Aug 182016

I posted this to Google+ a while back, but it strikes me it’s probably best served as a blog post. So here you go!

Here’s my position: Pricing a PDF at 50% of MSRP means the publisher, in the most common sales contexts (DriveThru for PDF, distribution for physical items), gets about the same payout regardless of format.

Therefore — for me at least — that sort of pricing strategy means that I’m consistently selling the content at about the same price, and everything beyond the content that the customer (and middleman) pays for is packaging for that content.

So if that’s the case, what’s the market value of the content on a product? About 1/3rd of its physical format’s MSRP. That means that about a third of a PDF’s price (assuming 50% of physical MSRP as its price point) is for the format & hassles & sales cost of providing that content in PDF. Meanwhile, with a physical item, about 2/3rds of its price is about the packaging, the plastic, ink, and paper that makes it something you can hold in your hand and not have to plug in a separately purchased electronic device to enjoy.

If you’re curious as to how I got to that approximate assumption, here’s the math, cribbed from a comment I recently wrote (which is a repetition of something I’ve written months before, I’m pretty sure).

Say you have a product with physical copy priced at M, and your PDF is therefore priced at .5M.

On DriveThru, that .5M is faced with a 35% cut (5% less if you’re exclusive); you’re gonna get 65% of it (tho you can increase that a little if you make a regular habit of using your referral code every time you link to your stuff there). .65 * .5M = 0.325M.

In distribution, you sell your physical book with an MSRP of M to the distributors at .4M (60% discount) most times. You’re often in a setup where you’re also paying some of the costs of getting the product to the distributors, as “must order a minimum of $X in order to get free shipping” deals are common in such transactions. So .4M is your cap. It’s not too much of a stretch to imagine that transactional and transportational costs could reduce that from .4M to something close to 0.325M.

So, conversationally, a good general estimation is that any established publisher that’s in reasonably wide game retail distribution and sells their PDFs on the premiere PDF retailer for games at 50% of the MSRP of the product is, regardless of the format, bringing in gross revenues of about 1/3rd of the MSRP of the physical book.

This should also illustrate why direct sales by the publisher to the customer, without a digital or physical middle-man taking a cut, are still attractive and important.

A PDF sold direct to a customer at 0.5M is going to bring nearly 0.5M to that publisher, which is about a 50% increase in unit sale revenue vs. DriveThru.

And physical items remain the king here: if you sell an item direct to a customer at M, it’s going to bring nearly M to that publisher. Even factoring in unit manufacture costs (which if managed smartly only come to 0.2M at most) you’re in great shape as a publisher making that sale, representing a 100% or greater increase to unit sales revenue.

Kickstarter is chock full of direct sales, which means that publishers get a lot more $ per sale than they normally would, which means they can cover a lot more of their costs and shore up risk factors much better. It just costs the publisher about 0.1M to do that, which still leaves a lot of M for the pub.

Even reward tiers that sell direct to retailers at 0.5M do better for the publisher, leaving him with about 0.45M per sale, which is at least 10-12% better than selling to that retailer through distribution.


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