KalNet Message Board

Mike @TechPB wrote:I certainly don't see Ed sticking around, now that he got the check he's always wanted.

Regardless of what you are seeing on their initial press release, this company is going to want to recover the $3,200,000 check they just stroked ASAP

http://allthingsd.co...TD_yahoo_ticker

Whew.... you are going to see a TON of changes taking place over at PBN in the next few months.....

As part of my job at work, I am responsible for tracking a lot of companies that my business works with. Using a couple of special tools and a couple of somewhat-conniving tricks, we are able to learn a lot about how our customers and competitors businesses are working. I decided on a slow day that I might take a look at some of the major paintball manufacturers to see what I could find out and whether there might be any interesting details. Turns out there was less info than I was expecting, but still a couple of interesting nuggets that I thought might be worth sharing.

In general, and not surprisingly, 2011 was a pretty bad year for paintball companies. However, it seems like almost to a one they all picked up from January 2012 through July. I'm not sure what to make of this because my window into history is so limited - is it because things slowed in the fall on a normal cycle, is it the abnormally warm weather of 2012, or something else? Hard to say with just a single snapshot.

One other not-so-surprising thing is that not a single paintball company is publishing their financials right now. However, it looks like at least Dye Precision was regularly publishing accountant-certified financial statements from 2003 to 2008. Most of the other companies did not have histories that went back that far because they have recently reincorporated in the last few years. In fact, a LOT of companies had reincorporated in 2011 or 2012. I think that further points to the poor cycle going on in 2011. Another thing before I get into the details is that the information I dig into is by definition trailing the current market. It depends on the paintball companies partners, suppliers, and whatever these companies are willing to self-report. This can lead to some inaccuracy, but when I bring up questionable results I'll qualify them with why my sources indicated the results that they did. Last point is that I did pull info for GOG, Planet Eclipse, and MacDev - however, all of these companies report a headquarters that is international and therefore I didn't get the full picture of what's going on with these businesses. The snapshot for those three, well - two really, will only be for any publically listed domestic operations.

On to the results! I listed the companies by measurable size in the United States.

1. Kee Action Sports
Kee is clearly the king of the hill, reporting 385 full-time employees and a $1,000,000 conservative credit limit. Kee has had the same management control, under George Eurick, for the past six years since incorporation. Interestingly, Kee is comparatively weak to other major players using my aggregate company scoring system (though just slightly), and displayed a much higher financial stress impact than most of the other companies as well. That's not unusual for a big player in a weakened market, and I'll qualify that by saying - in my own business experience - larger companies with better cash flow are more likely to be able to withstand a slowing market than their otherwise more agile competitors. Kee had a relatively average credit score of 448. My system expects that Kee has only about a 0.84% chance of going out of business in 2012 - that's about typical for the major manufacturers so I won't mention the rest explicitly.

2. Tippman
The rest of the pack will start to come together after that giant, with Tippman the next largest financial company with a $200,000 credit limit. In comparison, this business "only" maintains 100 full-time employees in labor. Tippman is owned by Howard Kosick, Lori Sherwood, and Dennis Tippman. They have maintained present management control of the business for 26 years. Tippman had a fairly high credit score of 483, but has a couple of notable risks to future business. The first problem is two separate liens against the business for state tax by the State of Indiana - filed in 2010 and have now been resolved, though one shows updated data just recently on 7/05/2012. The lien amounts in total were concerning but not considerable (about 20k in total between the two). The other problem for Tippman in 2009 was a lawsuit brought for product liability in the state of Pennsylvania. As of today, the case resolution is still listed as pending. I haven't dug for more details, but it is docket number 200900020071 in Allegheny County if you want to investigate for yourself.

3. Kingman
Kingman is a large debtor but has a small employee headcount, making the company appear larger than it may really be. They employ 25 heads and have a $100,000 conservative credit limit. Kingman appears in strong financial position with a high system score, a high credit score, and a good financial stress score. Kingman is tied with Bob Long for my rating of most secure companies, though they show a downward trend in performance over the past six months. Kingman was the victim of a toxic tort case in 2009 with judgement entered in July 2010. I didn't investigate it too much (if you want, it's San Francisco case CGCU09485693) because Toxic Tort is such an unusual case to bring against a paintball company. Kingman had a 545 credit score, and is owned by Arthur Chang.

4. Dye Precision, Inc.
Dye Precision employs slightly more people, 110, than Tippman, but has a lower credit limit of $95,000. Dye has been owned by David "Youngblood" Dehaan and Rhonda Dehaan for 18 years (17 for Rhonda). As said above, they have reported good financial strength between 2003 and 2008. From what I can tell, 2004 was probably the best year in that period based on my system ratings. Dye has had a significant number of credit checks by outside business since 2004 (31 total) - this is more a sign of healthy business transactions than anything else, but at that number it could also be an indicator of credit risk for overextension. This is already factored into their financial stress score and credit score of 486. Dye maintains at least one subsidiary in Europe.

5. Valken
Valken is the last of the major domestic players (though I'm going to mention the other smaller players in a second). Valken is somewhat weak on an overall system rating (just one point above Kee), but across the board all of Valken's financial metrics have been trending forward over the past 6 months. Valken has a conservative credit limit of $35,000 and employs 25 people. Valken is owned by Eugenio "Gino" Postorivo and he has maintained control since 2007. Valken has a current credit score of 422. In general, aside from the weak system score I thought this looked like one of the best companies in the group that I reviewed. I would expect continued growth based on the historical performance (though I temper that with the go-to financial advisor line I picked up in business school: "past performance is not a clear indicator of future performance.").

6. GOG Paintball
I'm going to take a brief second to talk about GOG, though there isn't much to say. All of their financial information is tied to an international location in Costa Rica which means I can't get access to it without spending more money than I'd be interested in spending. I will say that credit agencies still see the U.S. domestic location in Loyalhanna, PA as being out of business. That has not been updated since 2010, however. I did a phone investigation and it appears there are no other companies tied to GOG USA's published main phone number, though their fax number has belonged to a cleaning agency since 2010.

7. Smaller companies (Azodin, Bob Long, MacDev USA, Planet Eclipse USA, Dangerous Power)
There's not a lot of info on these smaller companies and company branches so these will each be one liners in a second. In general they all were measured as stable with a credit limit of $500 to $1,000.
Azodin - Only company to incorporate as an LLC. Gino, Arthur - you're small enough for an s-corp or LLC! Follow Azodin's example and get tax-free transfer to your shareholders. Interestingly, Azodin only reports present management since 2011, and reports their previous location as a completely separate business. Azodin does not list a current manager - nor do any of the rest of the small companies.
Bob Long - Had high system score marks tied with Kingman. Reports present management control for just the past 3 years.
MacDev USA - The USA operations seem to be small, with a somewhat weaker financial stress ability than the rest. Headquarters are in Australia.
Planet Eclipse USA - Reports 3 employees in the US, but headquarters and finances run from the United Kingdom.
Dangerous Power - The very weakest of the small companies. In addition, their phone number and address is shared with AMAZONE, Inc (implies same ownership). AMAZONE and Dangerous Power both had poor financial stress and credit scores. AMAZONE is also rated a D- by the BBB for unresolved customer complaints over a small pool of customer experiences.

8. The rest
I looked for credit info, well - any info really - for Unity Paintball, Thin Air Sports, and Machine, but I couldn't dig anything up. If you know a phone number or an address and are interested in finding out more like I was, just PM it to me.


My final remarks are to again say, with the exception of GOG and Dangerous Power I would say the grouping of 95% of these investigations was very similar. I don't know that I'd necessarily use this information to make a purchase decision (unless you are greatly concerned about toxic tort, maybe), but it might give you a peek into the window of how the paintball manufacturing business is going. If I can remember to come back to it, I set all of these files aside to keep giving me updates over time. I think it'd be interesting to come back to it in a year or 18 months to see what's changed.

EDIT:
9. Alien Paintball
This is a very interesting report to look at. Alien has just 2 employees but a conservative credit limit of $20,000. Alien is owned by Jack Rice and he has had present control of the company for five years. They have a fairly high system score, and it's been consistently higher in the past two quarters than the previous four quarters. This is likely due to taking and paying on a short term business credit loan. It would appear Alien has positioned themselves for growth in 2012, and with the strong paintball market in 2012 it appears to be a good bet to have made. Alien has a credit score of 457.

Morph admitted that the mesh was real and legit but not factory made a couple of posts above, and yet OP is not happy that the trunk is not original factory item. Let's clarify what these terms mean (correct me if I'm wrong):
"Factory Made": OEM-original item made by the factory.
"Legit": Legally obtained, not stolen. Legitimate.
"Real": Actual physical object, not imaginary. But loosely can also mean Original.
"Remake": A fake reproduction made to look like a factory made.
There are Legit and Real Oakley and Rolex look-alikes. But they are not Original Factory Made.
The important thing here is to see what was said when the deal was being duscussed. NationFreak claimed that the item had been misrepresented during the discussions, specifically that Morp did not clarify that the trunk is NOT original factory made. So OP please post ss of your PM's of the convo.

Ok I am going to wade into this slightly. As DesertT1 noted I have enough business training and experience that I am not coming in totally from left field on this. That training and experience did have me abort after sticking my toe in the water in paintball. On a small scale the cost to reward ratio was not enough for me to feel like investing the amount of time it would require.

Step one: the national figures are interesting and businesses should be at least passingly familiar with them. However a successful business is built in a manner that will allow it to weather downturns while making profit during upticks. IE: "My business failed because of a downturn in the industry" is likely a culmination of other factors. It is easy in small business to get lost in these numbers and seek outside causes for their concerns. Its an interesting thing to do but unless you have some means of control and influence over these outside causes it will not help you run a successful business. Unless you are operating on a national scale your influence on these is likely minimal at best. Concentrate on what you can do and what you have control over rather than what you cannot and do not.

Step two: This step takes some getting used to. Unless you are providing a necessity of daily life and have virtually no competition (or you and all the competition is operating at peak capacity) you are selling an experience and not a product. People don't buy BMWs because they need to get from point A to point B they buy them for the driving experience, the boost to ego, or any number of factors that have little to do with getting from point A to point B. BMW is not "a really good mode of transportation" it is "the ultimate driving machine". People do not go to watch a professional sports event for the pleasure of buying an $8 beer (or a $5 soda at the movies) they go for the experience of the game. People do not pay $60 a plate at a fine dining restaurant for nourishment. Paintball fields are selling an experience not a product

Step 3 - Learn from "lady's night". While some groups are large enough that they can provide all the atmosphere they need in order to enjoy the game these cannot be your target audience (see step 4). When I go to a paintball field I go alone. Without other players it can be no fun. Your staff and facility has an "optimal number". This is the number where your staff is not overstressed and is able to effiectively do their job (see step 5). You should have some idea what this number is and it varies wildly depending on staff and facilities. If you do not have an idea figure out what it is. This can be done from a pure business sense or from looking around. Do you have a lot of people waiting for games and growing board? You are over the number. Do you have players feeling rushed to get back on the field because you need them to play - you are under the number. From a business side you figure this number by figuring profit - however you must be certain that figuring by profit alone does not cause you to overshoot the number and create bored players or a bad experience. You likely make more per player by having 100 players than you would having 10 due to the economics of scale. However at some point this balance tips. Because players are sitting around rather than playing you start to see a decrease in profits per player. The point where you see the most profit per player (while providing an atmosphere that brings people back) is your optimal number. You do not need to be able to figure it exactly (chances are you do not have a large enough sample size to be exact) but you should have some clue what it is. This optimal number is important to your field. It helps provide the atmosphere as well as the profit. If you have to give away entrance or rentals to get there get there.

Step 4: Know your target audience and do not screw this up. You know that group of ten guys that comes every week, demands better prices, and appears to an outsider to be most of your business? Calculate it out. Between the interest free loans that tend to get floated (and often defaulted on I would guess), the reduced prices, and various other concerns do they actually provide a value to the field. And how much pull do they have? Those ten guys, if annoyed at the field, will likely go somewhere else. In a group that provides its own atmosphere you are simply providing facilities. They can probably find some farm land, pool together some money, not have near the overhead of your field and play on their own. Be careful how much you build your business around them.

Step 5: Make sure your "sponsored" players and your refs understand their place in regards to open play. Your profits are not balanced on these sponsored players and attempting to do so is dangerous. They can however provide some of the atmosphere so vital to reaching optimal numbers. Make certain that they know their role in assuring that the people who play a few times a year, the parent and child out for their first try, and the players who are not sponsored or discounted have an enjoyable experience and want to come back. I am amazed how many fields do not get this. Do you really think that a team simply wearing your name and competing in some tournaments (often far away from your location) is really so valuable to your business that it is all they need to do? These sponsored players must not use open play as a chance to practice and make life miserable for other players. Use them as a real assett to the business - its the whol idea behind the sponsorship.

Step 6: Do not be afraid to make a profit. I have absolutely no idea why so many people are afraid to make a profit on what they sell. You are offering the best experience - not the lowest price. Those seeking the lowest price can undercut you by entirely cutting you out and your suppliers have done you no favors in protecting a wholesale / retail price structure. This is disposable income and most people spending disposable income, while they will not entirely ignore price, will buy a better experience for a higher price (generally speaking). There are several models in paintball - from a business stand point the low to moderate volume at a high to moderate price in regards to paint seems to be more effective than the high volume / low price. Obviously the high volume / high profit (IAO when it was around) was an interesting model but chances are you do not have the established base to pull it off. Maybe if you build an atmosphere and the experience over time you will. Do you bring your own steak into a restaurant? No. I'm not certain on the theory behind bring your own paint. If you must reduce prices to some players to create the atmosphere make sure they know that you expect in regards to atmosphere.

Step 7: Why are you in business? Theoretically the answer to this question is to make the most amount of money possible with the least amount of work and risk. While this is a good theory its not why most people are in business. Most people who are actually in business will give life satisfaction type answers (autonomy, they love what they do, etc). The key thing I need to tell you is why you are not in business. You did not go into business to make the least amount of money possible with the most amount of work and incredible risk. Somehow I see a lot of field owners who seem to have accepted this concept though. The vast majority of small business owners will tell you if you consider the hours they work and the amount of stress they are under that they could make more doing another job - often that other job would be working at McDonalds.

Step 8: Please - before you put any substantial amount of time and money into this venture take a business class. The vast majority of businesses are not profitable in the first year. Going by memory the vague numbers often used argue most show zero profit for 2-3 years and take seven years to recoup the initial investment. Your accountant will love you for having some understanding before you go into this venture. You may find that you save yourself a vast amount of stress and risk by simply knowing what you are getting into or having some idea.

Good luck . Even doing everything perfectly owning a small business means a lot of sleepless nights. It means going home and trying to remember if you locked the front door when you left. It means, in paintball, worrying if little Johnny's parents are going to be calling you because he had a tooth knocked loose when he lifted his mask in the middle of the game despite being told twenty-seven times not to. Worse it means that one of your players who has had no consideration of the amount of time and effort you have put in is going to convince his parents to give him money to open a field rather than going to college. The good news on that one is when he figures out how little money he makes and time he puts in you may be able to buy all the neat new equipment he bought for a fraction of the new price.

In a letter dated December 29th, 2014, Wells Fargo Bank in San Francisco sent a letter to DYE dealers stating that any accounts payable with DYE would in the future be paid directly to Wells Fargo. The Ford Report was able to obtain a scan of the letter from Wells Fargo that can be found HERE .

In a response sent to the same dealer network dated January 13th, 2015, DYE President/CEO Dave DeHann (AKA Dave Youngblood) stating that DYE and Wells Fargo were in dispute. Here is the text of the letter, with banking information redacted:

January 13, 2015

To Whom It May Concern:

You most likely have received a letter from Wells Fargo Bank instructing you to make your payments directly to them. Dye Precision is in a dispute with Wells Fargo Bank and the bank has decided, unilaterally, to attempt to contact you in an obvious attempt to disrupt our business. I can assure you that this dispute is between Dye Precision and Wells Fargo Bank and in no way will impact our on-going business operations. Because of the sensitive nature of this dispute, we would appreciate confidentiality regarding the letter that you received. We would like to maintain the strong and supportive relationship we have had with you.
Since we are in dispute with Wells Fargo Bank, Dye Precision has moved its banking operations to a new financial institution, which is the catalyst of the letter that you have received today. Please disregard the letter with Wells Fargo Bank and please begin to remit all ACH’s and wires to the following account:

Bank: Citizens Business Bank
ABA/Routing: [REDACTED]
Account Number: [REDACTED]
Please continue to send all checks to the Dye Precision address:
10637 Scripps Summit Ct.
San Diego, CA 92131

We apologize that you, our loyal customers, have been pulled into our dispute with Wells Fargo Bank. We appreciate your continued support and we will work through our issues with Wells Fargo.
Thank you for your understanding and continued support. Please feel free to call or email your sales representative or myself if you have any questions.
Sincerely
David DeHaan
President/CEO
dave@dyeprecision.com

More news as it becomes available, assuming information becomes available. I won’t be holding my breath.

They lost the director \ manager of their CNC business and he took a lot of business with them. Their CNC department is failing and they are pounding the phones trying to find customers.

Dye closed their London office and sold the building.

I want Dye to succeed as much as the rest of us, but when news circulates about financial issues, they only compound. Raw material suppliers and subcontractors start to revoke credit. Customers stop buying stuff because they don't know if it will ship. High level employees get worried and start sending out resumes. Wells Fargo really ****ed them by circulating those letters.

I would imagine that Dave's drive to succeed and "never say die" attitude may be the only thing that saves them at this point. There's a lot of bad gossip floating around about him personally, but nobody can ever doubt his intelligence, drive, and vision.

Signed,
Person who was once threatened with a lawsuit from Dye

Paintball and the Economy - Guest Post by Doug Brown
Connor wrote on my facebook page the other day and asked if I would like to write about “paintball economics”. Being one of my facebook friends, Connor is subjected daily to my tirades on what is wrong with the economy, who caused it, and how to fix it. The more I thought about it, the more I thought, why not? I’ve read enough “economic theory” over the last couple of years to come to the conclusion that the truest statement ever made about economics is... economics is the only science where two identical experiments can result in two completely different outcomes. There are two major economic theories. John Keynes’ theory says when it all goes sideways, print money (deficit spending). This is what America has been doing the last couple of years. The other school of thought, promoted by Friedrich Hayek, is to cut government spending (austerity) when it all goes sideways. This is what Europe has been doing for the last couple of years. Looking at things that way… it appears you can conduct different economic experiments and get the same outcome. I suspect there is a lesson to be learned there.



The easiest place to make the comparison between the real economy and paintball is by using paintballs and housing. Now I could bore you to death telling you all the reasons and events that led to the latest housing boom / bust in the United States. There was the S&L crisis, the Community Re-investment Act, Mortgage Securitazation, and a dozen other things that would make your eyes roll back in your head, but suffice it to say, everybody wants a home. Paintballs are easier to explain to you. Everybody wants one that shoots straighter, goes farther, never breaks in the gun, breaks on target every time... and is cheaper. The US government, mortgage underwriters, the banks, and Wall Street did everything in its power to make it easier for you to get into a home. The paintball industry did everything it could to make you a better and cheaper paintball. The results were the same. The markets crashed.

When you first get into paintball you don’t think much about paint. By far the vast majority of your time is spent day dreaming about what type of gun to get. You want to be a sniper, you want to be a machine gunner, you want to look bad-ass. You want. You search, you talk, you listen. You just KNOW that if you choose wisely (or have unlimited funds) that your first gun purchase will put you light years ahead of the other guys on the field. It is one of the great disappointments of paintball to learn that a .68 caliber projectile fired at 300 feet per second from one gun behaves almost identically to a paintball fired from another gun. It doesn’t take you long to learn the truth. Shooting more paint is the easiest way to hit the other guy.

Your first home is no different. You don’t give a lot of thought to how many pieces of furniture it’s going to take to fill it up, how much the heating bill is going to be come winter, or how much time and money it’s going to take you to maintain the place. You just know when you see it, that this is the house you want.

So we buy our paintball guns and our homes with very little thought about the realities that occur once we have them. We buy the gun, the goggle, the tank, and the loader, only to find out that the fortune we just spent is nothing compared to what it takes to feed it paintballs. The entire history of paintball can be summed up in how we went from shooting one ball per second to shooting 30 balls per second. Every equipment advance from the day the first game was held until now drove towards that goal. Tubes went from 10 rounds, to 40, to 50, to 100, to 140 rounds. Tanks went from 12 grams, to 7oz, to 12oz, to 20oz, to 3000 psi HPA, to 4500 psi HPA. Loaders went from 40 rounds, to 100 , to 150 , to 200 rounds. When I first started playing around 1986 the average cost of a paintball was somewhere around 15 cents. It’s now around 2 cents. So why is the #1 consumer complaint “paintballs cost too much”? Because shooting more per second was secondary to shooting more.




What killed the housing market was the same thing that killed paintball. More. It wasn’t BPS that changed the market though, it was how we bought homes. 40 years ago there was one kind of mortgage, 20% down and 20 years. That was it. When the housing market crashed in 2008 Countrywide, the largest home mortgage provider in the US, had over 200 different kinds of mortgages. Adjustable rate, 30 years, no interest, negative amortization… the list went on and on. It was just easier to buy a home. So we built more houses. The more mortgage products that came out, the easier it became to buy, and the more homes we built. The end result was, everybody thought they could afford a home. In 2006 the same thing happened in paintball. A gun called the ION came out, and everybody thought they could shoot 25 balls per second.

There were plenty of warning signs of what was about to happen. In the 2005 inaugural meeting of the Paintball Sports Trade Association the president of the largest company in paintball told everyone (and I do mean everyone) that the number of new players coming into the sport had fallen off a cliff. At the same meeting the founder of one of the largest paintball manufacturers told the owners of the paintball leagues to merge or he wasn’t supporting them. He couldn’t afford to support both the leagues (ironically, the rumor that they are merging is going around as I write this). We all knew it was going sideways . With the exception of one company, every representative in the room said business was off and off drastically. It was why we were all at the meeting. Did we do anything? No. There was still money to be made. So we all went back to our businesses and did what we had been doing.



The housing market was no different. It had happened before. It should have been easy to see it coming. Did the government, banks, or mortgage underwriters do anything about it? No. Wall Street had figured out a new game. There was a new financial innovation called “the securitization process”. They took your mortgage, sliced and diced it into 100 pieces, then stuck it with 1000 other mortgages that have been sliced and diced, and sold them. The odds of enough people defaulting (not paying) on one of these “collateralized debt obligations” to make it a bad investment was zero. That earned them a AAA credit rating. These “CDOs” sold like crazy. Wall Street couldn’t get enough of them. Literally. So they manufactured more. Liars loans, stated income loans, paying S&P, Moody’s, and Fitch to keep rating CDOs AAA, and more mortgage “innovations”. You name it, if there was a way to keep the game going, Wall Street did it. They knew it was going to blow up. They could see it coming. But there was still money to be made. So they kept doing the same thing until every Tom, Dick, and Harry bought a new home. But it wasn’t enough. Wall Street needed more. So they talked Tom, Dick, and Harry into refinancing until Tom, Dick, and Harry couldn’t pay anymore and it all fell apart. Bear Stearns and Lehman Brothers, both huge sellers of mortgage backed CDOs, collapsed in 2008... and the rest of the world followed.

And that is where paintball and housing part ways. Nobody is going to bail paintball out.

If you look at the chart below, you can see where paintball has been and where we are. It is a Google Trend search of the term “paintball”. You’ll notice that things started going downhill in 2004. You’ll notice a pretty big spike in 2006…..when the ION came out. It’s all been downhill since then. I’ve heard many an argument as to why this chart isn’t a valid indicator of paintball’s health over the years (I’ve been talking about this chart forever). Nobody has convinced me. It’s not an indicator of paintball players. It’s an indicator of new paintball players. They can’t type in “field” or “store” or “gun” and find what they are looking for.



So what do we do? How do we get the glory days back? A lot of people want to go back to the way things were. A lot of people are still doing the same things that got us into this mess (just like the banks and Wall Street are). These are generally the same people who believe the economy led to the downfall of paintball. It didn’t. One look at this chart should convince you of that . The story of the rise and fall of paintball, like the housing market, is entirely too complex to put down to one single thing in a single article though, so I won’t try. After all, I haven’t blamed any one yet and it has to be somebody's fault doesn’t it? If you want to hear more, I’ll write it. There is so much more to tell. I guess I ought to say it one more time just in case it didn’t sink in though. The problem was… more.

Paintball: A Study of Free Market Capitalism - Guest Post by Doug Brown
Connor's note: For Doug's first post, please click here: "Paintball and the Economy".

Free market capitalism is a pretty basic concept. It is defined by Wikipedia as “… a market in which there is no economic intervention and regulation by the state, except to uphold private contracts and the ownership of property". The basic idea is ….you don’t make deals knowing they are bad deals. The “self-interest” of the two parties involved in an exchange of money will protect them. The government just gets in the way. You hear a lot of politicians talk about it. Between the EPA, OSHA, the clean water act and a bazillion other government agencies, it’s a wonder anybody can ever make a dime doing anything. There was an economist called Milton Friedman who, more than anyone else, was the greatest proponent of Free Market Capitalism. Mr. Friedman taught at the University of Chicago and was without a doubt the most influential economist of the late 20th century.


Milton Friedman

A buddy of mine and his wife both work in government circles in Washington DC. They both play paintball. I’m a big believer in making things as simple as possible (making paintball products will do that to you) so I asked them “As simply as possible…tell me how Washington works”. Without hesitation the wife says “You have a bunch of 30 year olds running around telling 60 year old politicians what to do”. The moral of that story is… governments (like economies) are extraordinarily complex. You can’t understand, much less know, it all. So when you hear a politician talking about economic theories like Free Market Capitalism, he probably knows about as much as I do... which is not much.

For the purposes of this post, let’s confine ourselves to the American market. My foreign friends will forgive me … they all know I’m just a crazy gun toting American anyway. The reason I want to confine the post to America is because I am pretty sure that there is NO government regulation on the sport of paintball. “Do what !?!” you say. Well… I don’t know of one. Do you? Sure there are government regulations on cylinders, pressure hoses, and goggles, but they were in place long before the first paintball was ever fired. They had no effect on how the industry developed. Trust me, no paintball manufacturer went to a cylinder supplier and said “make me this” back in the 80s. They went to the manufacturer and said “do you have anything like this” because they couldn’t pay $50,000 to develop a new cylinder.

There were a few legal battles that were fought with county and city governments over the right to play on a certain piece of property. But by and large the government, and especially the US federal government, has stayed out of paintball. Paintball is and certainly was, a Free Market.

Paintball is not without regulation. They are all “self-imposed” regulations though. Maybe this is the “self-interest” part of Free Market Capitalism kicking in. The first thing we all agreed upon was 300 feet per second. So where did the “other” regulations come from? Well, paintball goggles came from ANSI. A guy named John Gregory who owned a motorcycle accessory company called JT Racing (and played paintball) was the first guy to build one. Most of the other regulations came from the paintball committee of ASTM. Mind you, they didn’t come looking for us, we went looking for them. There were a lot of good reasons for that. Standards are important. Take the standard for a paintball. All the gun manufacturers got together with the paint manufacturer back in the early 80s and agreed the standard paintball would be 0.6875 inches in diameter. Then a guy named Denny Tippmann came along and made a .62 caliber ball. It caused all sorts of confusion. For years. Nobody ever could agree on what velocity to shoot them. You would go to one field and it would be 350. The next 325. Some fields dealers stocked .62 caliber, some didn’t. It was mass confusion because Denny’s gun was fully automatic…..and everybody wanted one. What solved the problem was the invention of the 100 round hopper. .62 caliber might be fully automatic, but 100 rounds beat 20 rounds and it would shoot further. Besides, .62 caliber hurt just as much, if not more, and it didn’t break half the time. Remind you of anything recent? I could have saved the .50 caliber guys soooo much trouble if they had just asked. Well…actually they did ask. One of my last projects for corporate paintball was to do a feasibility study on .50 caliber. My recommendation to avoid it like the plague was ignored.


.62 caliber as compared to .68 caliber

One of the more interesting phenomenon of the free market was “field paint only”. You have to ask yourself how something like field paint only could ever come about in a free market. It’s not that difficult to understand, people lied. Back in the mid 90s I was the VP of National Paintball. Our arch rival was PMI (Pursuit Marketing Inc.). PMI was the industry leader. They convinced R.P Scherer to make a paintball exclusively for them. They also convinced Benjamin Sheridan to make paintball guns exclusively for them. More than anyone else, (other than Bob Gurnsey) they built the paintball industry. We (NPS) were making their life difficult and stealing market share with a wider selection of product and lower prices, but PMI had a huge advantage in that they had all the larger, more established clients. To protect those field clients (and I suspect at the urging of some of their larger ones) they began to promote the idea of “field paint only”. Players hated it. What sold the idea though was the phrase “the insurance company requires it”. Of course insurance companies did no such thing. One or two of them, who had a relationship with PMI or some of their fields, might have retro-actively inserted the clause in their policy. But most field owners who had insurance, did so through a local agent who could find an underwriter. The fields could hardly go to you, the customer, and say “We are field paint only because we want to make more profit”. The simple fact of the matter is, “field paint only” is a much more profitable business model, so fields starting using it. Free Market Capitalism is all about the Benjamins. And as Dr. House says “everybody lies”.

Several other things happened about the same time. Wal-mart came in (see previous blog post), electro-pneumatic markers made their appearance, and the market got big enough to build a “stand alone” paint factory. Up until that point, most of the paintballs sold had been made with pharmaceutical grade materials. The reason was the paintballs were made in pharmaceutical factories. The cleanliness standards needed to manufacture pharmaceuticals are very stringent for obvious reasons. Using cheaper, non-pharmaceutical grade materials in and of itself might not have made that much difference in the price of paint, but building a stand-alone facility did. Somehow, everybody got the same idea at the same time. One company even built a stand-alone facility capable of producing enough paintballs to supply the entire world market. Then the economics of supply and demand kicked in.

The market swung from a seller’s market where if you had it, somebody would buy it, to a buyer’s market where if you would just buy a little more paint, you could get a much cheaper price. The Shocker and the Angel replaced the Auto-mag and the Auto-cocker. The Viewloader Revolution wouldn’t keep up any more and was replaced by HALO. Paint cases went from 2500 rounds to 2000 rounds. There were even some 1800 round cases. Paint deals went from being negotiated at 0.1 cents to 0.05 cents. Big customers would leave you for a tenth of a cent. The sponsorship deal for a team who played out of a big field could be a deal breaker. I paid for plane tickets, gave pallets of product away, I even paved a road once to get a paint deal. But it wasn’t enough, the paint just kept coming, and the price kept dropping. Slowly but surely, the power shifted away from the distributors to the big field owners. If you had a field that moved 500 people a weekend through the gates, you were golden. If you moved 1000 per weekend, you were a god. I knew all was lost when one of the most anticipated new electronic guns was launched at an event where the paint came from a company whose only source of paint was calling around to all the paint manufacturers and buying seconds. 3 years earlier, seconds were thrown in the dumpster at the paint factory. Cheap paint had become... everything.



Have I said anything about “the pros” yet? They of course had an impact. They were very much the tail wagging the dog. They refined the technology we gave them. They upped the level of the game. They created a form of paintball that brought millions of kids into the sport. And there was no doubt that they were the best players in the world. Some were nothing short of phenomenal. But just like their masters, enough was never enough, so they lied and they cheated too. And we put them in all the magazines and told the world… this is what we want you to be. But you can’t really blame the pros. They were just looking out for their “self-interest”. If they spilled a couple of dozen paintballs every time they reloaded, it was because that is what it took to win. Besides, it was free. If they used a competitor’s paint because it was better than their sponsor’s paint, that’s because that’s what it took to win.“Hey ! We put the paint in your box.“ If they jumped from team, to team, to team, looking for more money, well… that’s what professional athletes do. I was in some endless meeting about a year into my corporate paintball career and instead of playing BS Bingo I did some mental calculations on how much money was being spent to sponsor professional teams. I came up with a conservative estimate of about $6 million a year. In economic terms that is either called a hidden tax or wealth re-distribution. Your average everyday Joe paid the tax when he bought a case of paint and wealth re-distribution can work both ways… despite what rich people these days would have you think. I just called it stupid. I was in the business of getting people to play paintball and sell them product. “The pros” were in the business of getting people to sit at home and watch them play on TV. I wrote the check that put paintball on ESPN II. I knew what the return on investment was.

So what went wrong? How did Free Market Capitalism fail? Well… it fails all the time (can you tell I liked Reagan? For you kids… Reagan started every sentence with "…Well…"). Have you ever watched The Deadliest Catch ? Ever wonder why they measure crab and have such a short season? Here’s the answer. There are hundreds more. The idea that man will regulate himself when there is an advantage to be gained is asinine. As long as he can afford to maintain the advantage, he will….until the market collapses. If you want to accept that the best we can do is have a never ending series of market collapses, better known as the boom/bust cycle… then Free Market Capitalism is the way to go.


Source

The solution for paintball is more regulation. I’ll get to the real economy in the next post. I did notice from the comments to my previous post that some of you have missed paintball’s newest self-imposed regulation. The ASTM paintball committee has adopted the standard for paintball markers that 15 balls per second is the maximum rate of fire. It’s not a bad regulation. Rates of fire had gotten out of hand. I knew people who were working on 60 bps. That really would have been insane. But 15bps doesn’t solve the problem. Make that, it hasn’t solved the problem. The 15 bps standard is over a year old now. The PSP even had a 12.5 bps rule last year. You do remember what the problem was don’t you?