Plastic (and payments) in the fantasy supply chain

I’m a bit of a geek. OK, more than a bit of a geek. I double majored in Japanese and Computer Science, used to run a WoW guild, etc etc, I could be pictured next to “geek” in the dictionary. I sometimes worry about this coming across too strongly in professional spaces and sometimes want to just geek out. So it gives me enormous satisfaction when one of my geeky hobbies intersects my professional interests.

Recently, I got back into fantasy miniature painting, after a 17 year hiatus.  (Quick plug: YouTube is the best thing ever for people getting into a hobby or profession which involves tacit knowledge. Lyla Mev did more in 7 minutes for my painting skill than all of my previous practice. You can lose many, many hours watching extremely talented people break down exactly what they're doing, and watch high-def video translate sorcery into replayable, replicable hand motions.)

What was once a traditional IP-rich industry (a great writeup by Byrne Hobart on Games Workshop can help non-geek readers get up to speed on it) has had disruptive innovation happen through a coalition of Shenzhen manufacturers, bicoastal U.S. tech companies, mom-and-pop factories throughout the Western world, and a global network of small firms producing mass-customizable sculptures.

Let’s start with this from what the end user sees and then trace the supply chain backwards.

(Disclaimers as always: while I’m not directly conflicted with any company named below, some of them are likely clients of my employer, Stripe, and I may have purchased their wares recently at standard retail prices. As always, all views here are my own, and nothing is non-public knowledge.)

“Your high elf wizard’s cheekbones are not quite what I imagined for mine”

Some people paint fantastic miniatures purely for the aesthetic value, but the dominant use of them is to play games. Depending on the game, there may be an in-game benefit due to painting, but I’ll spare you that rabbit hole; suffice it to say that some hobbyists who spend a lot of time in a fantasy world get attached to their avatar(s) and want them to look both good and the way they think they should look.

This provides a challenge for traditional manufacturing industries, because the number of SKUs a game retailer can stock is finite and the number of D&D characters is not. Even for just minimal correctness on “vaguely appropriate for a gender/race/character class” there are over a thousand combinations possible, which already is more SKUs than a hobby store can afford to stock for this offering, and players sensibly demand that their character not look generically like every other high elf wizard in existence. Some want the character a bit plumper, some want them in a wheelchair, some want them holding the magic item they strived for in the campaign, etc.

Historically, the license to manufacture D&D miniatures was held by Wizkids, which produces a few hundred different SKUs at any time. Wizkids has a model not too dissimilar to Games Workshop and has a similar production function. They hire artists directly or on a contract basis to sculpt elven wizards. They arrange for a factory in, without loss of generality, China to produce a large number of copies of that single wizard. They send those copies to distributors. Retail stores order from distributors, mark up their wholesale price of of the wizard by about 100%, and sell to the public.

Then the Internet happened, and then some improvements in plastic manufacturing happened, and then the Internet happened again.

Today, if you go to e.g. Etsy, you will find more plausible high elf miniatures available, for about $5-10 each plus shipping (about the retail price point for single miniatures), than Wizkids could create in a corporate lifetime, with hundreds more being released every month.

Consider, for example, ScatterMaster’s rendering of Amlund Mageon, a wizard who bears a striking resemblance to many depictions of Gandalf, in a bit of remixing extremely well-known in the hobby and by Tolkien as well. A hobbyist unfamiliar with this might think that ScatterMaster is a truly talented sculptor or has hired one.

ScatterMaster may be an artist in their own right, but relevantly to a transaction on Etsy, they are a small U.S. based manufacturing firm which has licensed the rights to print Amlud Mageon for profit from a French sculptor who does business as Galaad Miniatures. The terms of the license is simple: ScatterMaster pays Galaad ~$30 a month for a license to reproduce any of their sculptures in any quantity as long as it is strictly 3D printed only.

It is a non-exclusive license (and that's why the artist enjoins the manufacturer from producing it with a technique amenable to industrial scale; to maintain the value for many licensees rather than reducing Mageon to his weight in plastic). Dozens of firms are paying Galaad the same $30 a month, along with a hundred-odd individual hobbyists.

Contrary the starving artist cliche, Galaad receives approximately the median French salary from Patreon (virtually) guaranteed at the start of every month, and to earn it the next month they just have to crank out another 8 sculptures to add to their library.

They can (and factually do) earn more with taking commissions, running Kickstarters or similar where they provide (or arrange for) their own fulfillment, or license STL files a la carte. If you really like Amlud Mageon, own a 3D printer, and wanted to print him yourself, the 3D “source code” is available by Galaad on MyMiniFactory for $5, of which Galaad gets to keep $4.50.

The average hobbyist does not own a 3D printer, and specialization in the hobby (and hobby-adjacent artisanship) is what enables ScatterMaster and Galaad to both have businesses. The small-scale manufacturer fronts the capital for maintaining (probably) a printing farm producing miniatures as fast as orders can come in, and does both the labor required to turn semi-toxic resin into pretty figures and also the entrepreneurial application to (basically) make sure they show up on top of Etsy and Google for searches for “wizard miniature for D&D game maybe a bit old and wizened?” The artist gets to largely outsource per-order customer service questions, fulfillment, owning and operating a printing farm, the complexities of international trade, etc. They can focus on marketing to end-users (and perhaps more importantly to potential manufacturers) and sculpting miniatures which fill the holes in their users' product lineups or tabletops.

There are many other firms one could name here, on both sides of this market. Some of them are strictly mom-and-pop manufacturers or individual designers. Some are small but thoroughly professionalized firms, like Loot Studios in Spain, which has an in-house painter and video crew to produce marketing collateral showcasing the work of their team of sculptors to potentially licensees.

And interestingly, in sharp contrast to most global plastics manufacturing, it is extremely useful to this supply chain that both the final producer and final consumer are in the United States, because it enables low-latency low-cost shipping. Most plastic you consume originated in China and got to you via, at one point, a rather slow ship, and the latency between the factory and your door was on the order of several months not a few days. Most plastic doesn't particularly care about the delta of a few months or staying in inventory, but a malevolent lich has a tight schedule to keep or he might be dead (permanently, this time) before his physical instantiation arrives on the tabletop.

But there is still a supply chain implicated here in China.

Shenzhen is eating the world

There are broadly two types of 3D printers in common use. One uses thermoplastic filament sourced from a spool and extruded through a heated nozzle attached to a gantry with three axes of motion to build a printed object from the build plate on upwards. This was the first widely commercial available 3D printing technology for home or small business use, and while it has a lot to recommend it for many applications, it did not take off for the miniature use case.

The other type of 3D printer is a resin printer, which are a technological marvel of chemistry and hardware design. If you want a full technical explanation I recommend the Youtube-delivered seminar Ph.D Chemist Explains 3D Printer Resin by a fellow painter who also found his professional life colliding with his hobby unexpectedly.

3D printer resins are liquid photoplastics; they cure (harden) in the presence of UV light. An LCD screen beneath the transparent bottom of a vat of ooze exposes a layer 30-50 microns thick to harden it; a single-dimensional screw then rotates to pull the build plate upwards (to remove it from the film) then downwards (to get more liquid resin stuck to the newly-solid layer then re-adhere to the film). The process then repeats until the print is done, in something a calculus teacher might describe as integration by parts and that a timelapse videographer might describe as absolutely mesmerizing.

And here physics and calculus made an unplanned splash into the economy for printing 3D fantasy miniatures. The thermoplastic option has build time increase linearly with the weight/volume of models printed. The photoplastic option does not; build time increase linearly only with their height, but the other two dimensions are free up to the limit of your printer’s build plate.

Recall that printed miniatures are numerous, extremely valuable relative to their weight, and…  very, very short. So you could, with a prosumer-grade printer costing only a few hundred dollars, print miniatures with a retail price equal to half the cost of the printer in a single print run lasting approximately two hours and requiring on the order of $3 of expendables (resin, cleaning materials, paper towels, and gloves) and less than an hour of skilled labor.

Intel would kill for the ROIC here, is what I am saying.

So where does Shenzhen come in?

The many faces of ChiTu

There is a thriving market in 3D printers both for industrial applications and for pro-sumers, with price points for the later offering clustering in the $300 to $1,500 region. They are largely made by a small cluster of companies which, unlike most manufactured Chinese products by tonnage, are consciously branded, with global marketing campaigns and customer service. Famous names in this sector include Elegoo (based in Shenzhen, short for “electronic googol”, a reference to a bit of math geekery which has proven auspicious in the tech sector before), Phrozen (based out of Taiwan), Anycubic (back to Shenzhen), and similar.

Much like paper printers, it turns out there is a flowing river of money in the resin printing business in rough proportion to the economic utility of all printed things. Most of that money is literally liquid. The hardware business is an extremely rough one to be in; my quick estimate of the BOM (cost of included materials) for a low-end pro-sumer printer is about half of the purchase price. But the printer literally exists to drink resin, and resin can be optimized and branded. Paper printers have fought an unending war against third-party ink toner, which needs to solve a difficult but tractable problem of repeatedly transferring pigment to paper. Resin, on the other hand, exists in an 8-dimension product space before you even start seriously thinking about it; if (for example) it doesn’t cure effectively on the wavelength of light your machine outputs then it is virtually useless to you.

This results in the printer manufacturers getting to price their resin at a premium and keep it, while maintaining a commanding share of kilograms consumed by their installed base, rather than being predated by third-party resin. Resin is sold in 500g to 1kg bottles at price points in the mid tens of dollars; it is produced in multi-tonne increments and likely at 98%+ margins. The chemical and economic properties of it make it basically ideal for putting in a shipping container even when the things it will be used to make would find that container a terrible economic fit.

And so the printer manufacturers likely make most of their money from selling consumables, primarily resin but also replacement parts for the machines (the physics of them currently invariably cause disabling damage to key parts over time, the LCD screen will eventually burn out, etc).

The printer companies are extremely sophisticated at marketing, to a degree which would be notable in almost any industry. They all operate first-party online storefronts and e.g. Amazon stores in their key national markets, and they aggressively promote themselves via e.g. ensuring that widely-watched hobbyists like Uncle Jesse receive review copies of their printers and all the resin that they can disclose. (One could write another essay just about the information economy for printer/resin/etc buying decisions; it’s a lot of the affiliate links, starred reviews, influencer marketing, online advertising, Amazon gaming, and similar you would expect.)

And inside substantially all the resin printers… is one board to rule them all, brought to you by ChiTu. ChiTu has a mortal stranglehold on the software and hardware that turns exported 3D designs into a series of tightly coordinated instructions for the motor and LCD screen. The printer manufacturers can all source final assembly and commodity electronic and mechanical components, but (in this segment) are not able to build the board yet.

ChiTu has vertically integrated itself from the embedded software segment up the stack to the slicing software as well. Slicing software is a requirement from 3D resin printing; it helps the operator turn an artist’s sculpture into something that can be physically realized on the hardware they operate. The most basic function is chopping the sculpture up into a scripted series of 30-50 micron slices (hence the name). It is also used to e.g. add additional planned plastic to support the structural integrity of the print. A fairy needs to hang upside down from a build plate fighting real-world gravity while perhaps being supported by a gossamer dress and the dreams of an imaginative child. Tolkien didn’t have to worry about that; operators do, and so you both have to put on (in software) and take off (with your own carefully gloved hands) plastic supports.

This is another reason why the mom-and-pop factories pumping out prints have an economic reason to exist: there is substantial skill involved in correctly operating one’s slicing software, one’s printer, one's post-production process to produce a model which is realizable in the physical world and survives its rigors in an aesthetically pleasing fashion.

(I have three scaly 30mm lizard rumps attesting to the fact that dragons might be vulnerable to arrows of dragonslaying but are absolutely destroyed by face-first contact into curing resin if their vicious claws can't stay attached to a milled aluminum build plate. Each of them cost me hours and a thorough cleaning of the printer to prevent the congealed puddle of dragon from penetrating the tank’s film and drenching my WFH desk in mildly toxic resin. Clearly the economically rational thing for me would be to procure my dragons from Etsy, but this is more fun than I’ve had in ages.)

Anyhow, ChiTu has started forcibly integrating ChituBox, their slicing software, with the leading printer manufacturers, and they have them over a barrel (of resin). The manufacturers hate going to their customers and saying “The hardware you buy from us now comes with a we-hope-this-won’t-be-mandatory $169 a year subscription”, particularly as they get to keep 0 cents of that subscription. (There exists competing slicing software, most interestingly the Belgian/French Lychee, but they don’t manufacture the baseboards).

So if you are following the money:

An end-user buys something from a small manufacturer on Etsy or a similar marketplace.

That manufacturer made a capital investment and OpEx purchases from a printer manufacturer. They have ongoing non-exclusive IP licensing agreements with multiple artists, brokered by software/financial services like Patreon and MyMiniFactory.

The printer company buys their boards from ChiTu, which (separately) may charge the plastic manufacturer an annual software subscription.

This is an impressively multilayered, global supply chain. Prior to buying my own printer, a single miniature routinely involved a manufacturer in Utah, a printer (and resin) from Taiwan, a board from China, a sculpt from Spain, and logistical and financial knitting by Etsy (East Coast, USA) and (multiple uses of) software-heavy financial platforms (West Coast, USA).

It's useful to ponder why the money movement here is more complicated than simply "banking" or "payments." The models themselves look like a classic e-commerce transaction, but their supply chain implicates a high-volume aggregated-then-distributed subscription commerce service needing to make multinational pay-ins and pay-outs. That is something that you can't conveniently get from either a bank or from the credit card networks. And the capability to offer this allowed entrepreneurs to create a business model which looks very little like existing firms; it is neither vertically integrated nor does it recapitulate the supply chain for most physical items with embedded IP.

Kickstarter: Marketing and capital stack for B2B art producers

Another wrinkle here: we’ve discussed the operation in steady state of an artist, plastic manufacturer, and similar, but cold starting an artist on the subscription model is almost as difficult as cold starting a SaaS company. As you might expect, VCs are not exactly wowed by the pitch “I am going to sculpt a lot of ogres; the IP will eventually be worth tens of thousands a month” and many artists cannot afford to bootstrap themselves into having a library worth licensing.

Enter Kickstarter, which both has an impressive amount of reach in hobby-adjacent spaces (people who enjoy board games have written more about the mechanics of board game Kickstarters than you could read in a week) and critically can raise I-can’t-believe-its-not-capital in advance of the IP being fully printer-ready.

And this itself has created a thriving little ecosystem of software firms! And enables advancements into more capital-intensive manufacturing!

A worked example: Dragon’s Hoard (the editor in me might suggest "Horde" instead since if a gamer wanted the pile of gold and gems a dragon slept on they would find it from a separate sculpting firm) is a set of miniatures which had a successful Kickstarter raising $250k. The campaign's proof-of-competence was enough beautifully sculpted goblins to demonstrate likelihood of success, but probably not enough to sustain a firm via the above-described ecosystem. This both paid for years of artist time and also a substantial amount of fulfillment work, because they are selling miniatures and not computerized descriptions of miniatures.

The physical properties of the models they describe are not easily achievable by the production processes used by traditional miniature manufacturers or the resin 3D printing ecosystem. They suggest to me that they might be adopting SioCast, which has the wonderfully evocative (to industrial engineer)s tagline “the link between 3D printing and injection molding” and which has to be seen to be believed. SioCast, if it is widely adopted, would be another quantum revolution in miniatures manufacturing, because it combines the (very high and low-marginal-labor-cost) scalability of traditional injection molding with the (very low) setup costs and lead time of 3D printing.

And while that might not make all that much difference for the long tail millions-of-SKUs that the hobbyist market wants, it makes a huge difference for e.g. wargamers, who need hundreds of models and can tolerate many of them looking substantially identical. You could imagine the Games Workshop of the future shipping new boxes of models directly to subscribers (and perhaps or perhaps not to hobby stores) on a monthly cadence, not on an annual-or-longer refresh cycle, basically as soon as their artists could sculpt them.

Anyhow, that is my guess at why it costs about $5-10 for a single artisanally produced fantasy figure via 3D printing but Dragon’s Horde is pre-committing to more than 100 for less than $100. They have successfully re-achieved economies of scale in plastic production, but at a scale more easily obtainable than in traditional plastic production, with a product which is substantially better for purpose than the one produced by traditional techniques.

Kickstarter apparently leans into their marketing and I-can’t-believe-its-not-capital-raising side but largely punts on fulfillment, which has caused a flourishing of boutique software-and-financial-services providers called “pledge managers” to step into the gap. A pledge manager is something akin to a CRM crossed with Shopify crossed with a physical fulfillment workflow. It lets backers pay for their (country-specific) shipping costs once the product is actually ready for delivery, lets the campaign not drown in Excel while managing thousands of orders, and it sell “late pledges”, which are post-Kickstarter-campaign purchases of the product. You could see Dragon Hoard’s here on GameFound.

And, playing forward a little bit, these Kickstarter campaigns buy artists/designers/entrepreneurs enough runway to produce assets which have enduring value, both the IP created and the customer relationships and reputation within the community. Reputation both leads directly to more customers and indirectly to more demand for prints of things in your style/range on e.g. Etsy, which causes manufacturers to license your IP. This causes a virtuous cycle not entirely dissimilar to the economic engine behind Disney or Marvel, but heretofore unknown in artisanal scale fantasy sculpting.

HeroForge: AI eats enables amateur sculpting

If you’re paying attention to the intersection of artistry and AI you might have seen it roiled by Dall-E, a language model which spits out plausible-if-vaguely-hallucinatory visual artworks in a variety of styles. Many commentators have opined on whether or not this will endanger the jobs of visual artists.

I tend to think that artists, like writers and programmers, generally succeed via achieving symbiosis with emerging technologies rather than being supplanted by them. Every programmer you’ve ever met is utterly dependent on an AI to do their work; we just call it a compiler or interpreter. The principal reason that the programmer/interpreter symbiote is not classified as an AI is that a book describing their operation isn't filed under science fiction but rather history or current affairs.

So imagine you’re someone with an idea for a fantasy character but not the time or sculpting skills to chisel them out of the ether. You might use HeroForge, a truly remarkable technical achievement which is essentially an in-browser CAD software which specializes in fantastic characters. Their software is free to use. The business model is that you can export the character you design to either a 3D printing business located in China (for about $20-$45 plus shipping, depending on whether you want it colorized) or to an STL file for printing on your 3D printer (for $8 a la carte or ~$3 if you want to commit to a monthly subscription).

The results are…  impressive. (See below.)

And despite the fact that they offer almost uncountably many models which would be at home in a D&D game, they do not in fact result in technological unemployment of fantasy sculptors, who are enjoying the best market for their skillset in history. A moment's thought will answer why: HeroForge is extremely good at producing a beautiful model which will look to all cognoscenti like it is a HeroForge model. Something of the job-to-be-done of a fantasy miniature is looking like you belong in the world with your friends but are nonetheless very different from them. In this, they are not dissimilar to fashion (or art generally).

Bringing it back to the real world

And there you have it: that’s the geekiest combination of chemistry, hardware/software, and international finance to have recently colonized my desk. I find these sort of deep dives into tiny parts of the real world are good in providing context to the broader forces which are reshaping society, such as globalization and increasingly software-mediated economies. If you’d like to see more (or less) of them, let me know. I promise that the next one won’t be quite this geeky.

To echo a line from Stripe's annual letter, we're still in the earliest stages of the broadly participatory cultural (and economic) dynamism unleashed by the Internet.