Paintball Wars: Is Armageddon on the Horizon?

People in general, not just paintball peeps, tend to believe what they want to believe and further tend to rationalize those beliefs by choosing to selectively believe only the information and/or data that supports their pre-conceived ideas. That appears (in many instances) to be how the battle lines are being drawn in this latest round of the paintball wars. Some are discounting the new water-based paintball and some are latching on to it like a kidnapped child, suddenly and unexpectedly, returned to its family.

Can HydroTec deliver? What happens to the marketplace--and the current manufacturers (of old tech paintballs)--if a new, better and cheaper paintball is introduced? What happens to Paintball? That's the multi-million dollar question.

The Players: the old guard (everybody making the traditional paintball including the return of Richmond Italia.) Includes KEE, DXS and a surprising number of smaller manufacturers around the world despite the North American corporate consolidation efforts (ZAP, X.O., etc.) and companies like GAP & Severe closing down. The new kid on the block, HydroTec (particularly with the rumored support of Kraft Foods) instantly gains credibility--though the proof is in the as-yet-unseen, untested product.

The Game: roughly speaking it's market share, at least for the big players. They have, by and large, gone the route of competing by price (and the economy of scale) although it's not even close to being that simple. Paintballs produced in Asia & India do have a production cost edge certainly on North American manufacturers and probably on Eurokids as well. But proximity matters in terms of shipping costs, currency exchange rates and even the delivered quality of the product. As does high end quality in a portion of the market and the effective reach of a manufacturer's distribution arm. What it amounts to is there are a myriad of factors involved beyond just making paint. The important thing to keep in mind is that in today's paint market there is a balance between quality and cost and the competition over sales is predominantly by price.

The Outcome: Whether HydroTec will kick off a new, hot paintball war is dependant on the quality of the new paintball--from shell consistency, breaking characteristics, marking ability, etc.--and the wholesale pricing structure. That, and their ability to deliver product in a timely manner. Let us assume for the moment the new paintball is as advertised; the functional equal of current paintball tech at something in the neighborhood of half the manufacturing cost. That would put HydroTec in the driver's seat but still leave some wiggle room for the old guard.
How would HydroTec play it? I had assumed the big players would look for opportunities to file lawsuits in hopes of delaying or inhibiting a HydroTec rollout. One source reasonably close to the situation doesn't think there's any room for legal maneuvering. I'll believe that when I don't see it. Basically HydroTec will have two ways of playing this. They can take on the established players by undercutting their best prices and still make a profit as they build a distribution network. And/or they can establish their superiority and then be open to negotiate licensing agreements, perhaps with flagship manufacturers in key regions around the world.

The Fallout: Again, assuming the new paintball is as claimed a variety of things are likely to result. It could be a real boon for competitive paintball where cheaper paint could have a real impact on a player's and/or team's ability to compete. It will almost certainly force the old guard's big players to try and match the technology. It's an open question if HydroTec can "protect" a water-based paintball--as opposed to patenting the process--but it leaves the potential for a small window of opportunity to the old guard. In the meantime even a brilliant success from HydroTec will take time to build up its manufacturing volume and distribution network which is where the old guard's big players find that window of opportunity; in the time it will take for HydroTec to take control of the market. Regardless of how HydroTec works out (or doesn't) the same basic tensions will continue to exist between wholesale cost and end user customer cost. A cheaper case of paint at the wholesale level eases some of the pressure on higher volume retailers and could allow for improved margins but as with the promises of small ball when the retailer benefits that savings isn't, for the most part, passed on to the customer. Or, if the savings are passed along to the customer the current debate over how the local field should operate will continue unabated. To say nothing of what happens to established PBIndustry giants if they can't compete with the new paintball.