Monday, December 28, 2009

Interesting Times: Monday Edition (again)

There are conflicting reports on a rumored situation at KEE. The word on the street before Christmas was that KEE had put a hold on virtually all product orders to their suppliers and that employees would (will) have to take an unpaid mandatory two weeks off in either January or February of 2010. More recent efforts to verify the rumors have met with denials from well placed sources inside the company.
I'm passing it along to y'all despite the conflict because the original source has proven to be very reliable in the past.
In any event, while unusual it may portend nothing more than a measure designed to deal with a temporary cash flow issue or ongoing credit crunch concerns since the government isn't yet bailing out paintball companies. Or the naysayers may have it right. Either way it shouldn't be long to find out.

At this time I have two or three more similar items that will posted during the week but this isn't going to devolve, even for a week, into rumor central. I also expect to have a Ken Bryson of the Palm Beach Vipers interview up this week and who knows what else.


Reiner Schafer said...

Well let's hope someone will be left after all the fallout. The right person with the right financial backing might come out of all this smelling like a rose. Fire sales left and right?

Hopefully KEE is just havng some minor cashflow problems.

Let's face it, right now there are enough new and used markers (and other gear) out there to go around. The only real consumable we have is paint. If paintball manufacturers and distributors have cut their margins down to the bone on paint, have mercy.

Industry In/Outsider said...

They did...

Anonymous said...

What Happen with the JT Paint manufacture who is going to Buy it ? You let us in suspense

Baca Loco said...

Read last sentence of rumorology post. *tsk tsk*

Anonymous said...

It could be as simple as KEE is sitting on a pile of inventory that didn't move during the holiday season, and there's no reason to order more stuff when you're sitting on a pile of stuff.

And if you're sitting on a pile of stuff you didn't sell, you didn't make the money you thought you did, so it would be handy to pay people in accrued vacation as opposed to cash.

Reiner Schafer said...

Anon. Yes, most likely they are sitting on a pile of inventory. And if they are sitting on a pile of inventory, it means they didn't have the sales they anticipated. If they didn't have the sales, they didn't make the money from those sales. If you are in the merchandising business (wholeslae or retail) you need to sell crap. If you're not selling, you're days are numbered.

Anonymous said...

Baca that was sunday it say that today it will tell who

Twisted Games Of Texas Paintball said...

I sure as hell hope someone will be around at Kee to ship paint. Otherwise, I will be taking an unplanned, unpaid and forced two weeks off as well. Nothing like something else to worry about....

Baca Loco said...

Anon--a mind is a terrible thing to waste. As I quote myself from Sunday December 27th, "Oh yeah, I promised to tell y'all who the rumor mill claims is bidding on JT's paint manufacturing--it's Gino at Valken and Richmond from GI Milsim. More tomorrow."

Relax Kim. It's all good. There's a pile of 50 cal sitting in a St. Pete warehouse. (Florida not Russia.)

Twisted Games Of Texas Paintball said...

Ha. Thanks for making me spew my last sip of Coca-Cola.

Crotchety Old Fan said...

this kind of activity also takes place prior to a sale...

anonachris said...

This rumor is 15 months old. I heard this Kee is struggling, might be going out of business rumor from "in the know" (ie, not your local shop owner or tourney guy) people over a year ago.

I'm not wishing for anyone in particular to go, but I'd be happy to see the forest cleared up a bit. If Kee goes, Draxxus will fill the paint void, with the rest being shared among smaller guys.

JT is actually the one that really worries me. They've got such a large volume of business that is served to players outside of our little world who've never heard of Pbnation, the PSP, and definitely not this blog. Those players are almost unreachable/invisible, but they help the industry quite a bit. I know quite a few kids who got into paintball from the Walmart/Sports Authority stores who've never thought to look for paintball online and know very little of tournaments.

Anonymous said...

JT folding or merging would indeed be a disaster... but that company had been mis-managed for years, and I don't think the latest team had enough resources with the new corporate masters to bring it back.

Baca Loco said...

This rumor is quite specific and it isn't 15 months old. If you want to say that there have been rumors about troubles at KEE for 15 months or more that's different.

JT is already outta Walmart. Isn't your concern really about avenues of distribution and not so much about who is distributing where?

anonachris said...

To answer your question, yes.

But I see the Walmart void much much more difficult to fill than a Kee void. There are already several players doing similar things in the same channel as Kee.

Losing the mass channel is a killer. I haven't kept up with the facts on the Walmart side. If JT really has lost Walmart there's no way I can see Jardis or whoever owns the company keeping the brand. Why keep investing money to try to build market share in a niche channel (100% small volume sales through proshops) they don't care about.

It will help shop owners at the margins, but will be bad for the sport in the long run.

If Kee goes, it will be sad because the company does seem to have a pretty good track record of "doing right" by the core industry. But someone will step in to fill the gap.

Reiner Schafer said...

Anonachris, good post.

I do have a bit of a problem with Walmart undervalueing paintballs. Using paintbals as a loss leader to get players to buy other higher marked up items, worked for them (while the industry was in a growth phase). But lowering the price of paintballs to the point they did, has ultimately hurt the industry severely. They didn't know it at the time, but ironically, lowering the price of paintballs (and apparently making everyone else feel they had tolower their paintball prices as well) is probably what in the end hurt them the most. Some people (mostly me) believe the low paintball prices at rec fields are the biggest reason the industry has seen a serious decline in growth. In the end, that decline in growth is responsible for changing the industry landscape.

anonachris said...

Well, I'm not sold on the whole shooting paintballs makes people stop playing paintball theory.

Let's look at the economic facts.

Lowering prices of a commodity (paint) causes usage of that commodity to increase.

This is seen in a few ways.
Players shoot more paint per game.
Players play more often
More new people come into the sport (lower barrier to entry)

All of those are pretty much economic truths.

What is not true is the unproven theory that people shooting a lot of paint at each other has caused less people to play paintball or to stop playing altogether.

That's just pissing in the wind and I spin as many yarns on my own.

But if you look at the evidence, I think it pretty much turns that theory on its head.

The evidence is everyone knows they are playing paintball where you actively shoot at someone. Everyone already wonders (and finds out) if it hurts.

I don't believe we've got a bunch of girl men that are all pumped to go and shoot their buddies and all of the sudden don't want to play anymore because 1 or 2 of them got shoot too much by some kid (or adult).

Yes, that can happen at the margins. But that does not explain the broad decline in the industry. It's a bunch of bullcrap being sold to people who have no understanding of statistics -- correlation is not causation! I've known exactly once person in the last 6 years (been playing longer, but just thinking of the time frame of super fast guns) who has called it quits because he got shot a lot. And he was 60+. And still talks about playing. And recently bought a new gun.

I've known dozens of newbie Tippmann/BT kids that got blown up, that didn't care. A handful more that did care and cried a lot, and sucked it up and went to play the next round and still talk about it. Of course, an anecdote does not represent data. But We can all find examples and use those examples to justify whatever our desired outcome is.

But I think when you look at kids who like to get thrashed on skateboards or snowboards or who dream about shooting each other and diving into trees these generally aren't people who are afraid of getting roughed up. It almost adds "Street cred" to talk about the huge fall you took on a skateboard. Getting lit up isn't much different in that sense.

So while I'm not saying we shouldn't safely police rate of fire, I do think it's a loud of junk that selling more paint has led to the decline in paintball.

anonachris said...

I also tink friends shouldnt let freinds commet without poof readin.

Janek said...

Lowering the price of the commodity increases usage of that commodity.

Yes, but not always - look up "price elasticity on demand" on wikipedia. This is also an economic fact.

What I like about economics is that economics works, whether you know the rules or not.

Reiner Schafer said...

Unproven theories aren't necessarily wrong theories.

I don't think the biggest problem with shooting higher volumes of paintballs at new players is that they are getting shot too often. In my opinion, the problem is that they are being "shot at" too often. It doesn't even need to be the actual body of the player being shot at too often, but just the bunker or vicinity that the play is in being shot too often.

At our field, the main demographic we choose to market to are new players and those that play relatively rarely (once or twice per year). I see on a daily basis how new players react to gun fire. Sure there are those that are all gung ho and don't really care who is shooting or how many balls are coing their way. They'll run for the flag and won't stop even though they've been hit a dozen times. Then they'll boast about their antics afterwards. Tyey are having fun, and that's cool. But for every one player like that, there are half a dozen sitting behind a bunker, afraid to move to the next bunker or pop their heads out to take a shot because the number of paintballs coming their way and pelting their bunker scares the crap out of them. And those paintballs don't need to be coming at tehm from an experienced player shooting 15 bps. They could be coming from another renter or two shooting a stock M98. But they are shooting a lot of paint. and the reason they are shooting a lot of paint is because they can. Why can they shoot more now than 10 years ago? The only thing that changed is the price of the paintballs. When taking into account the rise in wages and the drop in paintball prices, paintballs cost less than half as much as they did 10 years ago and much less still looking back 15 years or so.

If we don't care about the players that aren't tough enough, then all is good and we will just follow the path to where it leads us. There will always be enough players around to play a game of paintball with. But kleagues will get smaller, fields will have less customers and will continue to close down. Stores will close down. Manufactuers will merge and close down. Sponsorship money will be very sparse.

You say that with cheaper paint:

Players shoot more paint.
Players play more often
More new players come into the sport (lower barrier to entry).

The first one I will agree with. The second one is up for debate and will dependant upon the individual player. If number one is true for a player, then number two might not be as they might blow their budget in that outing.

Number three is an unporoven theory as well. Although in theory, it can be cheaper for new players to enter the game, history has shown us that most people, even renters, just end up shooting more paint. In the end, it may not be cheaper for them at all. It may cost exactly the same, the only difference is that they shoot more paint and have more paint shot at them.

The game has changed over the years. No one can deny that. Anyone with a brain can see that the game is totally differnet now than it was in the past. The game has not become more expensive (unless a person chooses to spend more), certainly not in real dollars. Yet fields and stores, manufacturers, and distributors are closing. Correlation is not causation! But something is the cause! And sticking our heads in the sand, refusing to look at what's staring us in the face, because we don't understand and don't like the implications, is not an answer.

anonachris said...

That's nice Janek. Would you also like to point out flaws in Newtons theory of gravity as it relates to quantum mechanics?

Back to generally accepted truths...

anonachris said...

Oh there are answers... I don't have them all though.

But if there is anything I could bet big money on it's not so simple as "more paint being shot" led to less people playing paintball across the entire United States. It's far too complicated to pin it on that.

I've always liked the, you know, completely crazy theory that in a recession luxury industries are the first and the hardest to get nailed.

And thanks to the political tweaking of our government, we really don't know how long we've been in a recession because they get to define what a recession is.

Paintball's downward trend can probably match pretty closely with the rise in oil prices. Which matches pretty closely with the fall in the dollar's value. That's a correlation I'm guessing is pretty close to one. And it all relates back to luxury. And paintball is a HUGE luxury (just not diamond-ring or sharper image style luxuries). While we're at it, why did The Sharper Image close down? Was it also relating to too much paint being shot? Or was it too much massage chair action? ;)

But seriously, I'd toss in the luxury industry decline is a leading indicator of an upcoming recession. And the a recession is actually a lagging indicator of the economy's health.

Is that 100% the reason? Nope. Next I'd toss in those simple 3 letters: f-a-d. Fad. Tons of people found out, tons of people played, tons of people moved on. I can go back to APG articles from 15 years ago talking about burn out. Back then we had hard core types that had to really really want to play and they still got burned out. Now? We have a bunch of post-MTV generation, Walmart shopper, ESPN watchin' people who tried it out and moved on to the next big thing (spending more time on Facebook?)

Not to say your claims are entirely invalid. From the sounds of it, you've identified a very good segment, and you're protecting it and nurturing it. I can go with that. But I don't think the success or failure of the garden you're growing is related to the global climate, so to speak.

Reiner Schafer said...

Janek, I personally don't know of any good or service that acts exactly like paintballs when it comes to overall demand. Demand per individual, once they've decided to play, is easy to see and follows tradition Demand curves.

"Experience goods" a concept by Phillip Nelson, seems to touch a bit on the way paintball consumption works, but even that isn't perfect.

With paintballs, the demand of paintballs by one individual affects everyone else that interacts with that individual. It will probably increase the damand curve for everyone else that interacts with that individual, at that particular time (lots of paintballs coming at you makes you want to shoot a lot of paintballs back), but if the "experince" at the end of the day was not a good one (or at least didn't have a high enough positive value), then the Demand for paintballs may actually decrease, as some of those players will not be consuming more paintballs in the future.

anonachris said...

How do you see it different to fuel/oil/gas? You drive more when the price goes down... more people driving more too... more traffic... more pollution... more accidents... more tickets... more deaths... prices go up, pollution taxes go up, people drive less, I don't know where I'm going with this... But it's pretty damn complicated, and no less so than paintball.

(also more jobs, more fun, more cars, more out of life)

Of course, if we define things so narrowly it will always be unique and stand on its own, because it is in fact a seperate thing that has its own traits. But there are certainly similarities to general consumption commodities (from poultry, to oil) and it's helpful to look at the similarities and just not assume we're different because we'd like to be.

Anonymous said...

Price of a day of paintball play has not gone down. It has stayed the same. Lower paint prices equal higher paint consumption, not a cheaper play price.

The game has changed. 10-15 years a

Anonymous said...

The game has changed. 10-15 years ago we marketed paintball as a game anyone can play. Old/young, fat/skinny, dad/son.

Now it only for the "extreme sporter" who likes getting hit many time and sitting in his bunker shooting a stream.

Reiner Schafer said...

Who wants it to be different? It would be a whole lot easier if paintballs were like commodities, like milk for instance.

I guess your gas comparison is somewhat (very little) comparable. But if gas consumption doubles or tripples and there are two to three times as many cars on the road at any one time, although accidents would increase and people would get more frustrated, it would not affect people quite as directly as doubling or trippling the consumption of paintballs per individual.

Also, as the number of cars/drivers increases, governments meet that demand, to an extent, with more/better roads.

As individual consumption of paintballs increases (more paintballs per player), infrastructure doesn't seem to change a whole lot. On the contrary, in the past 25 years as paintballs consumed by individuals has increased drastically, we have made the infrastructures (fields) smaller. That decision was made for the most part by people who, first, were used to playing and liked a more intense experience, and second, those that wanted players closer together so they would shoot more paintballs. Apparently most of us field owners thought it would be a good thing to get our customers to shoot high numbers of the consumable that we were selling to them. What most of us didn't understand is how that would affect the overall participation in the long run. Some of us are starting to figure it out though. ;-)

Janek said...


I think you should put quotes there, so that it read: generally accepted "truths".

All I meant to show you is that not in all cases will demand go up with a lowering of prices. Just because you choose to ignore the eventual implications that you might be wrong...Well, that's not really going to change anything in terms of what the problem really is. There might be different solutions to it, but the problem stays the same: There's less and less people playing the game.
Someone on here, maybe even you said it already: Lower prices of paintballs (or higher for that matter, as Reiner himself can attest), don't change the amount of money spent per consumer, just the volume of paint used by that individual. By decreasing the amount of paint "in the air" you're solving the problem of lower satisfaction that players receive from the paintball experience. Here's where you can draw a beautiful analogy that also explain another wonderful economic law of diminishing returns.
Let's say you go to a restaurant that does a "10 burgers for $1" deal, but with the condition that you can't share the burgers and you must eat all of them. Since you're hungry, you eat the first one, and it's tasty and juicy and you want to eat the remaining 9 ASAP. After the 2nd one, they're equally tasty and you're a still bit hungry and you think you can handle the other 8. After the 3rd one you think the burgers are very good and but you're not really hungry anymore and you think you can eat the other 7 but you're not sure...You eat the 4th, and the 5th one but you're definitely not hungry anymore and the burgers are that hot and juicy and grow in your mouth while you chew...To cut to the final, by the 7th one you're so full that you gargle and puke all the burgers back out.

What this is, is the law of diminishing returns ;)

anonachris said...

Janek I don't need to read much of your post if you are suggesting that an increase in paint pricess will not lead to a decrease in paint sales.

Demand curves are very important when looking at how much more paint will sell, with regards to break even points (is it worth it for walmart to "buy" extra volume with a decrease in margin) but it's pretty silly when talking about paint consumption to assume paintballs are so inelastic that price is not affecting consumption.

Yes, your aside about elasticty is a nice one. I suppose we can't get anywhere in life without qualifying every statement we make and making it twice as long because someone wants to pull out their econ101 and run down an unrelated tangent.

The only way I see your point being useful is if you feel raising paint prices will not reduce sales of paint.

And people do play more often AND other people do shoot more paint with lower prices. You guys have never played with a bunch of walk-ons who bought 200-500 rounds and were done? You think they'd be coming out to do the same thing if prices were twice as much? Not everyone dumps paint like a tourney or wannabee tourney guy.

I think Fad and Luxury industry explain the decline a lot more and allow us to examine ways to help the sport a lot better than suggesting we tinker with raising prices or reducing supply of paint or shooting at pump speeds in an effort to get people to play more paintball.

If paintball is declining because of a passing fad (With a double whammy of a recession thrown in), there are approaches to deal with that that may involve using the pricing-lever, but does not rely on it.

Reiner Schafer said...

Anonachris. You are perfectly correct. Raising paint prices will reduce sales of paint.

But it has also been my experience that it increases attendance, at least at the type of field I run (which happens to also be the most common type of paintball played in the world). Paint sales are only a part of my income stream. I also make money from field fees and attendance. If I can get the same sales amount from the average person AND supply them with less paint, I am ahead of the game. If that pricing structure also leads to MORE people attending (again, this is for my type of field), I am ahead that much more. The industry also wins if it means there are more people playing. As an off-shoot, tourney type and high volume rec fields win becasue there are more people available that "graduate" to those styles of play (remember how it used to work?).

However, it may very well mean that overall paintball consumption will go down. For instance, if the higher price/lower volume model creates twice as many customers but each is only shooting 1/4 of the paint, then the industry will only be selling 1/2 as much paint to those fields. Too bad, so sad. I'm in the business of selling "fun" first, and paintballs are only a tool I use to do that.

I am not suggesting that tournament type fields raise their paint prices or even that all rec fields raise their paint prices. There will always be a need and a demand for high volume/low cost paintball.

I'm saying that the industry overall is better served if there are low volume paintball facilities available for those that are just starting out and those that will never want to convert to a high volume environment. That doesn't mean high volume environments shouldn't exist. The problem right now is that paintball evolved (prices decreased) to the point that the choice for a low volume environment is not avaialble in most locations. That availability used to be there. It used to be commonplace. And paintball was growing at good rates in those days (and still is where it's available).

You can say the fad ended and the economy is playing havoc with participation if you want. But what if you are wrong? Our participation keeps increasing, even at $120 and up to as much as $180 (CAD)/case. At those prices you would probably consider our field a "luxury" field. Yet we are increasing in the middle of a recession, when I know of many rec fields selling at $40-50/case sinking like a lead zeppelin.

Give people a choice.

Janek said...


I'm not assuming anything in regard to the elasticity of demand for paintballs based on price change. You started it yourself with the biggest and most often used truism, that lower prices lead to higher sales - All I did was point out that it's only a half-truth.

You cannot look me in the eye and say that cutting the price of paintballs in half will double the consumption...You know that won't happen.

In the last couple years, unfortunately, everyone has been doing exactly that - prices of equipment and paintballs have been going down and down through market forces...The big guys do it, so the small ones have to do the same thing. The result of that is that barely anyone makes any money any more, the average age of the participants went from twenty-something to 'teens and that's a group that can't really afford to support paintball as a long term hobby nor is it capable of commiting to it due to generation wide ADD (games, girls, pot, cars, name it, they want to do it all - something's gotta give).

There are forces at work other than the cost of playing that are influencing the demand for paintball in the general population... In UK the rental field market is in a good shape while the tournament side of things is so deep in poo that Robbo (from Nexus and PGi fame) together with some industry people formed an organisation in order to try and build it back up, and these guys pay such low amounts for paint it's almost a crime...Oh, and there's only 5-6 paintball stores in the whole country...
In Poland, where I live, paintball is growing, there is a new store opening every couple months and things are looking really good, but the average age of a paintballer here is closer to 30 than 20 - these people have the money and can afford to play.

If lowering the prices is not working, then let's raise them. Sure, there will be less kids able to play, but the fields, stores and manufacturers will be able to survive.

Reiner Schafer said...

Janek, that goes against the very essence of the way most American's feel the economy should work. Americans take great pride in constantly trying to produce stuff as efficiently as possible. It's a big part of the The American Dream. Do it better and/or cheaper than the other guys and you will succeed and live happily ever after (or at least afford vacations in the tropics and come back to a big house and 3 cars). It's worked for quite a while. Ironically, it seems it may be the downfall of the US economy as others are copying and beating them at their own game. But enough political commentary.

Janek, what happens in an economy when the demand for a product decreases? Prices usually drop until they get to the point where some of the suppliers cannot afford to stay in the market. After that, prices rise to the point where a new price is established whenre the new Demand Curve and Supply Curve meet (see I remember a little from that basic micro-economics class I took). Right now, it seems we atre at the point where suppliers are dropping out (or several merging to become one). This is definitely taking place in the manufacturing/distribution sector, but it's also happening in the store and field sector as well. I can only assume that at some point in the future prices will rise. Either that, or, the customers will learn to accept crappier products (can we say .50 cal?).

Stores will continue to have problems and will continue to close, even when the economy turns around. On-line sales are not going away and as time goes by, consumers will get more and more comfortable with buying on-line.

Fields will either raise their prices or will offer a crappier product. Actually, the product can't get a lot crappier, so they will either drop out of the scene or will rasie their prices and produce a better product. Much of that will probably happen with crappy fields closing and better ones, with higher prices, opening up (alternatively crappier fields will be bought up and converted to better quality, higher priced fields). We are, I feel, right at the brink of that transformation in North America. It hasn't really started yet, but from communicating with many field owners, I get the feeling that things are slowly going to change. But it will be a very gradual change and a very gradual recovery for the industry here in North America. Much too slow for the liking of industry big players who look at monthly sales and cashflow charts. Their solution to slower sales and negative cash flows? Reduce prices and get stuff out the door and get money coming in. At least that is what it seems like to me. But that just puts the problem off and compounds it later.

Some of big Industry realized a few years ago that that trend cannot continue and decided that they need to fix things from another angle. That's when people involved in the PSTA and anyone they could convince started this whole "players need to play with more respect and honour" propaganda trip we are currently on. It's also when they started putting pressure on leagues to lower the ROF. It was/is a valiant effort. Unfortunately, as far as I am concerned, they targeted the wrong people. Players aren't going to change just because you ask them to and tell them it's the right thing to do. No. They should have targeted the field owners, as they are the ones that let the situation get like this in the first place (mostly oblivious to the fact that they were letting it happen, but nevertheless allowing it) and they are really the only ones with the power to change it.

Reiner Schafer said...

Addition to above: Field owners are also the ones that can benefit from changing the way they let the game evolve. Players (those that are currently still playing and tolerate the way the game is today), for the most part, don't see a big benfit to changing their ways. They play the way they play because they like playing that way, otherwise, why would they be playing like that in the first place.