ORX, Sales Numbers, and Retail
greyorm:
In response to a friend's post about retail pricing and the indie attitude, I decided to lay out my costs and profits for ORX over the last four quarters, and some exploratory number-crunching and business-musing. Rather than retype it all here, you can find the details in a post on my LiveJournal.
What really jumped out at me was the actual effect of retail sales when I crunched the numbers. Yes, I sold more potential books-to-readers via retail -- no guarantees those books actually sold thereafter to a reader or player -- but I made almost nothing doing it. I am spending money/sacrificing profits to try and use retail exposure as a promotional device and hoping it works.
Retail ends up being a HUGE gamble for the indie publisher: make almost nothing on what are effectively promotional copies and hope they stir up enough interest and sales to make retail profitable from either financial or fan-base stance. Yet how often does that actually happen? Especially given we know doing about 100 sales is going to be the average complete life-cycle of an indie product? (Meaning total profits if you sell retail, and depending on your expenses, MIGHT come out to gas money and-a-bag-of-chips.)
From what I can see, trying to enter the current retail market and leverage the three-tier distro model is actually a losing proposition for most indie publishers, with only highly successful games (like Burning Wheel, Dogs in the Vineyard, and similar) being able to effectively use it to create meaningful/profitable sales and everyone else dumping a lot of extra money out to have copies of their game(s) basically sit on a shelf somewhere.
So here's the question, or a question: what's up with the indie publisher drive to enter the retail market over the last few years?
Valamir:
I did not study your numbers in detail but here's what immediately jumps out at me.
If you are not making money in retail than you are either underpricing your book or paying too much per unit.
Having bought Orx, $20 seems like a reasonable price point to me so let's examine your per unit cost...whoa...
$6.96 per book!!! that's CRAZY. You'll never make money selling through retail with a cost structure that out of whack.
When I look closer, I see why your cost structure is so high...you printed 60 copies. Pricing at 60 copies sucks ass. If you only want to take the risk of printing <100 copies at a time...forgo retail altogether...or accept that you'll barely recover cost on those sales.
Here's my rule of thumb.
Start with your cost, double it. That is the amount of money you need to put in your pocket with every book in order to break even on your printing costs with 1/2 your sales (with a hot title you can triple it and cover your cost even quicker). Then divide by the money you get to keep (as a %) after the discount and paying IPR. That is the price you'll have to sell your book at to make retail attractive.
At a $7 cost you need to pocket $14 of every sale. If you figure you pocket 40% of cover (after discount, IPR, and miscellanious stuff like shipping) you'd need to sell your book for $35. I'm betting you'd expect that Orx would not sell priced at $35.
So lets reverse the calculation. If you're selling it for $20 then you'll pocket $8 of every sale, meaning you have to get your per unit cost down to $4.
Recommendation. Immediately go to any of a number of print quote services, put in the details of your book and ask them for pricing for 100, 250, 500, and 750 units. Going through those quotes, find out how many units you'd have to order to get your unit cost down to $4. I'd guess that will be somewhere around 250 units give or take 50.
If you're willing to foot the bill for that many books and you figure you can sell 1/2 of them in the amount of time you want to get your money back, then go that route and you'll make money just fine in retail. If that's too much of an investment or you don't think you can sell that many, then I'd not try retail sales.
guildofblades:
I agree. The printing price is too high compared to the MSRP the product is being sold at. Either the cost to print needs to come down or the the MSRP needs to be raised.
Who did you print the book through. Looks like we could do that same book for just a tad over $4.00 a unit. Though that doesn't count shipping.
Also, if you are looking for retail exposure, we would be happy to include your book in the GOB Retail Group's Retail Program. That's where we POD print the title as needed to inventory in store and fill orders. On that program you would make 30-35% (depending if you are doing your other printing with us or not) on each sale made. Under our retail program we pay for the products sold under the product so on a $20 product your cut would be either $6 or $70. Heck, even our wholesale program would net you $4.00 a book sold.
More details here:
http://www.guildofblades.com/pod.php
Both programs are in their infancy though and still being set up. For instance, we're still populating our e-commerce store and our B&M store won't be open until late Sep. We're still building the IT infrastructure for our wholesale and master distribution programs so we don't expect to actually "launch" those until we open the B&M store either. But we're working on signing up publishers now so everything will be in place by then. Grant, for the retail exposure it'll just be one B&M store initially, so its not exactly a market wide solution. Just trying to play our small part.
Ryan S. Johnson
Guild of Blades Retail Group - http://www.guildofblades.com/retailgroup.php
Guild of Blades Publishing Group - http://www.guildofblades.com
1483 Online - http://www.1483online.com
greyorm:
All stuff I know, Ralph, but thanks for posting the pricing formula, hopefully that will help others trying to price well. Unfortunately, none of it really answers my question or speaks to the issue I queried about, except as a supporting argument to it.
Indie publishers, at least the folks who aren't at the top of the indie food chain or don't have a whole lot of money set aside to begin with, can't afford to print 500 or 1000 copies to bring the printing costs down and profits up. I can afford a print run of 30. Through Lulu it's about $200. That's what I can afford. I think I'm pretty average as far as indie-interested publishers go. Looking just at Lulu (and yes I'm aware I could find lower costs by shopping around):
To print 100, the cost is $567.54 with shipping. That's a $5.68 per book cost.
To print 250, the cost is $1,241.83 with shipping. That's a $4.97 per book cost.
To print 500, the cost is $2,289.31 with shipping. That's a $4.58 per book cost.
To print 1000, the cost is $4,382.86 with shipping. That's a $4.38 per book cost.
(There are additional discounts for bulk rates, but those require specific quote requests so I'm not factoring them here, especially as it isn't germane to the point I'm making.)
Now, I don't know about you, but I don't have $500, $1200, $2000, or $4000 dollars to spend on printing a game. I just don't. And if you look at the economic realities, most lower and middle-class families (who are the majority of the population and I suspect the majority of indie-interested publishers) don't even have a spare $500 for emergencies, let alone to toss into a publishing venture.
Unless I've slipped into an alternate reality, the point of the indie movement was so that you didn't HAVE to lay out large sums of cash up front, raid your savings, or take out a business loan just to publish your game. Thus the point of my analyzing the cost/payout of retail channels for ORX and then point to it was to show that I can make a decent amount of money even at costs of $7 a book if I'm selling direct (I can pay for the print run and make some profit). But NEVER via retail. It won't happen unless I charge something ridiculous like $35 for my book. I wouldn't pay that for my own book, so obviously I wouldn't ask a customer to.
Clearly the retail channel is not the channel for indie publishers: the majority will lose out. Hence my question, why the push towards retail by indie publishers when it doesn't pay off or pay out for the majority, and simply can't pay off because of the nature of the three-tier system? And why do we push Lulu or point to them regularly for indie publishers when Lulu's pricing is apparently so crazy-horrid?
All of which sparks another question (and I'm not accusing you of this, Ralph): I'm also beginning to wonder if many of the successful indie publishers today are simply out-of-touch with the common indie publisher, so much so that their advice and experiences are wholly non-applicable to us. "Print 500 books! Print 1000 books!" etc. is becoming fairly common, and commonly useless, advice.
It's to the point that listening to some successful indies is like listening to a traditional printer, touting the glorious system and ignoring its flaws or holes that don't affect them or anyone who has to deal with them. I know situational blindness, especially when one throws success into the picture, is a pretty common thing: it's why we tell all sorts of stories about poor people becoming wealthy and successful, ignoring that statistically they're the significant exception, and the almost complete majority who try for the gold ring never make it regardless of how many things they do "right".
(We also like to talk about how "anyone" can make it, especially if they do X, Y, and Z, and then blame anyone who fails to make it for failing to make it, instead of the system, regardless of the statistics or if the individual did X, Y, and Z. We do love our cherished myths about how the world works and how we deserve what we have, and why others don't.)
So I'm standing here pointing to this gaping piece of illogic and inviting everyone to examine it and question the direction and perhaps subconscious of the movement.
ADDENDUM: Heya Ryan. You posted after I penned my reply to Ralph. I have to run out and deal with cell-phone issues and etc. right now, but I'll try to respond to you as soon as I get the chance. Give me until tomorrow, ok? Thanks!
Thunder_God:
I think there are a couple of reasons to point to Lulu:
1. They deal with extremely small print runs, where some of the other publishing houses who do PoD have a set-up cost, which you need to print more copies to make it worthwhile.
2. They are dirt simple and easy to use.
3. An outgrowth of #1, and some of the sensibilities, you can sell books through Lulu, direct, exclusively. If your book sells for $20, and it costs $7 to print one copy (and only one copy), then you'd still make $10.4 per copy sold via Lulu. Which is very solid.
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