The most common question we receive is “Why did the colour variants market collapse”? The spectacular rise and fall of the Golden Wildebeest and the Black Impala has characterized the game industry in the last year or so. Some feel that these 2 examples are predicting the future fortunes of the game industry as a whole. However, most, if not all commentators that remark on the game industry generally do not come from the industry itself and usually without a real understanding of how game works. The experts from Spoorex have been tracking the game industry for years and breakdown the economics of game on a daily basis. This article will lay out several theories and factors that contributed to the depletion of the colour variants markets. We will look at explanations from market speculation, basic supply and demand economics, market speculation and marketing.
What Happened: In Numbers
Before explaining potential theories on the decrease in value of the colour variants market, it is important to first look at what it is that actually happened. That is to say, did the market collapse? If so, by how much? What drop signifies a ‘collapse’? The team at Spoorex have actively tracked the sale of animals across the entire game industry. We look at each animal and use mathematics to value each one. We then look at the difference between the calculated estimated value and the real sold price. The start of the year took into account the entire 2016 market and we compared that to the sold prices in Q1 and Q2 of FY 2017. As we can see below, the Golden Wildebeest market dropped by 86.19% for males and 59.72% for females. In the case of Black Impala Males and Females the drop was 76.89% and 57.16% respectively. For both species, this is a dramatic plunge that by all measures can be considered a collapse. The more important question now becomes, why did the markets decline and in such a short time period?
The Next Big Thing
Anyone talking about the game industry in 2014 had two words on their lips, ‘Black Impala’. The Black Impala was set to be ‘the next big thing’. Why people thought this is unknown, but they did. As a result new buyers flooded into the game industry with the promise of ROI’s that would seduce any investor. With so few on the market and such high demand, it was no surprise that the price back then skyrocketed. This massive over-inflation of prices attracted more and more investors and breeders who thought they were going to be printing money. The number of people on the Black Impala bandwagon exploded as a result of market speculation. However, this was purely speculation. Hence the start of the rise was caused by optimistic market rumors. But the real question one needs to be asking here is, where is the money coming from and what is driving demand? The rise period was dominated by commercial breeders who make consistent cash flow and profit from selling hunting stock to hunting outfits. Yet when they came to sell to the hunting outfitters, things did not start to match up. There was an imbalance between the supply and the demand.
Supply & Demand
When people ask, what drives the market? Where does the money actually come in from? It is usually met with an ambiguous answer of eco-tourism, internal trade cycles ad infinitum. No matter what anyone ever says, there is one primary vehicle that drives the prices of the game breeding industry and that is hunting. The reason for the convoluted response from the game breeder to the outside world is to protect the industry from the global purge on hunting, usually led by foreign non-hunters that live in the city as their flag-bearers. Nevertheless, with Black Impala and Golden Wildebeest prices sky high several years ago, one should assume that there was a matching demand for hunting. This however, was far from the truth. International hunting demand was never intense and things became drastically bleak after major hunting organizations like the SCI and Dallas Safari Club had condemned colour variants. This meant that demand from the hunting industry was low, whilst demand on the breeding industry was high. The market was always poised for collapse because of the mismatch. Conscientious investors should have been tracking the hunting market rather than the breeding market. Then on the supply side, there are Impala’s that are breeding like rabbits across the country expanding the supply. Hence there was a large and ever-growing supply, a low demand and sky high prices. Even with a basic understanding of economics, one can see that the prices were never going to maintain themselves, unless there was an equal explosion in demand. The question then moves onto, how did the supply and demand move so profoundly out of sync?
There are very few sources of information on the economics of the game industry, which is one of the reasons we founded Spoorex, to fill that knowledge gap. As a result, a lot of the industry is driven by word-of-mouth and hearsay that aren’t based on real factual statistical evidence. Even worse, the hearsay can’t even be validated with research anywhere (or at least that was before Spoorex). Many promoted colour variants as a highly valuable bloodline that would feed the so-called hungry trophy hunter. Once the rumour started, it became a self-fulfilling prophecy. The price was high because people believed the price was high. The belief was driven by the marketing of colour variants as unique, prized and rare. The hunting market never showed a correlation with the prices of Black Impala in the commercial breeding sector. These animals were well-marketed to new entrants that simply saw the huge profits color variant owners were making, whilst the charade lasted. With no credible source for due diligence, the marketing sound bites sucked in new investors seeking to replicate the profits. The new investors kept pushing the prices higher and higher, despite the static hunting demand. Hence they were pushing the breeding market further out of sync. However, we should not place a heavy blame on the original sellers of Golden Wildebeest or Black Impala. These breeders' most likely also thought that the hunting demand for 'rare' colors was going to be hugely profitable, which is why they began breeding them in the first place. To think they knowingly and falsely 'tricked' adults into purchasing any animals is an unfounded conspiracy theory. In reality, old and new breeders took a huge gamble on the future hunting demand of colour variants, and the gamble did not pay off. Once the market realized that the anticiapted demand was almost non-existant, the prices came down and they came down hard. But why did they come down so quickly and so dramatically?
The Self-Fulfilling Prophecy Strikes Back
Rumors can push the price up, but they can also push the price down. Once people stopped believing in the colour variants market, everyone stopped believing in the colour variants market. Market scepticism hit with full force and everyone stopped buying. With everyone now overly-cautious about Black Impala or Golden Wildebeest, the demand side of the scales vanished and the market collapsed. The market does whatever people believe and not necessarily what the actual supply and demand dynamics truly are. With a huge speculation on whether prices were ever going to recover, people froze their buying to wait for stabilization. The issue is that without any buyers, prices were never going to be able to stabilize and grow. In a national economic crisis, governments usually provide stimulus packages to encourage buying again. The game industry has no stimulus package provider, and so the graph shows completely static movement in the value of colour variants. The market will eventually return to health once confidence is regained and hunting demand comes through. How long this will take is, at this point, an unanswerable question.
The colour variants market is a story that is seen so often in the investing world. A rumour spreads that a product is going to be extremely valuable in the future. Everyone invests en masse to drive the price up. The product's demand does not match the true market demand. At some point, the market comes down. Then the rumour spreads that the product is toxic and pushes the prices further down. The lesson for game breeders to learn from this moving forward is that the game breeding industry is heavily linked to the hunting market. If you are going to look at new investments into new species or new bloodlines, look at the hunting demand and do not play into market rumours and marketing. These are not good indicators of your investment in the future.