The last couple of months have been very interesting in the game industry, at least on the West Coast of the United States. Over the last several years, we've seen the consolidation, bankruptcy, and death of many game manufacturers, but last month (April, 2001) saw something a little more disturbing. The consolidation of several distributors.

Distributors are companies that act as middle men, buying products (games or comics) directly from the manufacturer and then selling them to small, independent retail stores.

Why do stores buy from distributors, instead of from the source? Because manufacturers are in the business of making product, and don't usually want to spend much time and money worrying about shipping it. They set minimum orders, so they only have to ship out a few large orders.

More importantly, distributors allow retail stores to place one order for many different manufacturers' products. Instead for placing an order with Steve Jackson Games and another with Wizards of the Coast, the store only has to call up their distributor and order both at the same place. And when you're ordering products from 50 different companies . . . distributors become quite important.

First, a little history. Over the last five to ten years, the comic book world has been going through quite a bit of turmoil as the distribution of comic books has dramatically changed. Through a shrewd campaign of buying competitors, and arranging exclusive deals with manufacturers (so that no other distributor can carry that product), they have become the only distributor of comic books in the US. A monopoly.

Few comic book retailers will say that this situation has improved the way they do business.

Switching back to the gaming world, about two years ago, two major game distributors, The Armory and Chessex, merged to form Alliance. Both these companies had East Coast, Midwest, and West Coast warehouses and the consolidation allowed them to combine those warehouses and do business more efficiently. Sounds good so far.

About 9 months ago, Diamond bought Alliance and sent out Diamond catalogs to all of Alliance's customers, giving them the opportunity to buy comics and other pop culture products.

The Trading Card Game craze had not been good to game distributors in the first place. As the fad started wane, many distributors did not catch on as quickly as their retail store customers. Distributors place their orders sometime 3 months in advance of a release, and with the huge demand for collectible card games, this lead time was often longer. When stores realized that they couldn't sell as much cardboard crack, distributors were stuck holding the bag, with large quantities of inventory and no one to buy it.

Those stores that didn't realize that end had come also became overstocked with crap that wouldn't sell. Many of them went bankrupt, and the money they owed to their distributors often went unpaid.

The decline in CCG sales left the West Coast with Berkeley Game Distributors, Chessex West, Armory West, and Wargames West. Chessex and The Armory merged, forming Alliance West. Berkeley was bought by Top Line, a traditional trading card distributor, but continued doing business pretty much as before. A new distributor, Barchetta, formed recently and kept the West Coast with four.

Then, in April came the surprise announcement that Alliance had purchased both Berkeley/Top Line and Barchetta. Many of the Berkeley employees jumped ship. All inventory was transferred from the Bay Area to Southern California. Rumor has it that the shipment that Alliance received from Berkeley was 3 times as large as what Alliance had on hand. They kept the Berkeley office open to handle their customers, but imposed the Alliance computer system on the former Berkeley. Changing computer systems is difficult under the best of circumstances. This was not the best of circumstances.

So here we stand. Two West Coast distributors. I strongly suspect that this will not be the last time that we see Alliance/Diamond flexing their financial muscle to buy up their competition.

Let's hope not.

--Tim

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