The Economy & the Fate of Paintball

There's been almost endless talk about the economic state of the paintball industry for a number of years now and it's impact on everything from the local field to the tournament player and the decline in new playership. And I'm here to tell you it isn't even close to as bad as it could--almost certainly--will be in the not too distant future. Given the list of changes made to the game on the basis of economic reality I don't even want to think what could happen. But somebody has to give you the head's up so it might as well be me; Mr. Popularity. It's gonna get worse before it gets better. Get ready & get smart. It won't be the end of the world but it ain't gonna be pretty.

Okay. About the economy. Here's some basic numbers. Current (acknowledged) U.S. government debt is over 14 trillion dollars. To try and put that number into some perspective annual government revenues the last couple of years were about 2.1 trillion. So we owe about 7 times what we take in on an annual basis. Over the last two years we've also borrowed about 43 cents of every dollar spent. Which amounts to around 1.7 trillion for an annual expenditure of around 3.8 trillion despite the fact Congress has failed to pass an actual budget. If that doesn't sound too bad maybe breaking it down will help. Divide 1.7 trillion by 365 days and divide again by 24 (hours in a day) and that works out to the U.S. government borrowing over 190 million dollars an hour. Yep. An hour. Still not convinced of the magnitude of the insanity? Imagine you started a business the day Jesus was born and immediately began losing a million dollars a day. Your loses won't reach a trillion dollars until the year 2732.
Okay, this is gonna be real long if I keep going at this rate. Time to shorthand it. Don't worry about default if the debt ceiling isn't raised. (It will be.) Technically it ain't gonna happen--at least in the near term. Yes, the government will run out of money to pay for things it has chosen to take on as obligations but the only way it meets those obligations is by continuing massive borrowing. This year, depending on which government office's numbers you believe (no, they don't all agree) debt repayment will eat anywhere from approximately 17-20% of all revenues. That is with historic low interest rates. All the current blather over an extension of the debt ceiling is utterly irrelevant in the longer term--which may be as little as next week to a year or two, if that, because continued borrowing only digs the hole deeper. What matters is getting a handle on spending and addressing the need to cut deficit spending. (Sure, a failure to borrow more today would precipitate a crisis but it would be the sort of crisis that forced the government to spend less and make big, immediate cuts. More on that in a second.) (For those of you who insist the government can print money forever, well, yeah, they can but there are inevitable repercussions from doing so. Yes, the government could pay off almost any debt but it comes at a cost too. A brutal one at that for the average citizen. Wiki 'hyperinflation' or 'Wiemar Republic' or any of a number of financial collapses in Argentina in the last 60 years or so to see what happens.)
Here's the thing. We are already caught between a rock and a very hard place. GDP (gross domestic product) includes government spending. But 43% of all government spending isn't spending--it's the disbursement of IOUs. Last quarter's growth was first announced to be 1.8%. Yesterday that was revised to 0.4%. That means that there has been effectively no growth but it's worse than that. Remember 43% of government spending is debt disbursement and that amounts to around 12% of the calculated GDP. If deficit spending stopped tomorrow we would see that real GDP was well into negative numbers--and has been since 2008.
So if we stop the deficit spending cold turkey the economy takes a big hit that will drive further contraction (a shrinking tax base too) and produce considerable suffering likely for a few years. If we keep on the current course we will, sooner rather than later, reach the place where default is inevitable, the dollar will be virtually worthless and we will suffer the same pain, only worse and for longer--but we might be able to stretch the inevitable out a few years--max.
A middle course would be to make real and serious cuts in spending immediately--not the illusion of promising to do it 5 or 10 years down the road or halting the automatic increases and calling that cuts. And even that would create hardships but it might save the nation's credit rating, reassure international markets and help preserve what's left of the dollar.
What both parties are currently debating is a waste of time and breath. It's unserious and will see our rating downgraded almost immediately and the follow on from that could precipitate its own crisis--with, you guessed it, a similar outcome to the other scenarios. At some point the house of cards collapses. The only question is whether or not it's a controlled demolition or complete structural failure.
And it isn't just us. Euroland is in the boat next to ours and busy making their own mistakes. And conditions either here or there could send the cards tumbling for everyone. The window is open now and I would be very surprised if we got past 2013 before it all falls down. Happy happy joy joy

UPDATE: Sounds a lot what I suggested. From Moody's today--"Reductions of the magnitude now being proposed, if adopted, would likely lead Moody's to adopt a negative outlook on the AAA rating," the credit rating agency said in a new report. "The chances of a significant improvement in the long-term credit profile of the government coming from deficit reductions of the magnitude proposed in either plan are not high."

Interpreting History

This post picks up where, Playing Pin the Tail on the Donkey, left off. I'ma take all the numbers, facts & figures (plus maybe a few extras) and mix them altogether in order to frame the Big Picture of paintball's last decade (or so.) In the past the highlights of my paintball commentary was in predicting the future--at which I have been depressingly successful if I do say so myself--and if I won't say it, who will? Oddly, I'm less comfortable with this hindsight approach but I'm close to convincing myself (at least) that I've got a handle on what happened and why. Go ahead and poke holes in the interpretation of the past I'm going to suggest. Have at it. I'm only highlighting certain data points and you may give more import to other things. One reason is because there's lots more basic info I'm not throwing into the discussion right now; like Am team numbers, the division breaks amongst the ams over time, the cost of entry, the total teams playing when both leagues are combined, the impact of classification rules, etc. Could some of that data change one's perception? It might very well. This isn't intended to be the definitive word (despite the fact I'm always right.) It's intended as a baseline, a starting place, a means for having a vaguely intelligent conversation.

Chronology: Competitive paintball exploded.
This coincided with and/or was driven by the move out of the woods, electronic markers, concept fields, a rapidly expanding market of new players, traditional formats (10-man & 5-man) were still played and shrinking retail paint prices.
Industry got slammed when the growth spurt suddenly stopped. (The critical question here is did sales go flat immediately or did they decline against expected growth? And how long after the rapid growth did sales actually fall behind past sales peaks?) Elements of industry begin competing directly with traditional retail outlets.
This is also the era of corporatizing PBIndustry which brought different management philosophies & goals into play within the competitive environment. The leadership and value of competitive paintball was no longer assumed. Sponsorship turns a corner and begins to decline in real dollars.
Xball is conceived as the Sport of Paintball designed for a TV audience.
The TV Wars begin. The result is competing leagues (NPPL & PSP) driven by shifting priorities (and concomitant expenses) only indirectly related to putting on MLP events.
The pro ranks are divided by the NXL and the NPPL is the beneficiary of all the burgeoning 10-man teams unwilling, uninterested, unable to make the leap to Xball.

So what happened? Here goes.
PBIndustry was caught ill-prepared when the growth years suddenly stopped. For whatever reason even the incoming transnational corporates failed to manage the transitions successfully except (so far) KEE.
Xball succeeded in turning tournament paintball into sport. That success has had some unintended consequences.
The TV Wars squandered the enormous base of competing teams with redirected resources and in the NPPL's failure to sustain a profitable series.
The Sport of paintball raised the bar for everybody (eventually) and as a result has pushed out of competitive paintball some number of players unable--for various reasons--to meet its demands.
5-man paintball remained vital until the last year to 18 months.
Local and regional competitive paintball has also declined--although the declines appear to vary in different areas of the country.
The impact of the housing bubble was felt most severely initially in competitive paintball strongholds like Cali & Florida.
The general economy remains in an extended recession (at best).

What's important here. (Well, d'oh! all of it in one way or another but --)
One--Xball (Race 2) isn't going anywhere. Despite the fact I am convinced that Xball drove our demographic down and a lot of pre-existing tourney players to 7-man (and out of competition) there is a dedicated core willing to do what it takes to play competitive paintball as sport.
Two--5-man has been amazingly resilient until the last year. 5-man is the heart & lungs of tourney paintball. Through years of being second class competitors (back in the day) and rising entry fees the national scene continued to benefit from a robust 5-man turnout
Three--5-man began to decline on the local level before real weakness appeared in national events. This is the result of pressing to integrate bread & butter tourney ball into the national scheme and raising the bar to basic participation too high.
Four--There's a significant number of former tourney ballers not competing.
Five--If the rumors of operating in the black this season are true the NPPL has a pared down tournament formula that is more sustainable in this economic environment.

Having gone long (again) the next post will look at possible answers.

The Gun Whore Effect

I have a new theory on the decline of the industry. Like all the other theories it's short on verifiable facts but there is at least a certain logic to it--unlike some of the others, for example, oh, I don't know, say the trickle down theory of robotic hordes of ballers shooting mad paint because that's what the insignificant One Percenters do. (Not to be confused with the punk ass tourney wannabes swarming unwary fields across the country like a plague of locusts. Shooting mad paint. At high ROF.) And while I wouldn't give this theory a primary role in the decline it could have served to make matters worse after the fashion of what repackaged mortgage debt did for financial institutions during the real estate collapse--and beyond. I call it the Gun Whore Effect.

It might more properly be called the Turnover Effect but that doesn't have the panache of The Gun Whore Effect. Gun whores, in fact, have been with us almost as long as the game has been played. Once different kinds and brands of markers hit the market the gun whore soon followed. The gun whore is, of course, that select group of ballers who can't resist the next hot gat and will buy as many of them as possible--sometimes selling older guns in the process, sometimes not. There is also a gun whore lite group that may not have a stash of markers but must have the latest and greatest and as a consequence goes through guns faster than Tiger Woods does cocktail waitresses. The result is gun whores churn the turnover rate in gun sales well above the norm.

It used to be that gun manufacturers made guns and aftermarket shops customized them. Eventually manufacturers began to try and tap the custom market and in no time at all the cycle of "new" gun introductions was annual. In creating an annual turnover cycle manufacturers overheated the marketplace (although since this first occurred during the big growth years it went unnoticed.) Amongst gun whores the effect was to accelerate the rate of turnover; both buying more guns faster than the average but also dumping more used guns back into the market as well. When demand was still rising it didn't matter but as soon as demand flattened (and/or declined) the result was a market glutted with used guns of virtually identical performance and nothing like enough newcomers to sop up the excess and still buy new at anything like the volume the manufacturers had come to expect.

Today that glut continues and continues to depress new sales while manufacturers are stuck trying to differentiate their latest gear from last year's and perhaps even incongruously relying on the gun whore portion of the market for even their reduced sales. And since player numbers have been calculated based on new sales nobody really knows how the numbers stack up, only that the sales aren't there. The one thing I would be willing to bet is that there are a lot of guns collecting dust in a lot of closets.

There Was No Paintball Bust

Okay, that's not completely correct if you wish to say that the fall off in sales (& apparently participation) from the boom years constitutes a bust. What this is really about is offering an alternative theory for the present state of paintball generally. And it's not going to be a paintball based theory, it's going to be an economics based theory. I intend to keep things simple. (So don't hesitate to ask questions, disagree or whatever.)

By the way, this isn't the scheduled post. That post, Paintball Diversity, will be up tomorrow and will bump 'Return of the Pro Loser' to Saturday or into next week (again). (For you newer readers you're beginning to see how this scheduling business works out, aren't you? Trust me, this is as good as it's gonna get so consider the schedule one for likely posts. (The intersection of the best of intentions and reality.)

Conventional wisdom has been that the "bust" following the paintball boom was caused by paintball-related forces that can be corrected. Unstated is the presumption (hope) that fixing the causes of the bust will restore the boom. Hence we're now talking about the price of paintballs and blaming the ROF for all our ills. (It's not often you get to use "hence" in a sentence and I couldn't resist.) What if we've been focused on the wrong part of the boom bust cycle? What if the boom was "unnatural" and the bust is actually a return to something more like normal or at least predictive? After all, the bust mentality is mostly an industry perspective that has trickled down into the tourney world because of reduced sponsorship allotments. (I'm not suggesting some industry types aren't struggling. Only that their struggles are not the direct result of fewer players playing paintball.)

My working theory is this: The whole period of significant paintball expansion (rec, scenario & tournament) roughly corresponded to an economic period of artificial economies inflated with cheap dollars and cheap debt which, in essence, created an unintended bubble in the paintball industry and as the big bubbles burst and impacted the wider economy the same happened to paintball. If so, we can't rationally expect to predict any future result based on past outcomes because they were the product of a distorted market. [And the potential discrepancy between tourney and rec participation against scenario type participation in this environment is likely explained by the relative infrequency of scenario events and the known quantity factor of most of the participants. (They know what a big game is like and they already are motivated to play paintball within that context.) Whereas the tourney and team costs outstrip the others by a wide margin and rec play (and first time play) has a high initial cost against uncertain motivation. It's easier for ballers to justify the occasional discretionary expense of scenario play than it is to commit to the longer term cost of being on a team and training and competing. Or against a rec player's ambivalence measured against a traditionally steeper per time of participation cost. At any rate that's not really the point. Just an alternative explanation that fits the alternative theory.]

Here's how it played out: The bubbles, first in tech, then in real estate mitigated the impact of two minor recessionary cycles thru the late 90's and into the early 00's but in doing so monetary policy flooded the marketplace with cheap dollars and cheap dollars encourage immediate consumption (instead of savings) and that wave was followed by (and overlapped) a wave of cheap debt which also encourages consumption. So paintballers did what everyone else was doing, they consumed.
What you ended up with isn't an artificial rise in the popularity of paintball but an artificial rise in the accessibility of paintball. More peeps who wanted to were able to or chose to finance that desire (at least in part) on cheap available debt. And that artificial rise in accessibility caused an unrealistic (and unsustainable) level of expectation in the industry that made the bust worse in terms of overproduction in the short term and unsupportable production capacity and unresolved inefficiencies. The result has been dangerous debt loads for some, cut backs in employees, consolidations, scaling back and assorted other measures designed to realign with the current market realities.

Curiously enough, if that happens to be true, largely true, substantially true or even partly true a workable small ball (the 50 caliber solution) might, in fact, actually do (largely, substantially, partly) what its prospective makers claim it will do in terms of transforming the marketplace. Who'da thunk it?

The German Tsunami

By now you've all heard about the German legislation aimed at, among other things, banning paintball. But did you know rumor has it that privately most of the European paintball peeps consider the effort to fight a lost cause? Which may be a realistic take on the industry's lack of any political influence--unlike, say, the real gun lobby. So either the ban is a fait accompli or else only a sufficient public outcry might deter the politicians and cause them to modify the final legislation. Fortunately, there are a lot ballers in Germany and around the world trying to make their voices heard.

That's not the tsunami though. Not by a long shot. Take a minute to think about the ramifications of a German ban on paintball. (Purely the practical apart from a future trend politically.) What does Paintball lose immediately? A lot of players, teams and a still developing market. But the German market isn't just the German market. How big a hit do the MS and Grand Tour take if German teams disappear or are drastically reduced? Two of Europe's largest distributors are based in Germany. I'm told one of the smaller paint makers ships hundreds of skids of paint annually to Germany. And that Germany, when considered separately from Europe as a whole, is a top five market worldwide all on its own. Are you beginning to see the tsunami yet? In a time of general economic weakness within PBIndustry the loss of the German market could easily be the straw that broke more than a few camels' backs. It will, if it happens, cause a significant contraction in the European branches of the big U.S. players they can't afford right now. The potential ramifications really do reach every corner of the globe.
So, if you were thinking that's really tough for the Germans but it won't affect me--we all might need to reevaluate.

Which leads me to the biggest VFTD tease ever. You will not want to miss tomorrow's post; The Ultimate Paintball Conspiracy. I confess to being a conspiracy buff but that doesn't mean they don't exist. And a German ban could push the conspirators further down the path they are already considering. Fortunately nobody in Paintball can keep a secret and the word has gotten out. It could be the biggest story of the last decade.

UPDATE: sources in Euroland called to tell me to get it right so here I am, getting it right. My only excuse is that thing's been changin' mighty fast over there lately as this latest information has developed in the last 48 hours. Seems paintball folks have organized and using the services of a PR firm may have made some inroads in the last day with the help of a lot of players rousing public opinion. No deal is done and the ban could still pass but what seemed two days ago to be a lost cause might yet carry the day.

FOLLOW-UP: Please check out the comments as Missy (who knows her stuff) disputes the scale of the German market's importance and consequently the scale of the impact should a German ban ultimately happen. While I aim to have fun here at VFTD it is never my intention to steer you wrong so I appreciate Missy taking the time to correct a possible error. The latest news looks more positive so hopefully we won't have to find out what the real impact of a paintball ban in Germany might be.

The Conventional Wisdom

This isn't the first draft of this post. Or the second. In fact this post isn't anything like what I thought I wanted to say. The easy part was starting. It's been a lot tougher finding my way through to any sort of conclusion but the mighty maw of the blogosphere doesn't long tolerate deliberation. (Much like my absurdly low threshold for boredom.) Truth is I've left out most of my conclusions, mostly so you can draw your own. I don't know if there's a meal here or only table scraps. You decide.
One long-standing, grey-bearded item of conventional wisdom in paintball states: Tourney ballers (and tournament paintball) are in the minority and it's not even close. No doubt you've heard that one. May even have repeated it yourself. Me too. If it's true (and it has to be, doesn't it?) then tournament paintball has been the tail that wags the dog. How did that come about? The industry has for a long time (in paintball years) marketed paintball via the tourney game and players. The media (when it existed) focused on tournament paintball. Tourney ball drove the tech developments and the notion of paintball as sport motivated many and inspired the push for mainstream acceptance and TV. I know how this looks but don't be too hasty about drawing any conclusions just yet. Is there a danger of the pendulum swinging too far the other way? What doesn't the conventional wisdom tell us that we need to know?
Here's some Old Skool conventional wisdom: Moving paintball out of the woods was a, and perhaps even the, critical step in the development of competitive paintball. (Ever notice how certain bits of conventional wisdom don't seem to fit with other bits of conventional wisdom and yet it doesn't seem to matter. I wonder why that is? /end Andy Rooney riff) Who can argue with that? But tell me how much impact moving out of the woods had, if any, on the player explosion of a few years ago. Are they related? If they are related is there any disconnect between the notion that the vast majority of players are rec/woods/scenario players? I'm just asking but with what little hard data there seems to be it looks like a case could be made that moving out of the woods also broadened paintball's appeal across the board. I realize that in some quarters that's sacrilege and I also think that some measure of paintballers preferences are regional but does the idea put a different face on the "typical" rec player? What else could have moved the majority of local fields to invest in some brand of airball or other? You know, given the conventional wisdom about the limited number of tourney ballers and all. I'm beginning to wonder about the utility of conventional wisdom in general.
How about another piece of classic conventional wisdom? The transition to xball happened because 10-man was dying out. Is that really what happened? Not according to the numbers. The last year that 10-man was the featured event ('02) was also the largest WC 10-man turn out ever and the Chicago event that year featured more 10-man teams than the WC of only two years earlier. In terms of numbers of teams xball has yet to match the 10-man numbers of WC '01. So what precipitated the sharp rise in 10-man participation? And what was the cause of the switch to xball? And if you really want to make yourself crazy figure out which years were the fat years for industry and try and relate those to event turnout. And if you can't does that make our first item of conventional wisdom seem all the more correct? Or are things becoming so complicated it's hard to know what to think?
Here's another bit of more current conventional wisdom: irresponsible punks and their high ROF guns are destroying paintball. Hard to argue with this one, right? I mean the signs are everywhere. PBIndustry is reputed to be in serious trouble. Sponsorships are definitely shrinking. The number of peeps playing paintball is on the decline, or so it's said. The NPPL is gone and if folks are to be believed some of the paint giants are struggling to survive. Nobody seems to know how tourney participation will shake out this coming season but plenty of peeps are worried. Local fields and stores are struggling too and some are closing. All true as far as it goes.
Except there's a problem. One problem with conventional wisdom is that it's not always true. Another problem is it can be an easy shortcut that appeals to Paintball's herd mentality. (You know, the one where everybody agrees instead of thinking.) In this case the problem is the disconnect between the legitimate trials facing Paintball and the purported cause. Irresponsible punks and their high ROF guns. How did the industry get into trouble? Are there more or less people playing paintball today than 10 years ago? If the answer is more, and it certainly appears to be, then were the paint companies even worse off 10 years ago? How did industry survive at all? On the local level is it numbers of players or gross sales that are the real issue? How does the current economy figure into the equations?
How many irresponsible punks with high ROF guns does it take to collapse an industry?
And if they all disappeared overnight would all of Paintball's problems go with them?

Mr. Curious Again

Over at John Amodea's (new) blog, (welcome to the new media, John) he began a series of posts that are, in part, a retrospective of the history of paintball. I recommend anyone interested in the current state of the game check John's blog out. So many involved in the game today know amazingly little about what came before which makes it all the more ironic that some of the peeps most in need of John's review are the ones who made that history.

The broad strokes of the post are unassailable but donning my Mr. Curious personae, which requires only an expression of wonderment mixed with confusion--and not a great personal stretch--I am curious about a couple of things in John's post. I wonder what gun sales were in say, 2000 or 2001 compared to 2008. I also wonder what impact the burgeoning market in almost new virtually identically performing used guns is having on new sales particularly during an economic downturn. I'm also curious about the real impact of media and industry focus on the tourney side in recent years (and the varied effort over the last couple years to reintroduce recreational paintball into the pages of most of the magazines.) I have no doubt that poor local field operation has been exacerbated by punks with blazing gats and alienated some numbers of newbies but were these ever players interested in rec and/or woods ball? And have these assumed losses impacted the numbers of rec/woods players? Lastly, did anyone expect the explosive growth of the early part of this decade to go on endlessly? (Well, doh, some parts of PBIndustry clearly did but still ...)

In any event it's great to have multiple voices and more venues in which to discuss this wretched game called paintball.

Paint It Blue

The post I'm not a seismologist was about the kerfluffle coming for the paint manufacturers. (I've decided I don't much like the word, crisis, as the urge is to use it so often lately it begins to have the same force as the threat of terrorism color code of the day so from now on unless it's an actual crisis kerfluffle will stand in for the possibility of destruction, chaos and the imminent imploding of the known paintball universe.) The later post monopoly 101 was about the ongoing dialogue considering the prospect of the MS (and possibly) the PSP restricting event gear sales and usage to league sponsors only. What intrigues me about this pair of posts is what conclusions might be drawn from information already in hand. (That, and I get to rehash in greater detail topics already commented on because I never know when to stop.)
This off season's paint sponsorships will go a long way to predicting the viability of the pro game and teams for next season. Sponsorship was down last year and if the rumors and restructuring have any validity availability is likely to tighten further.
The current practice – restricting brands available to league sponsors – for selling paint at events would seem to make the case for extending that policy across the board. But it doesn't, not when examined in any detail. For starters paint is unique in that it's meant to be used up. Like buying a hamburger. Or keeping it to paintball, batteries. Your purchase assumes consumption and has no long term consequences. Unlike virtually everything else you might buy in order to play the game. Even so, paint choice isn't irrelevant and is frequently simply tolerated by non-sponsored teams who are more price sensitive than brand sensitive. And the current practice must raise the price of any case of paint regardless of how reasonable it may seem because the vendors have to not only cover their ordinary expenses but also the premium the league charges. And at this point in time that is becoming prohibitive for the vendors – end of the day their wallet is bare, too. The larger problem is the old economies are failing to apply anymore. As everyone gets squeezed it becomes harder and harder to make the process, at any stage, profitable.
Instead the place Big League paintball finds itself is with the leagues facing unpredictable but almost certainly tougher times (think Richard Harris in A Man Called Horse) in the immediate future in part because of the precarious position of the paint manufacturers. In an environment where mid-sized and small vendors struggle to justify participating in Big League paintball instituting sponsor only restrictions across all paintball related gear sales and use is suicidal folly. The rationale with paint was to justify the promotion charging the paint manufacturers for the right to sell at the event. [The leagues can't charge the sellers for the right to sell if somebody who doesn't pay can sell, too.] Not only won't that work to improve league revenues with respect to gear it will drive all but a handful of heavily invested vendors away as well as some (probably significant) number of teams and players beyond the likely losses from the economic downturn. Beyond that it will raise the bar on future participation to a prohibitive level that will keep business and teams away.
Among other things it badly misjudges the current market trends and the value of participating in Big League paintball at every level.

Kay, I think that (hopefully) dead horse has been thoroughly and sufficiently beaten.