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With the recent plunge in Zynga(s znga)’s stock price and the quick rise and fall in popularity for games like Draw Something, it’s easy to imagine that the future of gaming is a fickle thing. But Eric Hautemont, co-founder and CEO of the company Days of Wonder, may have discovered a secret to viability in the industry: cardboard board games.
Board games might not seem like the sexiest of products, but Days of Wonder, whose slogan is “play different,” has shown the power of having physical merchandise in the digital era. The company has been profitable, bringing in an average revenue last year “in the $10 million to $20 million range,” said a company spokesman, and building fans across the globe who revere its high-quality, engaging products on two very different platforms — cardboard and Apple’s (s aapl) iOS.
Days of Wonder, founded in 2002, is almost the anti-Zynga. Hautemont, who is from France and has a background in startups and venture capital, said his goal was to build a company not to get acquired or go public, but to be profitable for the long-term without taking on investors. He said he promised himself he would never grow the company larger than 20 people.
“When I said to my friends that I was going to do game publishing, they said ‘Video games?’ And I said, ‘No, cardboard,’ and they gave me sort of weird, embarrassed looks,” Hautemont said.
Letting the cardboard game influence the iOS
But now, the company has sold more than 2 million physical copies of its most popular game, Ticket to Ride, and more than 1 million of the iOS digital version of the same game. While a cardboad game presents some data-gathering challenges, Hautemont estimated that about 1 in 4 board game owners play every day, roughly the same as the 500,000 who play the iOS versions every day. But even if the user bases are similar, given that the board game costs $50 and the iOS apps cost $2 on the iPhone and $7 on the iPad, board game revenue accounts for about four times the revenue of the digital apps.
The profitability of the cardboard game isn’t lost on Hautemont, who noted that Rovio, makers of the cult hit game Angry Birds, made 30 percent of its 2011 revenue from “the silly hats,” or merchandising and licensing income. The physical and digital games are self-reinforcing, he said, and players of one usually become players of another. He noted that when Days of Wonder launched the iPad version of Ticket to Ride, sales of the board game rose 40 percent and never faltered.
“When you deal with real world products, it has to be shrink-wrapped, it needs to be shipped, it needs to be tracked,” he said. “Financial divisions, they look at the number and they think that’s messy. I think they’re sacrificing the long-term benefits from short-term products,” he said.
The games are designed for cardboard first and iOS second, he said, and this results in a marked difference in how they’re created and played. For a board game to work, the rules must be simple to understand but difficult to master — there’s no digital scorekeeper to track complicated scoring rules. And unlike iPhone games you can play casually in line at the supermarket, board games require full, devoted attention from a group of people for an entire game. The Days of Wonder iOS games reflect this, requiring about 10 minutes or so of devoted attention — this isn’t a game like Draw Something where you make a move and come back to it next week.
The future for board games in the U.S.
Hautemont wasn’t about to call Days of Wonder the Apple(s appl) of the board game industry, but the parallels are remarkable. Days of Wonder puts extensive focus on the tiny details of the packaging and physical elements of every game, like a small metal bell players can ring, ignoring the effect on the overall cost as long as it brings satisfaction and creates an emotional connection for the customer. The company prices its games at $50, higher than most games were priced when the company first started. It releases no more than one new title per year, inspiring anticipation among fans who want the latest game and gather at competitions to play. The slogan, “Play different,” even sounds like Apple’s old “Think different” campaign.
According to the Toy Industry Association, sales for all games and puzzles in the United States has dropped from $2.7 billion annually in 2003 to $2.1 billion in 2011. But Hautemont said he’s seen a tremendous growth in interest in the United States recently, which is just catching up to European interest in board games. He said in countries like Germany which are board game-obsessed, it’s common to bring one to dinner at someone’s house just as Americans might bring a bottle of wine. He said he thinks Days of Wonder is riding the wave of re-investment in physical objects, with people beginning to appreciate again the emotional and social attachment we have with these items.
“That’s why people like real world board games so much,” Hautemont said. “Because you start an evening together all playing together and you’re all in it together, and in these days, that actually doesn’t happen all that often.”