PDF, Print, Pricing

Today I want to talk about PDF pricing, after seeing my friend Matt react poorly to the pricing of the recently released Dr. Who RPG PDF. (Don’t take this post as an attempt to jump on Cubicle 7′s case. As I’ve said before, I like the guys at Cubicle 7, and there are things I like about another game of theirs – Starblazer Adventures — that I’ve talked about before on Deadly Fredly. Heck, I was almost a part of the Dr. Who RPG project, and helped with their initial pitch to the BBC, but ducked out early on due to other time demands. This is a convenient and recent example, is all.)

PDF pricing with this product in particular is an interestingly sticky one. The physical product is going to manifest as a boxed set, so the PDF can’t bring along any physical components for the ride (though the only hint as to what those comprise is listed as “tokens” on the PDF listing). So things are already a little off the usual track here. Based on the markdown indicated on DriveThru, I’d surmise that the boxed set comes in at $60, and the PDF is showing as $35. That’s about 58% of the physical price for the PDF. Looking at Cubicle 7′s other “straight up gaming book” products, since DWRPG is their only boxed set so far, it looks like they trend towards pricing their PDFs as 70% of the cover price, so one could surmise that the math here is $60 = $50 of books (there are three in the box looks like) + $10 components (the box itself, the tokens), and thus 70% of $50 = $35.

For Matt, $35 is an abnormally high price to pay for a PDF, at least in this case. It’s a price he is deciding not to pay, at least at this time. I think Matt’s perceptions here match my own as a consumer, so I want to dig into that, and then talk about how my perceptions as a consumer affect the pricing decisions I make as a publisher.

This first graph is strictly Fred-as-consumer. Many PDFs out there are an alternative version of a product that also comes in physical form. I definitely pay attention to what the physical form of the product costs, and how that relates to the PDF. Ideally, I want to get the PDF and the physical product together at no or little mark-up over the cost of the physical product, but you already know that. But if I’m making the choice between physical and PDF (because the publisher hasn’t given me that high value bundled third option), I want the pricing to feel right to me. And try as I might, the 70%-of-physical pricing approach that several companies use never does unless they’ve managed to fold in some kind of ultrasexy must-haveness to the digital version.

I’m more likely to look for — and even expect, at this point, the 50% of cover approach. This is pretty common among the smaller end of the small press publishers, where Evil Hat and many others ala IPR hang. Unsurprisingly, this is exactly where Matt’s head is at, too. I never expect lower pricing than that — but when I find it, I sit up and take notice. Something unusual’s happening there, whether it’s as simple as a sale price or something more esoteric.

Cubicle 7 (again, great guys with great products) is not alone in the 70% approach. In fact, it’s something of a standard with what I think of as the upper echelon, bigger second tier publishers in the hobby. Consider that White Wolf does this (example: Geist, a PDF that’s $24.49 on a book that’s $34.99), and I’m pretty sure I remember that was the space that Wizards of the Coast put their stuff in when doing pricing. That brings us to the next graph, which doesn’t move the pointers around at all, just changes the labels:

Exceptions will always abound when someone (me) tries to make broad generalizations, so for the moment just look at this graphic as talking about trends I’ve picked up on rather than case by case specifics.

Because I’m coming to the publishing thing as a consumer first, I try to put prices on Evil Hat’s games that would appeal to me, that would result in a sale rather than a “hmm, I’ll think about it”. (This is true in my non-PDF considerations as well — there’s a reason Don’t Rest Your Head in book form costs $15 when many similarly-sized peers click in at $20.) I’ve tried my best to examine how I react to a price and unpack it for others to digest, so here goes.

A close to 50% PDF price feels like it makes sense, and it potently ties into the human tendency to look for easy shorthands. 50% is “half of” — that’s a dead simple concept. What’s 70%, though, in simple-speak, the language of the consumer’s gut? My answer is: “More than 2/3rds”, and the lizard brain wants to soak up that heat and just conclude “well, then it’s not much different than full price!” Patently false once the logic-monkey part of the brain kicks in, but the lizard brain spends all its time sitting on a heat rock, so it’s extra zippy and always gets to the juicy first impression ahead of the pack. “Half” is unambiguous, and when you’re talking about getting nothing physical for your dollars compared to something ambiguous, it feels deeply fair. “More than half” fails that gut feeling, and “less than half” makes the lizard do a little jig. It’s the tipping point as far as my instincts are concerned.

But for publishers who are currently at the 70% standard, that 50% can really look like crap. A 50% pricepoint vs. a 70% pricepoint represents a nearly 30% drop in revenue per sale. Turn that around and it suggests you’d need to pick up an additional sale at 50% for every 3 sales you’re already getting at 70%. That’s freaking hard, and I don’t honestly know if it’d happen if a company suddenly turned around and dropped all its prices down to the 50% mark. At the end of the day, a company that prices things at 70% is going to continue to price things there so long as they have customers who are willing to buy at that level. Sales you make as a publisher are easy to monitor. Sales you don’t make are nearly impossible to track. The incentive to change, then, is awfully low.

It’s also worth thinking about the realities that these bigger companies face versus the small guy. Whether we’re talking physical or virtual products, nearly everyone in game publishing is doing some amount of direct sales to customers. But with the physical products, the bigger guys are nearly always going through some sort of distribution service as well in order to make it out into the retail space. Those publishers are probably pulling in a gross of around 40% or less of the cover price of those physical books. Out of that 40% they need to cover the cost of production (talent, content, printing, shipping, overhead) as well as make a small profit in order to help their business continue to run and maybe even grow. Operating in this reality trains the mind to set the pricepoint on something as high as the market can reasonably bear so that the trickle of cash that makes it back to the publisher is enough to float the boat (assuming everyone involved down the line pays their damn bills).

So suppose that’s what you’ve been living with for a while, and now it comes time to price your PDFs. Your gut’s going to tell you that you should price things as high as the market can reasonably bear, and your expectations will be that a hefty chunk will go to operations that aren’t yours along the way. And guess what? You’re not exactly wrong. If you’re selling PDFs you absolutely need to be on OneBookshelf (RPGNow/DriveThruRPG); they easily own 80+% of the RPG PDF market. Even if you go exclusive with OBS for selling your PDFs you’re going to be giving them a 30% cut; it’s 35% to get nonexclusive sales there. PDFs are also a value play for many consumers, so you want to plan for the occasional sale — those value hunters are going to turn into impulse buyers when you drop the price for a limited time every few months. And you’re going to want to aim to get roughly the same cash you would from a print sale — or better than that, even, since a print sale also carries intrinsic value by reducing the amount of taxable inventory you have. 70% of the cover price, times the 60-70% of actual sales revenue you’re pulling in from OBS, gets you to 42-49%, which is within a few percentage points of the 40% you’d be making on that distribution print sale.

The rub, then, is that for all intents and purposes the 40% you’re getting of the print version’s cover price in a distribution print sale is the clearest expression you have as a publisher of what your product’s actual content is intrinsically worth. So if the 70% priced PDF sold through One Bookshelf gets you about the same amount of money, that makes “lizard brain” sense: whatever the form the product takes, you’re ending up paid a very similar amount for your gut-understood value of the thing.

Changing the middle-man variables is where this all breaks down, and unsurprisingly that’s where a lot of the guerilla publishing approaches of the smaller press guys show their effect. If you’re not in distribution, doing most of your sales direct to consumers, you’re getting a lot more money when you make a sale. The sales Evil Hat makes through the Evil Hat webstore leave us with close to 90% of the money paid. Selling PDFs through Lulu or IPR still leave us getting 80% of what’s paid; selling physical products leaves us with more like 70% on direct sales. I think when stuff like that happens for most of your sales (however meager), it breaks the “all the money I’m getting is for the intrinsic value of the content” assumption I was talking about above. If I’m getting 70 or 90% of the cover price on a print version of Spirit of the Century (cover price $30), I’m not going to find myself thinking, hey, I should be getting a net of $21 to $27 when I sell the PDF (i.e., a PDF price ranging from $27 to $30), because those numbers just don’t look right next to each other. So at that point I’m freed up to go and look at my PDF price with my consumer brain (at least that’s my current theory). And as I’ve already said, my inner consumer likes the simple concept of “half”, generalizing all other stuff outside of the “half” range as “holy crap cheap!” or “holy crap just crap!”

That’s not to say the 70% PDF pricepoint doesn’t continue to make sense for people who are doing both solid direct sales and lots of distribution/middle-man sales. The reality is that, as a business, you have to make decisions that maintain your cash influx at a certain minimum level, and when that’s a consideration you have to plan for the smallest possible amount of revenue gained from each individual sale, and you have to make sure that that smallest amount is at or above the minimum. But knowing that doesn’t keep me from being sad (from where I stand practically as a consumer and from where I stand philosophically as a publisher) when I see that pricing model.

I’m not sure where I’m going with this analysis other than to lay it out there and see what people think. When you’re firmly entrenched in one of the perspectives (consumer or publisher), it’s really difficult to remember/understand/sympathize/agree-with the price perspective of the other. At the end of the day, both perspectives make sense to me, but I’m more interested — as Evil Hat — in serving my consumer perspective first. Because I’m not just making sales to Evil Hat’s fans, I’m building relationships with them, and a fan is far more valuable to me in the long term than a few extra bucks. Fans watch your back and write your name across the sky. Customers just grab the bag and walk back out the door.

I’m also fascinated by experimental pricing stuff that completely nukes the percentage-ratio model. Look at John Wick’s stuff; in PDF form, he advances the simple notion that my games are worth five bucks, whether you’re talking about the multi-hundred page Houses of the Blooded or the dozen-or-so page Wilderness of Mirrors. And honestly, I think he’s on to something there. I’d happily spend $5 on each of those because the ideas inside both are pretty hot. Sure, I’m more likely to have a holy crap! reaction to the $5 price on the Houses PDF due to the sheer volume of stuff I get, but I’m not gonna complain about Wilderness either. So that’s something to think about, too.