Nov 152011
 

David Berg writes, over on the Evil Hat 2011 Q3 Sales Numbers post:

I have a bunch of distro questions!  If this isn’t the place for them, no prob, I can revisit some other time.

Basically, I’m wondering what those 1095 Q3 sales of DFRPG:YS look like, the chain of ownership from Evil Hat to the customer.  That’s 77% of the total 1427, which surprises me!

My (probably incorrect) understanding looks like this:
1) Alliance gets Dresden books from Evil hat.
2) Alliance offers Dresden books to American hobby stores.  The number of hobby stores is small and dwindling.  The number of those that carry RPGs is smaller still.  The number that carry anything other than D&D is vastly smaller still.
3) Those few retailers pay Alliance for Dresden.  Alliance then takes their cut and pays Evil Hat.
4) If the retailers can’t sell Dresden, they send it back and ask for their money back.  So Evil Hat hasn’t really sold a book until a customer’s taken it home with them.

1095 in 3 months seems like a staggeringly large number to me, based on that process.  Am I simply underestimating the number of people who go into hobby stores and buy a spiffy new RPG they’ve never heard of?  (I mean, if they’d heard of it, they probably would have bought it via another channel, right?)  Am I underestimating the overseas market?

Up front, I should say that the Dresden Files RPG books don’t necessarily behave like any other product in our catalog. That’s the strength of the license at work there. DF probably makes up a good 80-90% of our revenue — which can be a little nervewracking in the long term. Part of why I’ve been using this year and will be using the next couple to try to expand the variety of games that Evil Hat produces.

Anyway, to get into your question, the good thing here is that there’s plenty of history to peruse on this blog, so to get our context straight, let’s first figure out how that ‘77%’ on DFRPG:YS has been trending over time:

Quarter – Total Sales – Distro Sales – % distro
Q3 2011 – 1427 – 1095 – 77%
Q2 2011 – 1099 – 819 – 75%
Q1 2011 – 1346 – 967 – 72%
Q4 2010 – 1373 – 1004 – 73%
Q3 2010 – 2531 – 1776 – 70%
Q2 2010 – 4545 – 2741 – 60%

Now, I think if you broke down the month-by-month of the book’s first quarter, you’d see that Evil Hat and distribution were going about neck and neck at the start. We have very solid reach and leveraged it to give us a strong direct sales preorder (which trapped a BUNCH more per-sale cash for us, a real boon), but over the long haul, that reach only goes so far. So while distro started at a 50/50 kind of split with us, they’ve trended upwards since. The reason for this is simple. Or, perhaps I should say, the reason for this is “simple”. The service that distribution is offering to retailers is a simplification of product acquisition: one stop shop, many publishers. It’s a pain, and a lot of time investment, for a retail store to contact and buy from each individual publisher, so most simply don’t. They form a favored relationship with one to three distributors, and they’re done. If your product isn’t there, there’s a decent chance they won’t have your product on their shelves.

Once the spike on DFRPG:YS sales settled down, we started averaging between 300 and 400 a month, with 3/4ths-or-so of that being due to distribution. (Note: The ‘total sales’ numbers on the above fold in our PDF sales numbers as well, so if we limited the data to strictly only physical books, distribution’s percentage would be even higher.) We might have captured some of those sales if we’d stayed out of distribution, but I’m pretty certain we wouldn’t have captured all of them. It’s likely, given the interest in the game, that distribution has brought us enough additional sales to accommodate for any “loss” of per-sale revenue due to the steeper discounts that product is sold into distro. It’s been a good partnership.

Now, to get into your (in fact, semi-correct, semi-incorrect) understanding of the process:

What you’re describing is a situation where a service holds the stock, but does not own the stock, and sells it on behalf of Evil Hat, providing revenue to Evil Hat only when that sale (to a retailer) occurs. That’s not how most distribution works, though (more on that in a moment). That’s consignment, which is essentially what IPR does (not counted in my distro tallies). IPR sells stock on behalf of publishers both to retailers and direct to customers, so they’re sort of a half-distributor — as far as the retailer client is concerned, they are a distributor, because they distribute products they have not themselves created to retailers. The consignment thing is what makes IPR a little different.

What most distributors do is buy the products from the publisher, at a steep discount (often just 40-44% of the cover price). At that point, the distributor owns the product and assumes the risk. They’re responsible for then turning those units around and selling them to retailers. Since most of Evil Hat’s distributor clients are placing reorders at least once per quarter, we can surmise that all the books sold to distribution in prior quarters have at least been sold to retailers. Hopefully, those retailers have then successfully sold those books to their customers, but that’s nearly impossible to get visibility into. But, to get to the heart of your question, yeah: there’s enough interest in the DFRPG by enough retailers out there to have sustained such numbers as these for over a year.

Now — to complicate this a bit, along the way, Alliance made me an offer to take over as Evil Hat’s fulfillment service. That’s a phrase that simply means “act as shipper for”. They also are doing flooring, which means they’re warehousing our stuff for a small monthly fee (which gets reduced a little if our stuff remains active at a certain level). Because they’re doing this, they don’t need to purchase our stuff in advance in order to have it available when a retailer places an order. So this has essentially moved Alliance into the same ownership-sequence space as IPR: consignment (matching the 1-2-3 chain of ownership you theorized was applicable for all other distributors, but isn’t). So the sales numbers I get from them each month are based on stuff they’ve actually sold. Now, for business partnership reasons I don’t want to put a specific number on what Alliance sold, but I can tell you that they account for over half of Q3’s distribution tally, with Esdevium (a UK-based distributor) and ACD (Alliance’s top domestic competitor) vying for the second place spot.

Where your theorized sequence breaks down is “4) If the retailers can’t sell Dresden, they send it back and ask for their money back.  So Evil Hat hasn’t really sold a book until a customer’s taken it home with them.” That situation only exists if the publisher offers returnability — basically a promise that if a book isn’t sold, it can be sent back or destroyed and the seller can get a refund.

If you think about it a bit, returnability sounds great to a middle man — it essentially says that they face no risk for buying the product and putting it on their shelves. Which is dandy for them, but poison for a publisher (and in fact has sunk publishers of various stripe over the years, especially those that sold into big chain bookstores) because it’s utterly unpredictable, and it means that you can’t trust that the money you’ve been paid is money you’ll get to keep. But money spends — so the publisher spends some of it, and hopes that they won’t end up with a negative balance when the returns come in. Worse, when publishers offered returnability with a time limit (say, 180 days), they’d see a scenario where buyers would buy a bunch of books, return them on the last day or so of the time period, and then rebuy, essentially rendering the time limit moot and the cash situation continually in question. (And since most buyers don’t have to pay right away — they usually defer payment by 30 or 60 days — that wasn’t a momentary dip in cash on hand for the publisher, it was a canyon.)

I know some publishers still offer this, but I don’t and won’t, and that’s going to limit what distributors and retailers will buy and sell to an extent. But that’s fine by me. To be perfectly frank, I don’t want them buying books they don’t have confidence they can sell, because the point here is to get them to the end consumer — the guy or gal who’ll actually take the product home and put it to use.

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Nov 092011
 

Today’s Dear Deadly comes to us from Matt, who had a number of questions, but one in particular that I thought I might answer better in public.

How did you first get started working in the industry?  How did you get in the door?

Okay, first up, follow these directions:

  1. Decide to be in the industry.

You’re done. You’re now in the RPG hobby “industry”. Easy, right?

Obviously it’s not that easy, but that is something of the trick of it all the same. The notion that the “industry” hides behind some unclimbable wall riddled with secret entry-points is largely bunk.

But the reality is that the biggest barriers thrown up against entry are very likely in your head. The industry is made up of folks who decided they were the industry; therefore, the decision is the key.

Maybe the better question is: What happens when you make that decision? You:

  • Build a body of work
  • Build an audience that likes that work

The Big Wall might have been more of a reality in the days when self-publishing wasn’t nearly as easy as it is now, but these days the barrier is the quality of the work you create, and the effort you make to connect that quality work with folks who want to consume it.

There are a lot of side effects in that process, of course. Social media connects you with other folks who work in the field. Attending conventions gets you a chance to talk to people face to face, and for them to put a face to your name and work. (Networking is not a dirty word; it’s the only word, when it comes to “breaking in” beyond the “self-publisher with a name” level.)

The only way to get noticed is to make yourself noticeable — and I’m assuming that in this question, that’s sort of what you’re driving at. Not so much “how can I make myself be in the industry?” so much as “how can I make the industry include me?”

That networking gets you there, and works well when paired with a demonstrable body of work. Rob and I published Fate in the early 2000’s. It got noticed, eventually, by some award-givers. That award got us a phone call from an old friend named Jim asking if we wanted rights to a novel series. That phone call lead to our decision to try to become a “real” (commercial) publisher. Years passed; lots of hard effort happened.

During those years, a guy named Lenny Balsera made noise at us in our existing Fate-based community that made him look real smart. Time and again he had good ideas and good contributions on the mailing list. He and I would break into private side-conversations plumbing the details of the Fate system. I asked him to come on board and help us work on this Spirit of the Century project we were struggling with. Lenny got himself noticed with a body of work (just not in a traditional sense). Suddenly he was on the same path as us to “the industry” (you’ll note his name went on the cover of SotC, just like Rob’s and mine).

Along the way, I worked on a side-project that became our first commercially published game, Don’t Rest Your Head. Spirit of the Century followed close on the heels, but not before GenCon. Don’t Rest Your Head got noticed by some folks and I was invited to sit at the Lulu.com booth and provide some industry relevant customer testimony. Note that I wouldn’t have thought myself to be “industry relevant” in more than a scant sense at the time. But that got me meeting plenty of folks (including Robin Laws). We released SotC a few months later and made a splash.

Next year rolled around and I found myself going to lunch with Kenneth Hite at Origins, and helping Indie Press Revolution run their booth, their website. Somehow I was “in the industry”, but all that I’d ever done was just do the next thing, and the next thing, and the next thing, building work, building audience, meeting people.

How have you been gathering freelance projects these days besides Evil Hat?

The body of work does the job: It’s as much a resume as anything else you might do to “break in”. Even early on I was open to doing layout for other folks, and did work on books like Beast Hunters for Berengad Games and The Zorcerer of Zo for Atomic Sock Monkey Press. The work I’d done on DRYH and SotC were what got me there.

The audience does the job: With games I’d worked on as a public resume, I got invited to an industry mailing list. I’d also joined the GPA and got on their mailing list. When Hero Games posted that they were looking for a layout guy, it sounded like I was a fit, so I spoke up, and have since laid out over a dozen books for them.

Your work is your foot in the door. If it’s good, someone will notice your name in the credits. If you can be found easily, they’ll ask you to do some more for them. The network you’ve built on your way to an audience will help make those connections that get you work, too. And when those connections and jobs aren’t coming — there aren’t necessarily a lot of them, and each company usually sticks to its favorites unless they’re trying to grow or a standby is unavailable — you do your own thing and get that out there. That’s the industry, and that’s how you do work in it.

At least in general principle, that’s the how. The specifics of the how have to do with the specifics of you, and that’s not something I can magick away with my advice-stick. If you’re not building the body of work, or if you’re not finding an audience, you need to dig in hard on that and figure out the why.

What are some of the biggest concerns you have running Evil Hat?  What problems are you always seeking solutions for?

This one’s sort of a wibbly-wobbly one, and I’m not sure I can answer it right on the nose.

But the biggest problem I think I encounter with the company is simple deadline management, both in terms of figuring out what it should be at the start of a project, and in terms of enforcing them in a way that doesn’t tick off the folks collaborating on the project. I’m not sure I’ll ever get all of that 100% figured out. Related to that is the whole outlining thing — some folks need the outline determined already before you come to them, and when you’re more used to lobbing a loose concept-ball at your friends and seeing how it bounces, that’s rough. And related to that is stuff like word-count estimates. We’ve sucked at that. Still learning. Getting better.

Are there any practices you like to adopt to keep the writing and designing flowing as much as possible?  Did you do anything like this when working on Dresden Files, about which I read you pretty much had to reimagine from the ground up since FATE 2.0 couldn’t cut it?

I’m not the guy to ask this, oddly enough. I haven’t done deep/involved system design for a couple years now, and I’ve always found myself around superior writers (in terms of the ability to consistently and professionally deliver both setting and system content on deadline). Layout, where I’ve focused my non-business-running attention, does have a creative component to it, but it’s also got some routine elements to it that don’t tax me the way that writing does.

That said, I think the best way to keep whatever you’re doing is to plan for taking breaks from it. Distance is a huge win for any project; it’s how you freshen your eyes and your creative voice. (You’ll also more readily see the flaws. SotC’s core system got nuked from orbit after a year-plus of development; then we started over.) Long-term, the only way I was able to contribute positively to SotC was by taking a break from it during its development — that break lead to the creation & publication of DRYH. Without taking a break — hell, without asking for help when it was needed, as I did on SotC — I’m not sure either of those projects would have made it to the light of day.

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Oct 172011
 

Dear Deadly,

I’m getting pretty close to publishing my book and am considering a .pdf distribution along with print as you do with your products.

Obviously there is some concern for a small publisher for releasing something as .pdf not least losing potential sales. If I recall correctly your personal view is that this constitutes free advertising. Have your opinions changed and or do you place any protections on your .pdfs?

Secondly, given that there’s no way I will probably ever recoup the time I put into producing my game how do you set a price? $25 feels right to me (225-250 pages A4 with pictures and original art) but that’s without doing market research and so forth. Printing costs are ~$10 per book.

On PDFs, my opinions haven’t changed. “Protections” (i.e., restrictions) on PDFs only end up punishing the paying customer, in the long run. They get cracked by the pirates. Better to offer a restriction-free, more positive experience to the customer. For a lot of folks that’s a perspective akin to religion (be you for or against), so I’m going to leave that topic there.

Onward to pricing.

So, at $10 per book I’m assuming you’re doing very small or individual book-by-book print runs, because at volume you should be able to get a price considerably lower than that. (In fact, with Lightning Source, you could probably do more like $7 per unit, after $75 or so in set up costs, and that’s at an individually priced level, with volume discounts kicking in at as few as 50-100 copies. I’m assuming we’re talking *black and white* interior here, and paperback, when I make that assessment.)

At any rate, with a $10 book cost, $25 is your bare minimum, but good enough if you know for sure that you’ll only ever be selling the copies yourself, as directly as possible to consumers. If you want to start selling into retail, that $25 pricepoint won’t do you any favors vis a vis your costs. I sell into distribution, which means I get about 40% of my cover price (sometimes a tad more) not counting any free shipping subsidy I offer for volume orders. Sometimes I sell straight to retail at a 50% of cover price. So looking at your $25 MSRP, we’re talking a range of $10 to $12.50 of income (not counting any expenses of making that sale and getting it to the customer) vs. a cost of $10, so between $0 and $2.50 of profit (10% in your best case retail scenario).

The way “traditional” publishing tends to do the pricing calculation is to apply a multiplier to the printing cost. That multiplier is a slider depending on individual publisher philosophy, but if you put ’em all in a blender you’d probably see that averaging out to at least 4. Making the book you’re talking about a $40 item, tho, will probably price it too high for consumer willingness. Faced with this, trad pub goes to push that unit cost down as far as possible. The folks pricing similar books at $25 may well be getting them printed for around $5 — which, given the distro/retail scenario I used above, is a profit range of $5 to $7.50, or 20-30%, aka doubling or tripling the margin.

Bottom line for the TL;DR set: Before you worry too much about pricing your book, shop around on your printing options.

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Jun 102011
 

So, this question came into my inbox today, and it’s a question I’ve been asked before to varying degrees:

Can you really make a living in the gaming industry without working for a company like Wizards of the Coast or any other large established company?

Standing on its own, the question’s frustratingly vague. (This time it did not stand alone in the message, which is good, but more often it’s asked as if it’s a specific enough question. It isn’t really.) What kind of a living? Living where in the country? Supporting a family or just yourself? With or without insurance? Retirement savings? Doing what kind of work in the industry?

For all but the cheapest versions of the answers to those questions (just yourself, no insurance, no retirement, no family, living somewhere with a low cost of living), I come pretty close to answering the question with an unqualified “no”. If I’m more charitable about it, I’d say “if you’re lucky, yes.” But lucky, here, should be taken to mean:

  • By working really hard at it for several years at below the pay scale you need.
  • By having a spouse who has a day-job that can provide magical things like insurance and savings and mortgage payments.
  • By continuing to work really hard at it once you’ve “made it”.
  • By continually seeking out new opportunities to work on more projects.
  • etc

Luck, as my friend Rob Donoghue likes to say, is largely a matter of paying attention.

Keep in mind, though, that I do not have magic goggles that let me peer into the financial particulars of everyone who does manage to make a living in this hobby. I can only speak to my own direct experience. Which goes a little something like this:

When I came right out of college, I went into work in the internet industry. I got myself into a website customer support job back when that was a pretty new idea. I made somewhere between $20,000-$25,000 at the time. I grew my skills, moved on into doing perl programming and internal website design for a while, went in other directions from there, and so on, and so forth. Eventually I found myself in California, and eventually I found myself in one of those great, time-sucking internet jobs that paid just under or just over six figures, and I did that for a while. Moved back to Maryland. Kept doing it, with a worse commute. Found myself dead-sick of it, just terribly unhappy about the job all the time, and feeling unable to leave it. Until my wife found some job security of her own, and then told me to frickin’ quit already, because it’s making you miserable, and no, you don’t have to have another job to go to right away.

We have ever since been relying massively on her salary to keep the household running. That’s not to say I don’t make my own financial contribution. Through a combination of:

  • Running Evil Hat (I made $0/month for several years; then we got a little success, enough to justify $450/month for a while; I’ve gotten to increase that since, but I am pretty sure I’m still not quite rating McDonald’s wages, and unless Evil Hat can improve its product output over the next few years, I’m not sure the increase can be sustained; behold part of my motive to grow the company! I should note I don’t charge the company anything else for any writing, development, or layout work I do beyond this monthly draw.)
  • Running Jim Butcher’s online presence (the site has amazon referrals, other referral programs, the occasional ad revenue, cafe press gear, all of which funnels to me to pay the website costs and then pay myself the remainder for doing the work of creating & running all that over the past ten-plus years)
  • Freelance layout work (which is bursty, unpredictable, and can sometimes wind up with late or very late or never-happened payment if you’re not careful)

… I am just in the last year or two finally at the point where I’m making about what I made when I started in the internet industry back in 1996. Only without any benefits (save those that I get as a spouse), which is a lot like saying that I am making 30+% less than what I was making in 1996.

Some of this depends on the kind of work you’re expecting to be doing in the industry. When I do layout work on a full sized book I can pull in between $1500-$2500 these days depending on things like size, complexity, template development, color or black and white work, etc. When I was “making my name”, my project fee ran more like $500, but I’ve gotten better since and my time’s gotten more valuable. Writers may get to see entry level rates around 3 cents/word. Editors may get to see entry level rates around 1 cent/word. Artists may get to see entry level rates around $100/full page.

And all of this with the proviso that a) many someones out there would be eager to take less than the entry level in order to get their foot in the door (though those who accept such offers may be getting the quality they’re paying for), and b) very few companies can afford to pay above entry level, ever. Supply is abundant, and demand and budgets are relatively low in comparison. In that environment, how many books or words or images would you have to create in a year in order to get what you need to make, and do you think that environment will readily hire you to do that work over others?

This is what many freelancers are referencing when they talk about “the wolf at the door”. Something out there is hungry to ruin your security. It’ll come huffing and puffing the moment you slow down and don’t get your minimum of work.

Mind you, I’m paid in spades in terms of happiness capital, of course, and so long as my family’s mortgage and meals don’t depend solely on the income I bring in, how I am living now is sustainable.

But really, it’s sustainable only because my wife is awesome.

If you can’t engineer a similar situation and you’ve got mouths to feed and bills to pay, you should likely consider a day job, and be glad of getting a few hours here and there each week to put effort into sustaining your hobby.

But as I said, I can only speak to my own experience. I know that Ryan Macklin fought the wolf and the wolf won, at least a little — he’s back in a day job. So’s Chris Pramas, despite having a company like Green Ronin to build an industry career around. But there are other folks out there who seem to be making it without the day job. My guess is that they’re “lucky” by the definition given above.

So what’s your experience, readers who are trying to make a living at this crazy thing? Where do I have it wrong? What’s your story?

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Mar 242011
 

Dear Deadly continues! You can read the series on the “dear deadly” tag.

Dear Deadly,

I’ve been following your blog for some time, and I always enjoy and appreciate your views on the industry and the state of Evil Hat. I own Cracked Monocle, a new steampunk tabletop RPG company, and we’re constantly debating how small or how large our development team. On an almost daily basis, we flip-flop between wanting just 1 more person to help out and thinking that our team is too large to keep everyone on the same page.

So my question, when Evil Hat is working on a product, how large of a group is normally involved, and how do you split up the work?

Cheers & Gears,
Daniel

Daniel, to get this out of the way up front, there’s no normally at Evil Hat. We’ve seen too much change year to year to have had much time at any given point to establish the whole, okay, how the hell are we doing this kind of thing? thing.

Right-sizing your team is tough. It’s about finding a proper midpoint between too many cooks and not enough hands.

It can seem like latter is pretty easy to identify, even if it’s not easy to overcome. Dresden took a long time in part because we did not have enough hands on the job, but finding those hands — in terms of the correct fusion of quality, energy, drive, time, and willingness — wasn’t easy. But even getting to the point of realizing we needed more hands, really, was some work, especially when sitting there feeling like the problem is you, that you need to magically find your own stores of energy/drive/time/willingness to get the thing rolling. So on that end: be willing to say you need help, be willing to admit that you simply aren’t, yourself, up for doing the work, and find people you’re sympatico with who are. Look to your biggest fans and think about who can be deputized. Try to be up front with them and honest with yourself about what you can afford.

The former is something I have less experience with, but it’s the kind of concern that’s kept me always adding to a team slowly (perhaps too slowly). Each new person brings a new dynamic, so you want to be sure you’re giving time for the stress-impact of that addition to settle out. I think it’s pretty dangerous to bring on, like, three new people all at once, unless you’re right at the beginning of a project and haven’t gotten rolling yet.

In my own experience, I’ve done everything from a solo effort (Don’t Rest Your Head was 90-95% me on all fronts, with some valuable conversations, playtesting, and proofreading from some good friends) to a small team (Spirit of the Century was Rob, Lenny, and Fred on text, Lydia on editing, Fred on layout & art acquisition) to a large team (anything that rhymes with Mesden Miles). Large-team on our latest DFRPG book breaks down like:

  • Project Management & Oversight – Ryan
  • Authorial Pool – Chad, Clark, Jess, Lenny, Rob
  • Editorial Pool – Amanda (lead), Chad, Ryan, Matt
  • System Guru – Lenny
  • Setting Guru – Chad
  • Layout, Art Direction, Pre-press work, Publication – Fred

Where you see the same name multiple times, that’s someone wearing multiple hats. At this point, I wouldn’t ever recommend going beyond a small handful of people without someone getting tapped for the primary job of project management. Someone filling that role, and well, makes the difference between a larger team being a big band or a kitchen overstuffed with cooks.

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 Posted by at 9:23 am  Comments Off on Dear Deadly: Team Effort  Tagged with: