So, I was tooling around for commentary and ran across this post at Lamentations of the Flame Princess. I’m gonna quote a big chunk of it here, then get into some nitty gritties:
Tweets from Evil Hat‘s Fred Hicks indicate decent chances that they will hit 500 pre-orders each (on a book that’s not shipping for another 2-3 months) today.
That’s $45,000 grossed in two days.
He also said, “If those numbers hit 1000 each in direct-sales preorders, the print run (5000 copies each) and nearly all production costs will be covered.”
$90,000 gross to cover print and production costs. That’s one hell of an investment. Evil Hat’s not even considered one of the “large” RPG companies, is it? I mean, before this month.
So, yeah. It’s one hell of an investment. But how does it break down exactly?
First off, consider the form factor we’re talking about here. Each book is full color, hardcover, full bleeds (the ink goes all the way to the edge of the page). The first is ~400 pages, and the second is ~270 pages. Hefty little beasties. By getting those printed domestically, I am trading a little higher unit cost for more immediate shipping times (no customs, no slow boat from China) and a greater likelihood my print partner will be regulated in ways I find attractive (environmental regulations, worker protections), as well as the communal advantage of putting money from my company into the domestic US economy, which needs all the help it can get.
The two books at 5,000 copies each (total of 10k units) price out at a total that’s a few thousand dollars over $60,000 to print. That’s over 2/3rds of the $90,000 gross that was mentioned in the quoted thing above. Yes, I could have knocked that figure down a bit, but I’d be looking at an extra 2-3 months of delivery time, easy, based on what I saw come about with the send-the-files-to-getting-the-books timeline with other overseas-printed projects I’ve worked on. I like the choice I made there and I feel good about it.
The price point on each book is $49.99 for the big one (Your Story) and $39.99 for the … uh, less big one (Our World). This cover price translates into a flat fee per sale based on a percentage of the cover price that goes to Jim each time one of the books sell: it’s the royalty stream. No, I’m not telling you what the percentage amount is. With every license you’ll encounter a different structure.
So beyond whatever other fees are involved in a book sale, the royalty percentage comes out of the total (and in this case is not itself reduced by whatever discount I had to sell the book at). In the case of an Evil Hat webstore sale, consider transactional and handling fees to take 5-10% off the top. In the case of the preorder deal, shipping is free in the USA and mildly subsidized (about $6-10 per pair sold) for international customers. Consider this then to amount to us making about 90% of cover on the usual web-store sale (before royalties) and 80% for free or subsidized shipping. (Once we start selling through IPR, direct sales will get us 70% of cover before royalties come out; selling into retail through IPR or distribution will put it roughly between 40 and 44% with IPR at the high end.)
These cuts amount to the costs that scale on a per item sold basis. I don’t pay them until the sale is made, but they come out of our theoretical $90,000 gross when we’re talking about 1000 copies of each book sold. What’s left out of that $90,000 (minus 60-odd thousand for the printing and the royalty percentage and transactional fees) are the flat, usually up front costs. Shipping could play into that (though I tend to view it as a scaling cost factor and lump it with the above).
From there, I pay for art, editing, writing. I would pay for layout, except I’m the layout guy and I own half the company so that’s sweat equity territory. A lot of what’s left of that cost is the art, in fact, and the number would have been higher if I’d had to individually pay for every piece in the final product — but I got a big break when the guys publishing the Dresden Files comic book gave me permission to use art from that source. (Word to the wise publisher who wants to get into licensing: think what visual assets might come along for the ride with your license; comic books and TV shows might make the most sense from a budgetary standpoint.)
The rest after an up-front licensing fee paid to Jim went to my text oriented team. And to be honest, with little exception, they’ve been underpaid. Now, everyone gets underpaid in the game industry. No job in the hobby industry gets done without a little bit of “I’m paid in loving what I do”, whether that’s expressed explicitly (as it was with much of my team) or implicitly (by the rates and the paychecks simply being what they are when they’re offered). Sweat equity happens. All that stuff. I do plan to pay out more if we smash through some of the bigger financial goalposts beyond simply “break even on costs”, and I’ve done everything I could to do right by the Evil Hat family throughout the process. But this project was as much about belief and fandom as commerce, and many members of the team came to me and said “How can I help?” Every game you see on every shelf is to some extent a labor of love for someone, somewhere in the process. With the Dresden File RPG, it’s carpeted in wall to wall love. Still, if you’re doing the approximated math, you can see I still paid out a solid chunk’a change in all of this to the writing and editing team, so it’s not for nothin’.
(On all of the above where I’ve been vague, I can’t get into the specific figures — percentages, amount paid to whom and so forth — because that information isn’t just mine to share.)
Math heads will also remember that the biggest chunk of change Evil Hat gets on a sale is one made direct through its web store. That said I absolutely do not begrudge sales that happen to retailers through middle-men operations, whether it’s IPR or Alliance or Esdevium or DriveThruRPG. Those services get us more customers and they allow the customers to support more than just the publisher with their purchasing dollars. Which is why I’ve been enthusiastic about signing up retail stores to partner with us to offer instant PDF access for people who preorder in-store. A retailer is an advertising program that buys your products from you — at a discount, sure, but they reach people you won’t necessarily reach yourself, and their customers often don’t want to feel like they’re forced to choose between supporting a local business and a favorite publisher. Letting them choose both with a clear conscience is a good service to them and is why I offer it.
But to stick to the math of it, the figures I’ve given for breaking even are based on number crunches I’ve done built solely around our direct, webstore sales.
There are really three or four tiers at which I can evaluate breaking even on costs.
- At the direct sales tier, 90% of cover, Your Story breaks even around 1,000 copies, and Our World breaks even around 900.
- At the direct sales through IPR tier, 70% of cover, YS is about 1,300 copies, OW is about 1,200
- At the sales to retail high end, 44% of cover, YS is 2,400, OW is 2,100
- At the low retail end, let’s say 37% of cover based on a deep distro cut of 40% and free shipping to that distributor, YS is 3,000, OW is 2,700
But basically in the “worst case” scenarios I could expect to encounter on this product, if I’ve sold through (and been paid for) half of each print run, all costs are covered. I plan for the worst case, seasoned with a bit of optimism that asserts I’ll sell at least the quantity of this “worst” case.
But in terms of targets for my webstore orders — my best case — I’m looking more at numbers somewhere between the first and second bullet. (Remember, about 10% of a preordered pair goes towards covering that free or subsidized shipping cost.) So in truth we’ll hit our break even point through our webstore sales alone if we go a little bit beyond 1,000 preorders of each.
But 1,000 was such a nice round number that it’s what I tweeted as our goal.