Paintball ‘Brass’ Targets Market, Gaming Safety

A dip in guns sales and a flurry of lawsuits following a three-year string of coast-to-coast high school shootings have put the firearms industry in a jam. The spinoff paintball market, based on a game that pits players shooting one another with balls of colored paint, has not yet been affected.

Industry leader Brass Eagle Inc. of Bentonville announced July 6 that it expects second-quarter sales to drop 10.8 percent to $17.4 million, compared with $19.5 million in the second quarter of 1998.

But the company attributes the downturn to last year’s unexpectedly high sales and the timing of product expansions by retailers. The news comes only after the company experienced record first-quarter sales of $19 million, up from $15.7 million a year ago.

Brass Eagle’s chief executive officer, Lynn Scott, would not comment on the possible perceptions of paintball. But he did release a statement through his company’s public relations firm, Paschall & Associates of Little Rock, saying he expects tremendous company growth in the next two years.

“Through extensive research we have identified a target market of 66 million people,” Scott says. “To date, only 6 million people have participated in the sport of paintball. A recent industry study forecasts … retail sales will reach approximately $750 million in 2001.”

Analysts say the company remains buoyed by a collective marketing strategy the whole industry is using to disassociate itself from images of shooting and violence. Instead of “guns,” the $500 million paintball market refers to its devices used for firing paintballs as “markers.” Companies also stress the athletic and strategic aspects of their sport, billing it as a kind of “high-tech tag” that’s no more sinister than playing with water pistols or cap guns.

Critics say it’s more like target practice, and that’s dangerous because paintball markets itself to the 12- to 24-year-old male demographic.

Charles Prudhomme, Brass Eagle’s vice president of marketing, says “paintball is what it is, a recreational, safe sport.” He adds Brass Eagle, which designs, manufactures, markets and distributes paintball guns, paintballs and safety equipment, will not speculate whether or not playing its sport can lead to violent behavior.

“Nobody has ever asked us that,” Prudhomme says. “We’re not a firearm. We’re not a gun product. We don’t have to deal with that. We push safe paintball play by encouraging participants to wear face masks and goggles. All of our products and owners’ manuals come with warnings.”

On Business Week List

Traded as XTRM on Nasdaq, the company had a 52-week high of $26.50 in May following the April 20 shootings at Columbine High School in Littleton, Colo., that left 23 injured and 13 dead. In June, Brass Eagle was rated No. 2 on Business Week’s Top 100 Hot Growth Companies list and had the nation’s top annual earnings growth at 1,620.2 percent. It was the company’s second-straight year to make the magazine’s list after debuting at No. 39 in 1998.

Paintball’s recent success contrasts with slowed growth figures for firearms makers and distributors over the last 18 months, during which high school shootings have resulted in 29 deaths and many more injuries.

Revenue from the U.S. Bureau of Alcohol, Tobacco and Firearms’ 11 percent excise tax on shotguns and rifles increased to $67 million in 1998, up from $65.5 million in 1997. But the ATF’s yield on its 10 percent tax on pistols and revolvers fell from $37.6 million in 1997 to $35 million a year ago.

Sturm Ruger & Co. of Southport, Conn., is the only publicly traded fire arms manufacturer in the United States and the only one that makes revolvers, pistols, shotguns and rifles. Its stock fell to $8.38 in March, down 52 percent from last September. More firearms industry suffering is expected with as many as 10 cities from Miami to San Francisco filing lawsuits against 15 gun manufacturers for “negligent marketing” and the failure to make guns with child safety locks.

Justin C. Maurer, an analyst with McDonald Investments of Cleveland, says paintball companies were conscious of the need for “safe” marketing even before the recent string of school shootings.

“Because the roots of the activity are putting something in a gun to shoot at other people,” Maurer says, “the paintball companies have always been sensitive about how to market their products. I feared when Brass Eagle went public people would see it as too close in line with guns.

“But the industry has done a good job of centering the activity around the running around and hiding part. They hope there’s a fair amount of distance perceived between shooting your buddies and this being just another ‘X-treme sport.'”

One-Third of Market

Brass Eagle employs 225 people between its corporate offices in Bentonville and its production facilities in Neosho, Mo. It began as a division of Daisy Manufacturing Co. of Rogers before going public in November of 1997. Analysts say the company now controls about one-third or $160 million of the overall paintball market.

Maurer says Brass Eagle’s closest competitors, Ben Sheridan Crossman and Tippman Inc., each probably have about $5 million of the market. Fellow analyst John P. Hughes says Brass Eagle has been the most successful in mass merchandising its products because of its strong relationships with major retailers.

“Brass Eagle has the best distribution network of the major players,” says Hughes, who covers Brass Eagle for Dain Rauscher Wessels in Minneapolis.

“They have strong relationships with Wal-Mart, Kmart, the Sports Authority and Galyans sporting goods. They’re mass merchandising and introducing the game to teen-agers. They’re hitting the sweet spot where the industry is growing.”

The company has also found its groove internally. Brass Eagle is becoming more vertically integrated by manufacturing its own paintballs instead of buying them from a subsidiary that specialized in pharmaceutical encapsulation processes.

Maurer says in terms of equipment sales alone, vertical integration has probably helped take Brass Eagle’s market share to more than 50 percent of the market. The only downside is some hard-core players see the company as a corporate sellout.

“Paintball is still a garage industry of sorts,” Maurer says. “Some of the sport’s diehard players will pay higher prices for competitive niche products because they see Brass Eagle as the mass market retail brand. Many of the owners of paintball fields are the diehard guys, and that’s probably the reaction for a lot of them.”

Prudhomme says Brass Eagle is not aware of any “sellout philosophy.” But he does agree with Maurer that the key for the company and the industry going forward is to broaden paintball’s appeal. Maurer says the industry has been trying to confront the need for increased participation for three to four years.

“Through sales growth, paintball companies have gotten their products in a lot of people’s hands,” Maurer says. “But they still have to separate themselves from other fad activities. They have to get people conditioned to playing paintball like intramural football or pickup basketball games.

“They just have to push to make it a more frequent activity. If they don’t, paintball will run its course.”

Planned Expansion

Paschall and Associates president Bill Paschall says the company’s marketing plans include expanding into Canada and Europe. And along with the rest of the industry, the company is developing “pursuit parks” that will give the sport more penetration in urban markets.

The parks look like half-sized football fields surrounded by netting. At a cost of about $50,000, prospective pursuit park owners can purchase a kit that includes the needed netting and PVC pipe for setup. Players then pay a flat admission fee to run around and shoot competitors for 10 to 20 minutes.

Internal obstacles and barricades for the parks are extra.

“We’ll always have new products in the works to grow our business,” Prudhomme says. “We want to build our consumer base, and we’re doing that by developing play site arenas in locations across the country. We hope families will go out and play together.”