This is a repost of a comment I made on a G+ post I did about some interesting factoids about the recently concluded Fate More Part 1 Kickstarter. Someone asked how print sales compared to PDF sales, and that sent me off to dig into my own perspective on the value of print products vs digital products as revenue generators. It went a bit long, which was practically guaranteed once I said I was gonna try to keep it brief. Go figure.
At any rate, here’s the comment!
Okay! This is a big topic, but I’ll try to keep it brief.
First, the general case.
I usually price PDFs at about half of the cover price of a book. The major market for PDFs is DriveThruRPG and they take a 35% cut of nonexclusive sales (which is fat, but given that they probably own 90% of the PDF market, that’s the price of admission to the fertile lands), so on a PDF sale you can assert you most commonly take in 65% of the price of sale on the PDF. If we say the cover price, is C, and the PDF is priced at half of C, then in the most common scenario your PDF revenue for a sale is 0.325C.
The major market for print books is distribution, and they buy books at 40% of cover price (60% off). You’re usually also paying some or all of the shipping bill to get items to distro in the first place, and/or storage or flooring fees for keeping your product at that distributor. So if you start at 0.4C for a book sold in distro, and then there’s some stuff nibbling away at that number before you actually get to receive money for it, the adjusted number probably looks similar to that 0.325C from your PDF sale.
So in general my perspective is that 0.325C is the monetary value of your content regardless of the format you publish & sell it in. For example, a $20 physical book that also sells as a $10 PDF provides about $6.50 in monetary value to the publisher per sale, whether the sale made is a PDF on DriveThru or a book sold to distribution.
(Yes, there’s the cost of manufacturing your books, but I’m setting that aside for now. The physical book revenue stream doesn’t happen at all if you don’t make physical books, so there’s a “gotta spend money to make money” thing going on there. There’s also the shared cost of developing your content and getting it to the point where it could be printed. Those parts are a factor in the big picture but it’s not something I can dig into without making this thing considerably longer; those live over in expenses land, and this comment is more about what’s happening here in revenue land.)
So, this general case starts to get a little weird when you start to get into specific cases that don’t fit the general mold, especially where a kickstarter or your own webstore is concerned. This is the land of direct sales, where you’re able to get way more revenue from an individual sale than you would in the general case’s sales scenarios. Sell a $20 book, you get $20 (minus payment processing fees, but that’s small percent, 5% tops). Sell a $10 PDF, you get $10 (same comment).
How’s that compare to the nearly-equivalent print vs. PDF revenue of the general case? Check it:
If you sell a book with a cover price of C, you get C. If you sell a PDF with a sale price of 0.5C, you get 0.5C.
So, a print sale under this pricing strategy is worth twice a PDF sale.
Both of these are considerably higher than the 0.325C standard revenue value, so it behooves the publisher to try to create and capture direct sales revenue when possible, so long as it doesn’t undermine business relationships in the process. (So don’t heavily discount your goddamn physical games for direct sales if you’re planning on trying to convince retailers to get them on their shelves. 10% off now and again, sure. 20%, pushing it. More than that, you really don’t care about your retailer partners.)
That 0.5C direct sale PDF is a nice boost over 0.325C, but not quite double. That 1.0C direct sale book is a huge boost over 0.325C, over triple. Direct sales of physical games areawesome. They’re worth a ton to a publisher.
Kickstarters can have some pretty strange or unusual pricing constructions. Ours tend to get weird and experimental and discounted on the digital component (because you’re not really undermining any retailer relationship with the PDF format), while our physical books tend to remain at cover price (to help support and preserve the value of the physical item and therefore retailers as well).
For Fate More, our $10 digital tier had at least 4 books represented there. One could argue it’s actually 6 books because of the two compilations, but those contain content from PDFs that are all already available pay what you want (including $0) so I’m leaving those out. Similarly one could argue that it’s only 2 books because 2 of them were also digital rewards for people who backed Fate Core in 2013. But that’s not necessarily everyone, so I’m gonna average all those numbers and call it 4 books. That means a single product sold in the $10 digital tier had a sale value of $2.50 ($10 divided by 4).
Our entry level single $20 physical book tier added $10 shipping for the domestic scenario; I’m confident suggesting that that $10 covers the shipping nicely. As you add more books, in the domestic scenario, that $10 ship fee doesn’t increase, even tho the ship cost does scale up. I’m also willing to suggest that the ship cost doesn’t increase anywhere near as rapidly as the aggregate full cover prices of additional books do, so the increased ship cost gets spread around nicely in multi-book situations. So for this calculation I think we can look just at the $20 portion of the pledge, the amount actually being paid for the book.
That $20 single book, then, compares to a $2.50 single pdf. Even if you assert the $10 tier really only covered 2 new PDFs for most $10 backers, that’s a comparison of $20 to $5, then, the most generous scenario.
So for a given title, a physical-shipment backer on the Fate More KS represents between 4x and 8x the title-specific revenue of a PDF-oriented backer. (And look at that, the PDF backers only represented an eighth of the revenue. Granted, a sizable chunk of the 7/8ths that remain also contains shipping fees, but even so the ratio is steep.)
Regardless, all of this revenue in the KS is focused on manufacturing the physical books and shipping them to folks who ordered them. But on the other side of doing that, I’m left with a big pile of additional inventory that I can sell into distribution and other non-KS direct and indirect sale channels as a pure profit source. A result made largely possible, financially speaking, by folks who bought physical books.
But to go back to the general case again — where the majority of the action happens, at least at the scale Evil Hat currently operates — I said above that the revenue generated sale by sale is about on par, right? It’s easy to end up thinking that means that PDFs generate the same revenue as print overall. But that’s not the case, because print’s volume sales, on reasonably successful products, tend to outstrip PDF.
Here are a few examples to go with that assertion.
Atomic Robo RPG
PDF sales to date via DriveThruRPG – 973 – representing about $8.4k in post-cut revenue.
Print sales via distribution – 2615 – representing about $36.5k in post-cut revenue.
Print sales volume is about 2.6x PDF’s; print sales revenue is about 4x PDF’s (but there are some hidden costs as mentioned above that knock that down a fair bit).
Monster of the Week Revised
PDF – 770 – ~$6k
Distro – 1048 – ~$10.5k
Volume ~1.4x PDF, Revenue ~1.75x PDF
PDF – 593 – $7.7k
Distro – 2456 – $49k
Volume ~4x PDF, Revenue ~6x PDF
So obviously there’s a range of possibilities; every product has its own specific, multi-factor reasons for performing in its own way; there will always be occasional exceptions, which do what exceptions do, they prove the rule. The trend I see is that PDF remains the minority share in volume, so even if each format provides roughly the same revenue value to the publisher, the volume differential means that physical products remain the majority driver of revenue generation.
End of the day, no matter how excited and committed people are to consuming content in PDF, it’s print sales that provide the vital majority share of revenue generation. It’s usually the sale of physical goods that primarily funds the development of content, as well as paying for the additional expenses of manufacturing those physical goods. PDF sales put a dent in it, to be sure, but just a dent.