Exploding Kittens and What Surprises Us About Tabletop Games and Lo Fi Media

July 8, 2020 by  Chris Erwin

Exploding Kittens (“EK”) is a rapidly growing game and entertainment company with major investor backing. It started out as a modern tabletop game publisher with a highly successful Kickstarter campaign.

We like a few things about the company. Like their name, founder DNA, lean IP strategy, COVID navigation, and growth prospects. The business is a good case study on the future of entertainment.

Let’s dive in.

 

What is Exploding Kittens?

The company was founded in 2015. At inception they raised $8.8M from a record-setting Kickstarter campaign, and secured a $30M minority investment from TCG in April 2019.

EK publishes and sells titles across six game brands. In addition to their namesake brand, Exploding Kittens, they’ve also released popular titles including Throw Throw Burrito, Bears vs. Babies, You’ve Got Crabs, and On a Scale of One to T-Rex. The games can be purchased on the company website, as well as at Target, Amazon, Walmart, Barnes & Noble, and numerous other retailers. Their newest game, Poetry for Neanderthals, just launched June 22 and is also sold exclusively on the company website and at Target stores and Target.com for now. The online store features expansion packs for game titles including Bears vs Babies and You’ve Got Crabs. The Exploding Kittens namesake game has four editions, as well as a mobile game app.

The company also has a fan convention called Burning Cat (postponed to 2021 due to COVID), and a movement called The Kitty Convict Project, “an elegant solution to a tricky problem” for house cats.

 

Why the founders are a great fit for Nextgen Entertainment

The two founders blend experience from gaming, creative, digital media, and interactive. Elan Lee was previously the Chief Design Officer at Xbox Entertainment Studios, and Matt Inman is the creator of well-known web-based comic The Oatmeal.

Not your traditional big studio and talent agency pedigree. That’s the point.

They’re experts at telling stories and engaging fans on new tech and consumer platforms. A deep understanding of social psychology to create new forms of gameplay and entertainment, powered by emergent software and hardware.

Nouveau thinkers and interaction architects, not dealmakers. With pedigree and an approach to building that will drive the new guard of leadership for next-generation Hollywood and the future of consumer entertainment.

But tabletop games are old school entertainment. Dating back 5,000+ years to the Egyptians. How is this a step forward for consumers, vs backward?

 

Fan empowerment and the timeliness of lo fi augmentation

The company’s 2015 Kickstarter campaign was underway before the game was finalized. Crowdfunder feedback on the prototype was encouraged and incorporated. The move enhanced the fundraising story and marketing efforts, and helped attract over 200,000 backers, making it the #1 most-backed project in Kickstarter history. The company has sold over 9M games to date.

Future fans helped the EK team build (1) a more fan-delighting game and (2) incredible brand loyalty.

There’s also a bigger fan mission. A quote from CEO Elan Lee:

“We don’t build entertaining games. We build games that make the people you’re playing with entertaining.”

Empowered fans fuel modern brands and fandoms. Fans inspired to participate in the brand narrative, and inform the evolution of the brand-consumer experience. Fans that promote dialogue between brand and consumers, and among consumers themselves. Through user-generated content and recurring peer-to-peer and peer-to-brand engagement. Deepening the brand’s ties to existing brand loyalists, and creating new brand aficionados.

Empower your fans, and they will empower you.

Lee’s quote reminds us of the value proposition of Augmented Reality: technology that enhances people’s day-to-day interactions with their environment and peers. EK enhances our social and shared experiences with lo fi augmentation. Compelling considering society’s burnout from tech-enabled consumption and interaction.

The tabletop format has a nostalgic appeal to millennials, harking back to when families turned to traditional tabletop game-makers like Milton Bradley and Hasbro to pass the time during rainy days and power outages. The tabletop format also encourage multi-generational entertainment. Similarly, EK’s games are designed for ages seven and up (excluding the NSFW expansion packs). Fostering parent / kid co-consumption and brand loyalty is the ultimate consumer win (see our Nike Adventure Club and Spotify Kids blog posts).

And IP that delights multiple generations, and that can also be leveraged across all of film / TV / consumer products / theme parks / gaming / more, is the consumer holy grail. Think Disney!

Yet this IP pursuit can be costly. Studios and networks spend billions on acquiring IP portfolios and high profile talent partnerships.

What’s another route?

 

In hot pursuit of “lean” IP 

Many new IP testbeds emerged over the past decade. Digital and social video. Podcasts. Fan-fiction platforms. For early-stage IP, these testbeds enable lower production and marketing costs, shorter time to market, and immediate fan feedback. And they’re working. New upstream IP sales to traditional studios and networks are announced weekly.

Incubating IP via tabletop games offers many “lean” advantages. It may even be the best “lean” IP model we’ve observed to date.

Publishers can create highly sticky consumer brand experiences in a high growth, highly fragmented, and lo fi environment.

Industry insiders estimate a market size of ~$10B with a ~20% CAGR over the past five years. COVID will further fuel market growth due to work-from-home and shelter-in-place orders. And what we at RockWater believe will be a more permanent than temporary behavior shift.

And access to startup capital is growing, powering a long tail of new tabletop game entrants. A gaming renaissance of sorts. Tabletop game makers now go direct to fans via Kickstarter and Indiegogo crowdfunding. That means consumers drive new tabletop game launches. Historically, traditional game publishers were the gatekeepers of capital and curators of taste.

No more.

A similar dynamic to how online creators now fund their businesses via tip jar models like Patreon, or ad-based publishing platforms like YouTube. And with it, the decreasing tastemaker power of studios and networks.

Does this mean anyone can enter and win? No.

Creative instinct is critical. It’s the “lightning in the bottle” that can’t be taught at business school or easily replaced. The inherent leadership talent that media and consumer investor savant TCG demands for its company bets.

And the EK team has it. Now add $30M of growth capital from a highly networked investor. Who wants to take multi-generational IP and amplify its audience reach and monetization. Via a media growth playbook it knows very well (e.g. Barstool, Crunchyroll, The Action Network, Headspace, MeatEater). And possibly explore an M&A roll-up strategy in a fragmented market.

That’s an exciting path ahead. Both for TCG and EK, the horse they’re betting on.

 

So what’s next for Exploding Kittens?

The company will pursue aggressive growth. We forecast some ideas below.

The team has recently ramped up production to 3-4 high quality game releases per year, from just one in 2018. With more IP to build upon, the team will create more digital businesses that leverage its growing games and products. Think title-specific mobile apps with increasing features and fan monetization over time (Exploding Kittens is the currently the company’s sole mobile app).

The company will also bring its IP to more audiences via new content channels and events / experiences. Conversations with the big streamers and studios are likely underway. And we expect planned events like Burning Kitten to expand to more dates, and alternative virtual forms. The team launched Quarantine Kittens in just two weeks to accommodate remote gameplay due to COVID. We’re confident the team will ideate fun new ways for online and socially distant community interaction at scale.

We believe fan events will also rise up for EK’s other titles. And new festivals may bring together multiple EK titles under one event banner. Events may even emerge from among the community. Like the Rave Family Block Fest, a festival for the Minecraft community, yet produced by a third party.

And yes, COVID threw a wrench in the tabletop game market. But the EK team didn’t miss a beat. Existing titles intended for live gameplay are already being re-imagined (Exploding Kittens –> Quarantine Kittens). New titles are being designed specifically for digital interactivity via Zoom and Google Hangouts, such as Poetry for Neanderthals. And physical products, like the inflatable club in PFN, are being designed to accommodate new manufacturing and distribution dynamics.

From Steve Cousineau, a VP at TCG who transitioned earlier this year on a secondment to serve as EK’s Head of Strategy, Business Development, and Finance,

“I wouldn’t say every product we design will be designed with remote play as a primary use case, but it’s very much become a key component of design going forward, both due to COVID today, and longer term as a way to broaden our games’ playability with friends and family, whether they’re in the same room or thousands of miles from each other.”

COVID was a forcing function to re-think the creative process. It also accelerated achievement of long term plans on the EK growth roadmap.

The company’s overall goal is to build more consumer facing experiences that delight fans and consumers of board games. We’re excited to see how this uniquely adept team manifests this vision.

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