Dominate Your Market: How Self Contained Communities Create Permanent Barriers To Entry
Some of my early readers may recall that I was a Magic: The Gathering card player as a teenager. No, that’s not dungeons and dragons or role playing or anything like that. It’s closer to poker combined with chess with a little bit of lord of the rings story telling thrown in. It’s a “mind sport” as far as the PR people at Wizards of the Coast, the company that produces the game, are concerned, although I’m not sure that’s the most accurate label.
Whatever the case, “Magic” as we call it, is a serious game for some people, and besides the first two or so years where I played for fun, most of the latter years in my career as a card gamer, were about trying to win tournaments.
Tournament Magic is big, with millions of dollars given away in a pro tour that travels around the world. Some guys even play the game professionally as their full time job. I never won big money as a gamer (my highlight was representation on the 98 Australian national team at the World Championships), but I did get to visit Japan, Singapore and the USA thanks to gaming. I look back on those years as a lot of fun.
Magic Cards Are Money
Magic cards, like baseball cards, are collectible. Each card has a value, and for a long time I made my lunch money by trading and selling the cards I won at tournaments. As a typical entrepreneur, I often enjoyed the business of running a little card shop as a teenager more so than playing the game itself (unless I was winning a tournament of course!).
Wizards of the Coast (let’s just call them “Wizards”) made some very smart moves with Magic. It became a serious cash cow for them.
In case you are wondering how they keep the cash coming in, each year Wizards produces new cards so the pool of cards people play with at tournaments is constantly cycling over. This makes the playing field very dynamic, but it was also a brilliant business decision as they keep making new cards that players need to purchase in order to stay up to date.
It’s fair to say that effectively, Wizards produced a new form of currency, at least within the realm of their customer’s universe. As long as the cards have value to players of the game, they can print money simply by printing new sets of cards.
Wizards Goes One Better
I thought that Wizards had a good thing going already, but when the Internet came along, the did something really clever – they ported Magic over to the virtual world.
Online Magic is pretty much the same as offline, or real world Magic. You challenge people from all over the world to a game, you can play in tournaments to win more cards and cash and you can buy and trade cards virtually with other people.
The kicker is that the online digital cards have roughly the same value as the physical cards. You can buy packs of cards for the same price, but instead of receiving little pieces of cardboard with pictures on them, you receive digital cards with pictures on them that are stored on computers.
In other words, Wizards can now print money online, with the cost of production and distribution drastically reduced. All I can say is that is one heck of a good business model.
