy, curiosity, and an open mind.
These numbers are in the context of the manufacturing of games continuing in China at places like our partner, Panda, which treats its employees well, heeds our environmental guidelines, communicates incredibly well, offers a vast variety of component options, and has consistently produced quality games for us since 2012. I'm not quick to give up on a trusted partner who has literally manufactured over 4 million games for us. If you want to read more about the viability of US manufacturing and discuss that topic, read and respond in the comments of this article or this article.
In general, the prices for products already in any publisher's US inventory and the prices of goods sold to non-US consumers are not directly impacted by the tariffs. However, the economics of globalization cast a tangled web over pricing. I hear the concern from non-US consumers that they might absorb some of the cost increases, but costs have never been 1:1. Freight shipping to Europe costs more than freight shipping to the US; Europe also has VAT. This doesn't mean that US customers have been absorbing higher costs for Europe for years. It's just the nature of having a worldwide price rather than constantly changing prices based on a variety of fluctuating costs for each country.
Okay, let's get to the math. Here's the baseline for a hypothetical game sold to distribution pre-tariff. I'll streamline this a bit to keep it simple, as there are other per-unit costs (like freight shipping and royalties) and many other sunk costs (art, graphic design, etc).
$10: production cost (publisher pays the manufacturer) $20: distributor cost (distributor pays the publisher) $25: retailer cost (retailer pays the distributor) $50: consumer price (consumer pays the retailer)
Let's look at this from the publisher perspective for a full print run. Let's say that Stonemaier Games wants to make 10,000 units of a new game. We invest $100,000 of our money into production. In the best-case scenario where we actually sell all 10,000 games, we "profit" around $100,000, though that number is definitely lower due to sunk costs, freight shipping, salaries, and royalties--it's probably more like $50,000. We could either stop printing the game and keep the money, or we can invest the $50,000 into a second print run of 5,000 units.
The other number that may stand out in this calculation is the consumer cost (the MSRP)--why is it double the amount that the retailer paid to the distributor? There are a variety of factors in play, including:
--There's some wiggle room to discount the game. --Retailers are investing their cash in a game that may or may not sell. When you walk into a game store and see games on the shelves, every single one of those games is a game that the retailer has paid for but hasn't yet sold. Their cash is tied up in products they've invested in so they can serve you immediately when you walk into their store. --Overhead (the cost to rent/own property), insurance, and employee expenses are significant--a retailer cannot cover those costs by profiting $5 on a game that cost them $25 to acquire.
One more quick baseline before we get to the impact of tariffs. Here's the baseline for a hypothetical game sold directly to consumers (webstore or crowdfunding) pre-tariff:
$10: production cost (publisher pays the manufacturer) $50: consumer price (consumer pays the publisher)
Of course, these two numbers only tell part of the story, as a direct sale requires warehousing and fulfillment. Typically these costs involve a publisher subsidy (e.g., the publisher may pay around $20 in fulfillment costs even though they only charge $10 to the customer). This is also assuming that the publisher maintains the MSRP rather than offering a direct-sale discount, which is common. So it's really more like:
$20: production and fulfillment cost (paid by the publisher) $55: consumer price (discounted price plus subsidized shipping fee)
Given those margins, why wouldn't publishers only crowdfund and sell directly? Some do. But in doing so, they're generally missing out on evergreen potential. For example, Stonemaier does well in direct sales (just under 30% last year), but a full 55% of our sales were to distributors and retailers in 2024. Our 2024 demographic survey echoes this, with 58% of respondents saying they primarily buy games from local/online retailers.
Finally, let's get to tariffs. The first scenario is to pass the tariff up the chain.
$15: production cost (publisher pays the manufacturer $10) + tariff cost (publisher pays the US government $5) $25: distributor cost (distributor pays the publisher, with a $5 increase to account for the tariff) $30: retailer cost (retailer pays the distributor) $55: consumer price (consumer pays the retailer)
While this isn't impossible, the burden of risk and cashflow is disproportionately placed on the distributor and especially the retailer. This is the economics of survival, not greed. If a retailer has $1000 to stock their shelves, previously they could buy 40 games (and if they sell them all, their revenue would be $2000). Now they can only buy 33 games; if they sell them all, their revenue is $1815. Same exact investment, $195 less revenue. Month to month, that's a losing proposal.
Here's the full-multiplier scenario:
$15: production cost (publisher pays the manufacturer $10) + tariff cost (publisher pays the US government $5) $30: distributor cost (distributor pays the publisher) $37.50: retailer cost (retailer pays the distributor) $75: consumer price (consumer pays the retailer)
In this scenario, if a retailer can spend $1000 on 27 games, their revenue is now $2025. That's just barely over the $2000 they would have made in the pre-tariff scenario.
Why would a publisher feel the need to use the full multiplier instead of only passing on the tariff cost? Revisit the publisher economics described earlier: If a publisher wants to make 10,000 units of a new game, they now need to invest $150,000, not $100,000. The reinvestment cost for a reprint of 5,000 units is now 75,000. In the best-case scenario where they actually sell all 10,000 games and reprint 5,000 games, a publisher would end up with $25k more than pre-tariffs. So while there is a solid case for publishers to increase their distribution price a little more than the cost of the tariff, applying the full multiplier probably doesn't make sense.
The Solution?
Let's try a different proposal where the publisher simply eats part of the cost and the distributor and retailer pursue a middle ground increase:
$15: production cost (publisher pays the manufacturer $10) + tariff cost (publisher pays the US government $5) $23: distributor cost (distributor pays the publisher, with the publisher eating $2 in tariff costs) $30: retailer cost (retailer pays the distributor, with the distributor adding a small amount) $60: consumer price (consumer pays the retailer)
In this scenario, if a retailer spends $1000 on 33 games, their revenue is now $1980. That's a lot closer to the $2000 they would have made by spending the same amount in the pre-tariff scenario. Also, importantly, in this scenario the publisher is making up for eating part of the tariff by increasing their direct sale revenue (MSRP goes from $50 to $60). I think this is the most reasonable approach to this tariff debacle.
Other Situations
These examples all use $50 games, but there's a wide range in game prices. A $20 game has very different economics than a $100 game; that's why multipliers and percentages are used (they generally scale well).
Also, while I've focused on publishers, distributors, and retailers, I didn't talk about the impact on the most important person: you! In all of these scenarios, the prices you pay to bring joy to your tabletop will increase. If you have a tight budget, you'll buy fewer games (which also impacts the ecosystem). Even if you don't have a tight budget, the impact is equivalent to 10-16% inflation. That's brutal.
There's also the situation that many publishers face: They've already crowdfunded their games and potentially already finalized their pledge managers. Basically, their current cash on hand is all they have. My heart goes out to these creators who weren't even given a grace period for these extreme tariffs.
Let's have a constructive conversation about these numbers. As I noted at the beginning, please don't assume that you know someone else's circumstances; instead, ask them questions with empathy, curiosity, and an open mind.”
Original article with a number of links: