Sep 242015
 

Between the Fate Core Kickstarter’s later stretch goals and our ongoing Fate Adventures & Worlds Patreon campaign, we’ve had a pretty killer development budget for a bunch of games over the past couple years. That’s not the same as having a killer manufacturing budget, though.

I should perhaps define some terms first.

In this context, when I say development I’m talking about all the stuff that’s needed to get a book written, edited, art-directed-and-acquired, indexed if appropriate, proofed if appropriate, and laid out. All the stuff, in other words, to produce a digital release of that book. When I then talk about manufacturing I’m talking about the stuff needed past that point, to turn something you’ve got as a ready-to-go digital asset into a physical item you can hold in your hands, flip through, ship, and sell into retail.

What those various crowdfunds did, for the portions of them that I’m talking about, was give us a healthy-sized budget for developing the digital versions of various projects — all our Fate Worlds of Adventure, and approaching-the-final-few-laps books like Do: Fate of the Flying Temple and Young Centurions. But that’s about as far as the associated goal-driven crowdfunding took us on a number of those. If we want to turn those things into printed physical books, we’re looking at an out-of-pocket expenditure to make that happen.

Which is all well and good — to an extent. I manage Evil Hat’s risks and budget to make sure we’ve got money in the bank when we need it, especially when it comes to paying our bills. And yet, recently, as I constructed a more detailed company budget, a few things became clear.

One, based on what most closely fits a “standard” year for us (2014) under our current company model, that about 25% of our budgetary income comes from crowdfunding efforts. In 2015, we’ve been pretty light on our crowdfunding efforts, and that’s unlikely to change for the rest of the year (luckily, other outflows have reduced somewhat in proportion to this, so we’re on track to break even for the year).  In 2016 we’re going to need to push to correct for that, running one or two more Kickstarter campaigns than we normally would.

Two, crucially, while we’ve got a solid foundation in our bank balance, the new projects we’re eager to get underway in 2016 (or which we already have underway) are looking to draw on some of the same funds that would be needed to take those prior projects from digital (development) into print (manufacture).

Three, we’ve been putting a lot of content out digitally, but that doesn’t have the same earning potential as a physical product (digital is great, but you can’t sustain a company at the size we’re trying to be on digital alone). On the physical product side, our output in 2015 has been a bit sparse, with a proportionate drop in income for the company. And that suggests we need to produce more physical products in order to better support our company’s ongoing cash-flow. And while we don’t need to take our digital releases into print — and without a budget to do so we might have to leave them as such — I think all our interests would be better served if we got those suckers into print.

So as we contemplate how we want to structure our crowdfunding efforts for 2016, all of that budgeting-driven thinkery is a part of the analysis. And I think that it’s pointing at one of our first being a “from digital to print” campaign to make it possible to take a bunch of items into print.

If fully funded through all its potential stretch goals, this would cover producing a few full-color hardcover volumes compiling three or four of the Fate Worlds of Adventure each, a combination of Venture City Stories and the upcoming Venture City Powers into its own book, as well as a couple of Fate Core’s digital-only stretch goals (I’m looking at Do: Fate of the Flying Temple and Young Centurions RPG there, tho much depends on how the timelines for those behave in the remaining months of 2015), and the currently-intended-as-digital Majestic 12 supplement for the Atomic Robo RPG (again, timeline behavior dependent).

But therein exists a bit of a dilemma. As noted before, these are all (well, these are mostly, but close enough to all) things that have had their development budget crowdfunded already. Folks may have assumed (consciously or otherwise) that that funding covered everything that would be needed to take the books to print. And regardless of that assumption, it may simply appear that we are “double dipping” on those various projects, rather than seeing this as a follow-up funding effort covering a separate segment of what these products could be.

So, it’s tricky. I’m pretty sensitive to the double-dipping thing — it’s a real thing, where two or more crowdfund campaigns are run to fund essentially the same thing, like a second crowdfunding campaign to pay for printing costs that the first campaign was supposed to pay for. But in this case we never positioned those goals as oriented on printing costs.

The question is whether or not we can convince the backing public of that. 🙂

And, relatedly, the question that the campaign itself is intended to help us answer: should we be putting these things into print? Or will digital-only releases be enough?

Hit me with your thoughts in the comments. I’m listening.

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Jun 292014
 

Derek Sivers just posted this thought about the philosophy of customer service: https://sivers.org/cs

“This isn’t some sales technique, it’s just good human behavior.”

Derek nails it, which is no surprise if you know anything about him.

It’s also worth noting that if you like Evil Hat and you like what Evil Hat does, a healthy portion of that appreciation likely flows from our customer service focused philosophy, in one form or another.

We don’t limit it to our customers either. When we’re hitting all our marks, functioning exactly according to plan, then everyone in any interaction with Evil Hat gets a great “customer service” experience. Freelancers working for us (ask around). Business partners (the Campaign Coins guys, whose Kickstarter for Fate Point tokens is coming up soon, have told us we’re one of the best licensing experiences they’ve had). Licensors (Jim Butcher and the Atomic Robo guys have been happy with what we’ve created for their IP — in part because creating games that they’re not just satisfied with, but actively happy about, is a major goal for EHP).

While we can’t send everyone away happy from an interaction with Evil Hat — that’s just how reality works — we do everything we can to make sure that the vast majority are happy; that they get a personal, human touch whenever interacting with us; and that we’ve done something for them, customer or not, that makes them more inclined to say good things about the Hat whenever the topic comes up.

This is why, ultimately, when folks ask me how to replicate something Evil Hat does — Kickstarter being the most recent and most frequent example — I start with a bit of a “quip”: “First, take ten years building a fan base.” It’s a quip, because it’s funny and quick, but it’s true. Every bit of our success flows forward from the fans; and fans come about as direct and indirect effects of the “customer service everywhere, all the time” perspective.

Interested in replicating that? Read up on Derek’s article, and get to work making his philosophy your own. It pays off, and it feels great.

This post is a duplicate of what I posted on Google+. For further discussion, see the post over there.

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Nov 152013
 

So, woo! The Fate Core Kickstarter brought in $433,365. That’s money in the bank, y’all. We’re swimming in it like Scrooge McDuck, right?

Well.

For illustration purposes only. No twenty-dollar bills were harmed in the making of this image.

No twenty-dollar bills were harmed in the making of this image.

At this point we’ve taken care of printing and shipping all of the physical reward components for the Kickstarter. There are still funded stretch goals that we’ve yet to get done, which we haven’t really spent any money on yet. Those are Do: Fate of the Flying Temple, Young Centurions, Shadow of the Century, and Dresden Files Accelerated.

So the question is, how much money do we have left to make those things happen?

  • $433k to start…
  • minus ~$22k for Kickstarter’s cut
  • minus ~$20k for Amazon’s payment processing cut
  • minus ~$20k for development & art of Core (not including printing)
  • minus ~$4k for development & art on FAE
  • minus ~$8k for development & art Fate System Toolkit
  • minus ~$20k for development & art Fate Worlds 1 & 2
  • minus ~$6k to get the art, Fate Core expansion, and index for Strange Tales of the Century (editing and writing had already been paid for outside of the kickstarter)
  • minus ~$15k for development and where necessary art on other projects (Sally Slick novel, Freeport, Day After Ragnarok, Deck of Fate, the various consultations)
  • minus ~$68k for printing Core, FAE, Worlds 1, Worlds 2, Toolkit, Strange Tales, and Sally Slick
  • minus ~$24k in preemptive royalties paid to Jim Butcher for the essentially free PDF we’ll be giving backers of Dresden Files Accelerated once it’s done
  • minus ~$120k for shipping all the physical rewards (rough estimate to include cost of sending replacements for lost and damaged stuff as well)

Assuming I’ve accounted for everything in the above — and it’s not certain that I have — and that the shipping estimate is accurate, that leaves us with about $106k to spend on the remaining four projects from the Kickstarter.

This is without accounting for the expense of supporting all that: my time, Carrie’s marketing time, Chris’s business development time, Sean’s project management time. I didn’t charge the company anything separate from my salary to do layout on FAE and Toolkit; I’ve spent at least a full month’s time solely on customer service and data-wrangling for this campaign. Carrie has been making sure we’ve got solid product message and marketing for all of that. Chris has been charting the trajectory for all this stuff and helped conceive of a bunch of it with me during the campaign. And Sean’s efforts are a big part of why we’ve been able to deliver so much in so little time. So what’s definitely not reflected in the above is a lot of additional sweat and the coin needed to turn up the heat.

Bottom line, I think there’s a chance that we’ll still retain a small profit after accounting for the as-yet-unpaid costs of those four stretch goal projects we have as yet to complete, but it’s in no way certain… and really, taxes on the income/“profit” we’re carrying into 2014 might eat that up right quick. So I’ve been looking at Fate Core as a “profit-neutral” Kickstarter.

Had we not managed to time the second wave of physical books such that they all came out and were able to be shipped at the same time, the additional shipments for those who wanted the split might have put us more firmly into the red. As it is, I’d rate this as a very approximated break-even, with our actual profit-taking to come in the sales of the product line outside of the Kickstarter campaign.

Which, at the end of the day, is pretty much as designed and intended.

Folks have joked that Kickstarter should be called “Kickfinisher” because you do best to bring a nearly-finished product to any campaign you’re Kicking; it’s not so smart to launch a campaign where you really haven’t started work yet.

But I think it’s in this kind of breakdown and analysis that the -starter suffix makes the most sense. Having crowdfunded an entire product line, with solid expectations that our costs will be all or close to covered by that funding, we’re now starting a new phase of Evil Hat with our most robust product line ever on offer. If there’s profits to be made, it’s not in the Kickstarter campaign and its fulfillment, it’s in what comes after, that the campaign made possible. We brought a near-finished product to get it going in the first place, yes, but we walk away with thousands of books in inventory and already paid for and ready for sale.

That is what we Kickstarted.

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Oct 292013
 

James Dawsey asked me to distill some of my comments from this Google+ conversation into a linkable blog post, so here goes!

International shipping for a Kickstarter is a problem from a bunch of different directions. The way I see it, you’ve basically got three options:

  • You can not offer international shipping, and get complaints about it;
  • You can offer it at a high but fairly honest cost and get complaints about it;
  • You can offer it at a cost that the international backers think is fair, but which pretty much eats up all the actual revenue value of their pledge, rendering their contribution effectively moot and potentially undermining your financial goals for the campaign.

These are not good choices, but they’re the choices.

Before you pop on down to the comments to tell me how I’m wrong here, let me say this: I’m happy to see options like facilities that can offer bulk international shipping start to open up for the international market. That said, such options open up a number of additional logistic hurdles which aren’t always worth the effort, especially if you’re a) going to be selling the game after the KS through distributors (or other internationally accessible channels) anyway, and b) your game is going to be distributed to the target market in question through one of those distributors.

Bottom line on that: When I’m running a KS, I have to budget both the money I’m getting and the impact on my time. So while some of the expense can be moved from the money column to the time column, that’s not always the best of exchange rates. 🙂

But what’s the deep core issue here, aside from, y’know, the fact that the United States postal system is underfunded and legally constrained from increasing domestic postage rates to the point where their costs would actually be covered, so they’re doing what they can by making regular-ish, big increases in their international shipping charges?

Comes down to the algebra of reward tiers.

With Kickstarter, because shipping gets wrapped up in the pledge, you have to watch your percentages. You could have a $25 tier that ships domestically, and a $50 tier that ships internationally, and that’s great — to an extent — if the international folks are willing to pay it.

But suppose that the $25 domestic tier represents $5 shipping + $20 contribution to the goal, and the $50 international tier represents $30 shipping + $20 contribution to the goal. When an international backer pledges that $50, they’re putting the project $50 closer to its funding mark… while only ACTUALLY contributing $20. Compare this to two domestic backers pledging $25 each and actually contributing $40 towards the goal. So in this example scenario the international backer’s pledge is only “worth” half a domestic pledge in terms of actual revenue contribution after shipping. This can be super problematic if the budgeting on the project, and its ultimate funding goal, is built around the scenario of a pledge that’s 80% meat, 20% shipping.

The two strategies (aside from “don’t offer international shipping”) for dealing with this are not all that satisfying.

First is “well, why not bill for shipping as a separate thing after the KS is over?” — And the answer to that seems to be a pretty consistent “because international backers don’t realize exactly how high a charge that will be, and the sticker shock will produce a lot of anger, especially amongst those who didn’t bother to read the pledge tier text closely”. That’s a huge emotional and cognitive load for a projectrunner to parse through when the shit starts hitting the fan, and it inevitably will.

Second is what we did with the Fate Dice kickstarter: if the budget’s ratio holds that 80% of a pledge should go towards the actual goal, with a max of 20% for shipping, then you should take the expected average cost of international shipping, and solve the equation for that. This is algebra in action! If X is the reward tier, and 20% of it needs to go towards shipping, and your international shipping charge is going to be about $30, then your equation to solve is .2x = $30. This tells us that the international shipping pledge tier needs to be $150: that way $30 goes towards shipping (20%) and $120 goes towards the actual non-shipping project costs. Voilla! Except, ohhh, the complaints you’ll get for only offering a $150 tier as your entry-point for an international backer.

At the end of the day project runners take the blame for factors beyond their control. They can’t control the fact that out-of-the-US shipping costs are spiraling out of control, and are highly unpredictable 6-12 months in advance, which is often the (minimum) hang time on many KSers; they can’t get KS to adopt a more sensible mode of splitting the shipping charges off from the project tally (at least not so far); and they can’t adopt an international-friendly shipping package that would ultimately bankrupt the project if it got popular. Congratulations! The math says every option is bad.

And so, that has me pursuing the least expensive, still disappointing, first option from that list up top. “Please order from an FLGS supplied by one of the following distributors” is fast becoming my go-to strategy for international stuff. Pair that with a cheap all-digital buy-in, and I don’t feel like I’m forcing the international folks to miss out on much. The only thing they’re potentially missing out on is a little bit of a speed-win for the delivery of the product, and that is something I’m comfortable asking them to take and like. If someone’s truly interested in being a supporter of what a Kickstarter campaign is about, and not just in it for the what-are-you-gonna-do-for-me of it, they can wait, and optionally, buy in for a buck to stay abreast of backer-only updates and developments. That’s lowest risk for everyone and doesn’t come with an implicit demand that the projectrunner choose insolvency in order to serve a few additional customers.

One possibly unnecessary footnote: There’s no judgment here. If you’re an international potential-backer, I’m not saying you have no value to me. I’m saying present circumstances are making it very hard to serve you and at some point I have to focus on the things I can do, cheaply, in bulk, and set aside anything that requires a lot more time, slow and close attention to detail, and so on. Business realities are what have put the squeeze on your role in a Kickstarter. Yes, these things could be worked around, at least marginally, but I think the best, strongest workarounds come through selling the results of a Kickstarter to you outside of the Kickstarter itself. As part of my acknowledgement of that, I avoid designing Kickstarters that have exclusive content — or if they do have it, they’re designed such that you can get at them digitally. I don’t get to choose my ideal results here, and I’m sad about it. But I also have to be smart about what I do and don’t do, for the health of my company.

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Jul 242013
 

So, this happened to a perhaps too aptly named board game:

http://www.kickstarter.com/projects/forkingpath/the-doom-that-came-to-atlantic-city/posts/548030

Have a read, then come back. I’ll wait.

Okay! So let’s review:

• If you have one, don’t quit your job to fulfill a kickstarter campaign. The time and financial costs always turn out higher than you project, and you need that other source of income to make sure you stay afloat — and can (if you didn’t start with money in your company coffers) personally float yourself a loan for overruns.

• Don’t, y’know, move or make any life decision based on the funding of a Kickstarter campaign. This has to fit into your already available time-space and current location.

• Put yourself and your partners through whatever emotional stress-test you can in advance of running the thing. There’s no sure riftmaker like success, and few pressurecookers like a Kickstarter campaign; add to that the obligation to and expectations of your backers after you’ve funded and you’ll find yourself at a high-stress breaking point all the damn time (believe me).

• Unless you’ve got some rock solid experience personally implementing and delivering on a project at any scale under time and budgetary pressure, do NOT make a Kickstarter your first time out. It’s all of that _plus_ additional stressors unique to a crowdfunding campaign. Take incremental steps: not giant leaps. Kickstarter doesn’t patch over any of that for you.

• That means you need to build experience to do your dream project. For 99% of folks who make things, that’s how you have to do it. Yes, there’s a loud 1% of folks who got it right the first time. They’re the exceptions. The rest of us have to get there by increments. Dream big, yes, but also dream small. Make your first thing a small thing. Make your next thing a slightly larger thing. And so forth.

Evil Hat spent 6 years working on being a successful RPG publisher before trying to branch into board games. Our Race to Adventure Kickstarter was a success. We funded to the level we asked for. Getting there meant a bunch of swag and shipping that we maybe shouldn’t have taken on. All told it meant we got to product launch about $20,000 in the red with the expenses that went beyond the funds covered by what was funded.

We knew we would probably see overruns. We planned for it. That $20,000 came out of funds we already had prior to the project. After several months of sales following the game’s release in April, we’ve cut that number in half. We’re confident we’ll eventually break even on the game—it’ll just take time. Time we can afford.

This is not an atypical Kickstarter boardgame scenario.

Be ready for it.

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