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Where do your game dollars go?

Interesting bit on where your game dollars go when you buy from certain outlets.

#Tabletop #RPGs

Where does your money go when you buy a game?



Over the years I’ve been asked a bunch of times questions like “What’s the best way to make sure you get the most money when I buy your stuff?” And, y’know, I’m me, so I tend to answer it at length.

There always seems to be one detail or another about my (usually very similar) responses that surprises the querent, which is a good reminder to me that despite my own increased understanding of how things work in tabletop games publishing, for many customers and fans it remains a smooth opaque surface with few windows in it.

So today I want to dig into the territory I typically cover when answering this type of question.

To me, it feels pretty relevant during the global quarantine. A lot of creators, publishers, and supporting businesses are struggling during the economic impacts of this, and that has prompted some folks to think a bit more about where their money goes.

So wash your hands and take a seat.

Direct Sales


I could end my answer to the question right here (but I won’t), because this is very often the way to make sure your intended recipient gets the most money from the transaction.

So, buying directly from the publisher or creator themselves (from their own website, in person, etc) very often is the way to go when you’re most concerned about making sure they get the majority of each dollar you spend on their stuff.

Generally the only thing cutting into the transaction itself is the payment processor fee (credit card, paypal, etc). These usually manifest as a small flat fee plus a small percentage (3–5%) cut of the overall total per transaction. The flat fee is the main snag here. It tends to mean that making series of small-dollar purchases of single items leaves the recipient with less money than if you’d put all of those items into your cart and buy them all at once, but once you get past a few dollars as the pricetag on each item, the flat fee isn’t that big of a percentage of the overall total.

After the transaction’s done, there are fulfillment costs. These are the costs of actually delivering the goods purchased to you.

If you buy digital stuff, the fulfillment costs are incredibly low; however much it costs to run the website for your specific interaction with it and push the modest amount of bandwidth needed so you can download the items. (Please make local, backed-up-to-the-cloud copies when you can; each time you re-download increases that bandwidth variable just a little.)

If you buy physical stuff, there are a few more variables, most of which have a pricetag. Key considerations are * How much of the actual shipping costs are you picking up, and how much is the seller subsidizing that shipping cost so you don’t have to (free shipping isn’t free, it’s just free to you)? * Are they doing the shipping themselves (spending more time on fulfillment) or are they paying a third party to ship to you (spending more money on fulfillment)? * What’s the cost to the seller of maintaining the inventory so you can buy it? (Storage fees here, plus some tax considerations around held inventory; plus, they have to spend to manufacture the physical units in the first place.)

Even with those slices into the costs, it’s often true that physical products remain king. They usually have a higher pricetag, so direct-sales revenue of physical items tends to be pretty great, which is one reason why Evil Hat sells its physical books with the electronic versions included for free; it produces a greater incentive for folks to buy the physical item.

Recipients: Creators and Publishers


As I talk about the receipients of your expenditures, I should ask you: who do you think the recipient is?

If the creator of the thing you want is not the same as the publisher you want, and your agenda is solely about making sure the creator gets the most possible money… you shouldn’t really stop at buying the thing they made, even if it’s direct. That creator was either paid a fee for the creative work up front (or upon publication, which is not as good), before it got turned by a publisher into an actual product, or will get a royalty percentage which is near always less than (likely far less than) half of what you paid for the thing.

If the publisher is doing work you want to see continue, great, buying direct from them when possible is a good strategy. Hopefully they’ll continue to hire the designers you like for future projects, thanks to your money. Publishing isn’t a low-cost endeavor by any means. One way or another, Evil Hat spends the majority of every dollar it gets on being able to continue to function, launch new projects, pay more creative folk.

If the creator is a big concern for you (and I’d argue they should be), look for ways that get them money more directly (their patreon, their publicized paypal donation link, etc). Creative work is a tough way to go. It’s a buyer’s market, and within gaming the margins and total sales dollars are low enough that that means it’s hard to muster the economic capacity to increase what the designers end up with. At Evil Hat we still try to make those increases when we can, while acknowledging that the costs of taking a design into product form (artwork, manufacture, fulfillment, maintenance, et al) tend to significantly exceed the costs of making that design in the first place.

Plus a lot of design work is not salaried, it’s freelanced project-by-project, which means that unless the designer keeps a constantly full plate with paychecks resulting at regular intervals from those projects in aggregate… the income’s just not regular or reliable. Income from other sources – whether that’s a day job (reducing the time to design) or some flavor of crowdfunding/donation support – is key for keeping the creatives in gaming afloat. So if you’re able to be one of those other sources, it can have a big impact for them.

I’ll continue to talk about recipients and publishers below, meaning both creator-publishers and other publishers in aggregate. Just remember to filter that word through this understanding. Not all recipients are the same, and if you’re interested in understanding where your money goes, it’s worth taking the time to figure out who the actual receiving party is.

Kickstarter


Kickstarter lives pretty close to direct sales. Kickstarter itself just adds another 5% cut on top of the payment processing fee, so aside from 8–10% of your payment going to the payment processor and KS, the rest will get routed to whoever’s running the project.

That said a lot of folks who run a Kickstarter don’t have a lot of experience on the manufacture and fulfillment side of things. Experience and (sometimes for a fee) experience surrogates are more available these days than ever, but I still see project runners getting goosed by unexpected cost factors in these two categories.

The more complicated your manufacture is, or the less established your relationship is with your manufacturer, the more there’s a chance that there’s a cost factor in there you didn’t expect, especially if there are multiple refinement rounds. The cost of getting the product delivered to your fulfillment center(s) can vary quite a bit. And in total, shipping to your backers is way expensive and many backers have been trained not to expect to have to pay much for it.

If a projectrunner has a good grip on all of that stuff, then backing for a physical goodie works plenty well; like I said above, physical games are still king. And with the higher pricepoints, your backing is a more significant step towards the project’s funding goal. But given all the potential gotchas, I will often back at a digital-only level, because the manufacture and fulfillment process and costs are much less fraught, especially for a first-timer. And as someone interested in the health of the project-runner, I’m very interested in producing the highest value for the lowest cost to them.

Pledge Managers


Pledge managers have really caught on, largely because Kickstarter continues to lag behind what pledge managers can do to provide robust tools for handling what goes on after a project funds and the campaign phase concludes.

I’ve personally only used Backerkit, but many other options abound. They have a few packages you can buy into (which have changed over the years), which essentially amount to: the bigger of a cut they get of any post-campaign money spent, the less of a percentage of your campaign’s take they’ll ask for as an up-front flat fee. Regardless, the cut they take is only a few percentage points of the campaign’s funding level, plus maybe a few percentage points of whatever you spend after the campaign in the pledge manager itself.

Patreon


Patreon warrants a specific note due to its subscription-style crowdfunding model, as opposed to Kickstarter’s fixed-length campaign model. That said, their fees aren’t that far off the norm, taking around 5% for the site plus whatever the payment processor costs were (sometimes baked into a somewhat larger cut, sometimes externalized in addition to the cut). What Patreon really brings to the mix is the potential for ongoing, semi-predictable (whether upon post/release, or on a monthly ongoing basis) income for the recipient. Ongoing income is really a different beast than “burst/event-based” income like Kickstarter, in terms of its effects for the recipient, but the net dollar amounts are usually quite small.

Itch.io


Itch has emerged recently, particularly in “indie” and creator-centric digital RPG sales, as a potentially interesting marketplace (I still find it difficult to use the site itself for discovery of games, preferring to visit itch when I’m directed to a specific publisher or creator’s branded sub-site, e.g., https://evilhat.itch.io/).

If I’m spending money on a PDF and want to be sure the most money makes it to the intended recipient as possible, itch is a great way to go, because itch lets each publisher set what percentage they get of sales (I believe there’s a minimum amount itch needs to get, but a publisher can always let them have more if there’s a solid reason for that).

In practice this means most publishers are getting a good 90% of sales money from itch, which is in nearly the same space as a direct sale via a Kickstarter or similar.

Beyond that I find that the site is fairly features-light, but as a fast and easy way for a creator to spin up a storefront for their digital wares, getting revenue nearly the same as spinning up their own with no added costs, itch is hard to beat…

DriveThruRPG


… but DriveThruRPG remains the big beast on the block in RPG PDF sales. And by big beast, I mean that they easily represent a good 80–90% of the market for gaming PDFs, if not more. The volume of sales you can do on DriveThru has trounced pretty much any other PDF sales venue (some of which have come and gone) that I’ve seen over the past 15 years.

DriveThru cements its position two big ways.

One is simply due to inertia and momentum: because they’re biggest, they’re good at staying biggest, because being the biggest means that most popular publishers and many others besides sell their stuff there. It’s about as close as you can get to a one-stop shop for gaming PDFs.

The other is the toolsets they offer. As a publisher you can also offer print-on-demand (POD) versions of your books (more about that below), and even POD cards and cardstock items like battlemaps (great for prototyping even if you don’t sell the items publicly). They’ve got some decent sales reporting and promotional tools too.

Both factors come together for their customers, because a) they have the large majority of all RPG publishers on the site, and b) all your past purchases go into a virtual bookshelf, allowing you to recover from, say, a drive failure without losing all your digital gamebooks for good, as well as allowing folks to just download books when they need them without much thought put towards local storage. (I still prefer local + cloud backup to the DriveThru bookshelf, but from listening to my own customers over the years there are plenty of folks who don’t.)

All of which adds up to DriveThru having quite a lock on the PDF segment of the market. Which is why they charge a lot more than, for example, Itch.

If a publisher agrees to be exclusive with DriveThru, listing PDF products nowhere else (I think there may be an exception for the publisher’s own website, if applicable), DriveThru gets a 30% cut. If it’s not exclusive, DriveThru gets a 35% cut. This can be blunted, slightly, if the publisher is good about providing a referral code in any links around the internet to their stuff on DriveThru; there’s a 5% kickback on “referred” purchases. But regardless, it’s a big cut.

In my opinion, you shouldn’t feel bad about this. If DriveThru’s tools are useful to you, it follows that it’s okay (even good) to pay them for developing and maintaining those tools as well as a site that’s available to you and able to push the bandwidth needed for all those downloads. The bigger a company is, the more robust the service offered, the higher the costs of just existing. It’s okay to pay both them and the publisher for the game you just bought — just don’t tell yourself that the publisher is getting more than 65–75% of what you’re spending.

Print on Demand at DriveThru (and elsewhere)


A quick note about print-on-demand stuff. When you’re buying POD, by and large you’re paying the folks manufacturing the physical product. The only way a publisher makes money on POD is through the mark-up on top of the (high, in a per-unit sense) manufacturing cost. So while POD can look like a direct sale, it’s really not.

On DriveThru, it’s only the mark-up that gets divvied up via the percentage agreement. So if I, a non-exclusive publisher, sold you a $20 POD item there that behind-the-scenes cost $10 to print a single unit, then the remaining $10 would be $6.50 to me and $3.50 to DriveThru. The POD printer would get $10 (plus what you paid for shipping) to go towards their actual costs of manufacture and getting the item shipped to you.

Distribution, the Funnel into Retail


Distribution is the term for the middle-men in game sales, situated between publishers and retailers. Their job is to provide a single source for the games of many publishers, so a retailer can place a single order to get most of the stuff they need from their store, rather than buying publisher-by-publisher, and saving on shipping fees.

Publishers sell their stuff to distributors for typically 40% of the cover price of a book. Distributors sell to retailers what they get from publishers at a price that’s between 50% and 60% of the cover price.

So, the distributors are making between 10–20% of the cover price, the retailer is making 40–50% of the cover price (less discounts offered to secure your purchase), and the publisher is making 40% of the cover price regardless of how discounted your purchase is. In fact, it’s largely the case that the publisher already made that 40% some time before you make your decision to buy their item from a retailer, the way things work.

It can be tempting to look at that and think, hell, why ever do anything other than buy direct? But a publisher is “buying” a lot of reach and, potentially, support with that 60% they’re not getting. For Evil Hat, a large majority of our income is from distribution sales, even if we’re only getting 40% of the cover price on each sale. And if we lost this sales channel (which, during COVID shutdowns, we nearly have), other sales sources (especially digital, which can continue to operate with little trouble) simply don’t make up for what we’d lose. Our stuff would be in front of fewer customers, and would sell less, which would lead to us making less stuff. Bit of a snowball there.

More to come on this piece of the puzzle in the next several sections.

Consolidators


I don’t have any personal experience with consolidators, but here’s the gist.

As a publisher selling to retailers, I take purchase orders from each distributor that wants to sell our stuff, make sure the folks handling our warehoused inventory for us (Alliance, as it happens) ship them what they ordered, and invoice them so we can get paid within a couple months (and chase them down when they don’t pay on time).

I don’t mind this work. Some publishers do.

For those publishers, a consolidator condenses the whole distro-retail pipeline to a single party (and cynically, to a single potential point of failure).

In essence, consolidators act as middle-men to the middle-men. Where distributors sell to individual retailers (so a publisher doesn’t have to make each of those connections and hope there’s enough interest to make a shipment worth it with each of them), consolidators sell to individual distributors, handle storing product and shipping it out to distributors as orders come in.

As I understand it, for this service consolidators generally charge about 10% of cover, so a publisher’s cut drops from 40% to 30% when using a consolidator. Those prices may have shifted around since I last learned of them, so if you’re a publisher reading this and you want this, do your research.

For my math, losing a quarter of my distribution revenue in order to not have to deal directly with each distributor is not good math. But each publisher’s capacity varies in flavor and magnitude, so that’s far from universal.

IPR (Indie Press Revolution)


IPR is a wonderful and weird hybrid. For its publisher clients, IPR is a distributor, a direct sales site, and a route for convention presence. They operate on a consignment basis, which is to say that publishers own the inventory that’s stored with them, and IPR pays when it sells one of those copies.

As a distributor and convention presence, IPR offers slightly better terms, paying publishers 44% of cover when they sell a game in either of those contexts. IPR retains 11%; their retailer clients buy the game at 55% of cover price.

As a direct-to-customer sales website, IPR pays publishers 80% of the list price for PDF sales, and 70% of cover price for physical sales. These percentages being as high as they are have made them a viable option for small publishers who don’t have the time or resources to commit to running and maintaining a website store of their own.

Outside of the numbers themselves, IPR is useful to small-scale indie publishers with physical products, because IPR is oriented on exactly those sorts of publishers, whereas a number of large distributors won’t have any interest in doing so. As a result, IPR is sometimes the only opportunity an indie has for getting their games onto gamestore shelves. Evil Hat started with IPR, and they’ve done right by us for over a decade.

(At the time of this writing, IPR also remains open and operational during the global quarantine. They’re located in the middle of a desert in Nevada; really isolated, and as a shipping company, designated essential by the state.)

So IPR getting a smallish chunk of your money (11–30% depending on the who, what, and where) as part of a purchase through them, whatever the context? Yeah, worth it. You’re supporting a business that’s truly valuable to a bunch of publishers at the smaller end of things.

Friendly Local Game Stores (Brick & Mortar Retailers)


As noted above, game stores are typically buying items from distributors at between 50% and 60% of the cover price. These sorts of seemingly big discounts are necessary for retailers to do business.

The margin retailers can make as profit on a sale goes towards to be able to pay rents and salaries, and to take the occasional risk on new games, re-buy games that do sell, and offer modest-sized discounts to their customers.

That margin also shores up those gambles that don’t pay off. By the time a game is on a shelf at a book-store, the publisher who produced that game has already been paid for it. But if a retailer buys a copy of a game and it doesn’t sell, they have to rely on the sale of other items to absorb that sunk cost. If they buy a copy of a game and it does sell, that’s also where they get the money to buy it again.

As a publisher, initial orders are great, but repeat orders are superb. And remember, for Evil Hat, distribution (which relies on retailers to buy publishers’ stuff) is the majority of our company’s income.

So, yeah. Buying a game from a retailer is mainly about supporting that retailer; they’re getting about half of the money you’ve spent for themselves, while the other half goes towards covering the expense they’ve already paid to have what you’re buying in stock. A healthy, supported retailer in turn extends the reach of publishers to customers who might not otherwise know about them, and that’s what drives future and ongoing sales, keeping many a game company afloat.

So especially in times of economic crisis, support your local game store! Your money goes towards preventing the collapse of the ecosystem that allows our hobby to thrive.

Amazon (and other online-only retailers, to an extent)


Amazon and other online-only deep discounters leverage their lower-than-a-physical-store’s running costs by selling games (and other things) at discounts that put the sale price much closer to what they paid for it, themselves. This can and often does undermine brick and mortar retailers, who can’t afford to give up that much margin if they want to survive. They can also afford to do things which would, in terms of subsidized expense, kill smaller businesses (and they often end up doing exactly that), and they can also afford to treat their workers poorly.

But hey, free shipping, am I right?

Evil Hat’s stuff on Amazon gets there via a single Amazon-focused distributor called Flat River. Flat River buys our stuff at the distribution rate, like all our other distributor clients do. They just sell to a different kind of retailer.

And, really, I can’t ignore the revenue benefits of getting our stuff onto Amazon: fairly consistently, Flat River is our largest single source of revenue each year, beating out the largest national games distributor, Alliance by at least a little. Add up all the distributors selling to brick & mortar retailers, and the brick & mortars are in aggregate still doing better for us overall.

When we added Amazon as a customer of ours through Flat River, our revenue from the other distributors didn’t drop that much at all. That’s a strong indicator that Amazon is also reaching customers that won’t buy from a local game store, or can’t because there simply isn’t one near at all, or at least one that carries what they’re actually interested in. Which… makes them even less ignorable.

So while their discounts and free shipping inject a certain amount of poison into the overall picture of gaming retail, Amazon is also getting games where they can’t otherwise go, and serving customers who might not be able to buy games otherwise, for whatever reason.

Still, in terms of putting the most good into the world with your dollars, they should be the last option you consider. Money that’s needed to maintain the health of the hobby’s industry (see all of the above) ends up staying in your pocket instead.

And, hey, if that’s the way you need to go, I get it. Being able to pay more than you strictly have to for games is a privilege that many simply don’t have.

4000 Words And You Still Haven’t Given Me a Quick Reference, Fred


Well, that’s true. Thing is, I really, really like to make sure that when I’m sharing facts that I’m also covering the context in which those facts operate. So, I made you read or at least scroll through all of that valuable context crap first. Sorry not sorry.

Still, here’s your quick reference.

I’m buyingFromSo the publisher gets
PDF or Physical The Publisher 95-97%
PDF or Physical Kickstarter 90-92%
PDF or Physical A Pledge Manager 90-92%
PDF or Physical Patreon 90-92%
PDF Publisher’s itch.io 90%
PDF DriveThruRPG 65-70%
Print on Demand DriveThruRPG 65-70% of what remains after deducting the cost of manufacture.
PDF IPR Website 80%
Physical IPR Website 70%
Physical IPR at a game convention 44%, plus making sure the publisher’s stuff continues to show up at conventions
Physical Local game store or online retailer 40% (or 44% if supplied by IPR) or 30% if sold into distribution through a consolidator; supported stores help in other ways long term.
Physical Amazon 40% in the least best way, but hey, free shipping!

Image/Photo

http://www.deadlyfredly.com/2020/04/where-does-your-money-go-when-you-buy-a-game/
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