The State of Cthulhu will be a new segment in our newsletters, expected to appear periodically. It will pull back the curtain a bit on Petersen Games as a business, and in particular regarding our not-yet-fulfilled Kickstarter projects. For this first State of Cthulhu, I want to talk a bit about where we’ve been in recent times to provide context for those who are new, and those who have a “seven second memory” as my wife Wendy often repeats.
To everyone who's stuck with us through the storms—especially our Kickstarter backers who've waited years for their rewards—thank you. Your support isn't just funding; it's what kept us from the edge. We know the delays have tested your sanity (fitting for Cthulhu fans), and we're committed to making it right.
|
|
When I founded Petersen Games a little over a decade ago, I had no idea the success several of our game lines would have in the hobby board game market. Not only Cthulhu Wars, but also Planet Apocalypse and my now-defunct Sandy Petersen’s Cthulhu Mythos role-playing series, among smaller successes.
These games were financed via Kickstarter, the most popular crowdfunding platform. Between 2013 and 2021 we ran 28 successfully funded campaigns.
What is less well known is that within only a few years our business operated successfully apart from Kickstarter. Not only did we release multiple game lines direct to retail, but retail sales have accounted for more than half of our company’s lifetime revenue. But the heart of our fanbase remained our Kickstarter supporters, which we always sought to please.
|
|
|
The Double-Edged Nature of Kickstarter
|
|
Despite these wins, financial instability in the early 2020s forced us to peer into the abyss of bankruptcy, similar to the 65.3% of small businesses that fail within 10 years.
As with most small businesses, the precise reasons for our challenges were multi-faceted and complex. Some may ask: how is it possible for a publisher to receive Kickstarter financing and yet face such obstacles? Well, how does any business receive startup loans or investment capital and still fail? In fact, crowdfunding has a downside traditional funding doesn't, arguably making it worse: it is simultaneously the source of initial funding and of sales revenue. While no one truly knows sales revenue until customers actually pay money (just ask Hollywood), not even knowing the actual funding total beforehand would handicap the wisest of us.
The joining of funding and sales revenue fetters in other ways. It means some critical decisions must be made before all the facts are known and expenses are actually incurred. A key example is product pricing. Normally, before a business actually takes money from customers, the crucial inputs needed to set sales prices have actually occurred. Not so with Kickstarters (and board games are quite diverse in cost given the creative and idiosyncratic nature of their components). Acquiring factory quotes before a Kickstarter is launched (which we diligently did) only gets you so far.
As (in)famously reported by my son Arthur over the years in forums, we blundered on this very issue on our very first Kickstarter, Cthulhu Wars, in 2013. We had adequate data for product cost, but not for the actual fulfillment. This is one of the few places a crowdfunding-based creator has room to maneuver, and we blew it. Not only did we set the shipping price in media res (a failure we never repeated), but our exploding stretch goals kept increasing that expense while revenue did not proportionally keep pace. We also did not account for Europe's crushing VAT (nor expected upwards of 25% of our backers would be from there! woot!). This translated to a deficit of $400,000 between that project’s final funding amount and the actual cost to fulfill it (i.e., a net margin when the dust settled of minus 35%). Thus, contrary to popular belief, Petersen Games began existence with a net loss - and yet we still had the liability and commitment to deliver to backers, which we joyfully did.
In those first two years I truly thought this major "startup" hurdle was the worst we would ever face. How I was wrong. For the non-business minded among you, note that the total market in the US operates on a less than 10% margin. That average is twice as good as our experience in this industry: most of our Kickstarter campaigns ended up with a razor thin 4 to 5% margin after all fulfillment expenses were accounted for. This means even seemingly minor errors have a habit of rapidly becoming major problems.
In brief, many suppose the type of liability created by crowdfunding is easier to manage than traditional means of starting a business: our experience suggests the opposite. It presents several challenges hidden to untutored entrepreneurs.
|
|
|
Analysis is a Picture in a Picture
|
|
The types of decisions businesses must make can take months - even years - to manifest their consequences. Thus, attributing patches of difficulty to particular courses of action isn't always straightforward. Some of the things we were doing obviously worked well: we had seasons of great success. But like a body with various organs handling different jobs, one organ's failure may present elsewhere in the body, hiding itself as the true cause.
We keenly self-assessed (e.g., holding post-mortems for every project release and milestone along the way). We altered our main strategies on several occasions (e.g., we had about 5 different "eras" with different managers on top in less than 9 years). But this ensures neither perfection nor stability.
And this messiness of separating missteps and blunders from acuity is itself subject to examination. Were we even discerning the proper framework for analysis?
Obstacles identified ranged from those outside no one's control, to the machinations of antagonists (of which more may be written in future States of Cthulhu), to our own errors.
Examples of internal failures include misreading the market to overprint some products while under printing others; taking too long to identify and correct mismatches between our team’s constellation of expertise and the business’ needs; and even expanding too fast into the “non-hobby” tabletop market (our carefully grown fan base required quite separate considerations).
|
|
Like general Zeng Guofan said to the emperor, we cried: "the enemy defeats us, but we fight on."
As the direness of our situation became ever more clear, we dramatically shifted in multiple ways. One very public way was the decision to not launch another crowdfunding campaign since 2020.
We felt it would have been irresponsible to seek funding for a new project once we knew we would have trouble fulfilling any prior ones. Announcing the halting of new campaigns, and that fulfillment of completed ones would be delayed was understandably met with frustration and concern by backers. No one wants delays, least of all us. Delays jeopardized non-crowdfunded releases, and vice-versa, creating a tricky conundrum.
With revenue dropping, and expenses continuing, I personally put more than $1,000,000 into Petersen Games by selling all real estate I bought during my successful video game career, and gutting my retirement. After all, Petersen Games was the first and only business I’ve ever founded and owned. I knew that most entrepreneurs fail more than once before finding success, but my singular goal had always been to avoid dissolution, since none of the remaining rewards would ever be delivered were that to happen.
Stopping the launch of any new projects and delaying fulfillment is not the same as stopping fulfillment altogether. Each of the past 3 years some level of fulfillment was able to take place, and fulfillment for all projects remains a top priority. Already by 2022 we had completely fulfilled 75% of our projects, and as of now we’ve fulfilled 83% of all backer rewards of all projects.
|
|
Cthulhu rises when its death will die.
In June, 2025 we revived from our semi-dormant state. About two thirds of our extant product inventory was back under our direct control (the story of how any of it left our control is a tale for another day). And we launched our new Shopify site, to great excitement among so many of you. Thank you for your continuing patronage!
It has now been 5 months since that time, and trends are positive. But we are not out of the murky woods yet. We only have a team of 3 (including myself), as well as a group of exceedingly heroic friends and volunteers. Even with their Herculean help, many critical tasks take much longer than when we had more than 10 full time employees. Rest assured, fulfillment remains our north star—no dissolution means no loose ends. For international backers facing shipping hurdles, we're exploring consolidated options to cut costs/delays.
|
|
Regarding the 17% of unfulfilled Kickstarter rewards, here’s what I can say right now:
Hyperspace — we have released the standard edition, and qualifying backers in (most) regions have the ability to get this now. The remaining expansions, as well as the miniatures, will likely be the next things to fulfill overall. We do not have a real timeline for this yet, however.
We've released the standard edition core game, and backers can log in via PledgeMaster to correct any eligibility issues with getting it. If you're eligible but haven't received your invite, reply to this newsletter or email pgsupport@petersengames.com— Dakota will sort it ASAP. Expansions and minis are next on deck, but no firm ETA yet.
Eternal Adversary — this game is fully developed, with illustration, sculpting, layout, and editing complete. When the time is right, we will begin tooling the miniatures.
The Gods War 2 — this game is fully developed, with illustration, sculpting, layout, and editing complete. When the time is right, we will begin tooling the miniatures.
Dinosaur 1944 — this game is fully developed, with illustration, sculpting, layout, and editing complete. When the time is right, we will begin tooling the miniatures.
Return to Planet Apocalypse — this game is fully developed, with illustration, sculpting, layout, and editing complete. When the time is right, we will begin tooling the miniatures.
To our friends in Canada (or elsewhere) who do not yet have Cthulhu Wars Onslaught 4:
We have your items set aside (so we don’t oversell the copies at retail), and as soon as we can, we will fulfill them. You have waited the longest, and the situation with Quimbley’s has put a major wrench in our ability to get these to you. But the solution will come.
To those waiting on Startropolis 2nd Edition:
The vast majority of the 2nd edition items are still held in a location we do not have access to. I cannot say more about this at this time, but our attorneys have indicated before the end of next month we should be able to say more on this (it’s about time!).
To all those waiting on replacement parts of any kind, for any game:
Our 3PL in the US will (finally) begin sorting through these next week to organize them, after which my son Arthur will label each product part so we can then start sending out replacements, just as we did for many years in the past.
In summary, the seasons have rolled forward, and the stars are becoming aligned. We hope we have passed beyond our darkest trials. As this new version of our business continues growing to become what we once were, more of the picture will come clear as to when and how the remaining projects will be handled.
This State of Cthulhu will drop quarterly (or as stars align).
We know this has been as long and painful a journey for you as it has for us, and cannot express how grateful we are for you as we begin to build anew.
Your friend,
Sandy of Cthulhu
|
|
|
|
|
