Aug 252016
 

Evil Hat has gone through a number of changes over the years. We’re going through a new one now. But to talk about that, perhaps we need some context.

We—Rob Donoghue and I—established the company late in 2005, right on the heels of getting an offer from an old friend of mine to do an RPG based on his series of novels.

Right away we knew we weren’t the equal of the job that offer set before us. We had zero publishing experience. We’d gotten onto the radar as a possible team to make that RPG because we’d put some well-laid-out house rules for the Fudge system online, named them Fate, and gathered something of a community of interested gamers around them, which culminated in us getting a few awards for that work. Those awards got noticed by my friend’s agent, who in turn asked my friend if he’d rather have people he knew working on the game rather than a company of folks he didn’t know.

Looking at that lack of experience, I started charting a course that would get us to it. I severely underestimated the time involved in crossing that distance, but we did cross it over time. Early on, in 2006, we leveraged the early rise of affordable, online-friendly print on demand to release our first two games, first a “one-off” that I wrote called Don’t Rest Your Head, and the second a few months later, Spirit of the Century. That latter one was in essence an unadvertised-as-such public beta of the system we were working on for the game that started the company off in the first place.

That game was the Dresden Files RPG, and it took us four more years to get it to where we released it at Origins in 2010. We went at a slow and careful pace in all the years in between, putting out a few more things here and there, all relatively small, and supporting the hell out of the Fate community along the way. Open licensing for Fate and my strong tendency for (as Jeff Tidball puts it) pathological transparency helped give us an online presence that was far bigger than we actually were. We were a loud, small indie throughout.

When the Dresden Files RPG launched, a few things happened.

First off, we suddenly ended up bringing in considerably more income for the company than we had previously. Not tons, mind you, but enough that I started paying myself more than $0 a month for the work I was doing for the company, and enough that I was able to pay back both Rob and myself the money we’d put into the company to get it started back in 2005 (a total of about $10k).

Second off, we started getting into bed with traditional games distribution. Previously we’d been solely selling our stuff through Indie Press Revolution (I am a very big fan of paying specialists a cut for doing what they do best when what they do best is something I don’t do particularly well — in this case, running an online storefront and handling shipping; ESPECIALLY shipping). But the Dresden Files RPG was a big enough deal that it meant the distributors came to us asking to carry it, rather than the other way around. And that gave us some power; we were able to dictate a few terms (which a few years later we relaxed towards more standard rates, etc, because it meant we’d sell more), dip our toe in to exactly the depth we were comfortable with, and see how it went. Over the years that followed we eventually expanded beyond IPR and Alliance, and today we’re carried by most major RPG distributors.

Third, it prompted a conversation with Rob. I sat with him in his house one evening and said something like this. “So with Dresden Files money coming in, we’re at a fork in the road. We can consider us done, since we’ve achieved what we set out to do, but I don’t think either of us is interested in Evil Hat stopping where it’s at. We can continue to be an RPG publisher, which is us doing pretty much what we’ve been doing for the past 5 years, just on other things. Or we can look at what it will take to turn Evil Hat from a roleplaying game company into, simply, a game company.”

Rob and I both felt that that last option was the way to go. And this was the first big pivot for us, really. You can tell when you’ve hit a pivot point, because the clock gets reset to zero. We were back to a point where we were about to go and do something … and had no little experience in how to do it, just like we did in 2005.

The next four years, the time between 2010’s Dresden Files RPG release, to 2013’s Fate Core Kickstarter and its release late into that year, is what followed. That lack of experience meant a lot of experimentation, of selecting incremental “stretches” for the company where we’d take a few steps in a new direction, testing our footing, making mistakes, and learning how not to repeat those mistakes. We tried publishing fiction (my conclusion: not something Evil Hat should do unless it’s willing to really focus on the fiction market; it does not work well as a half-measures thing). We started looking at publishing board and card games, making a series of newbie mistakes both on the Kickstarter and manufacturing side as we did so, but still producing a game that as of today is in the black (Race to Adventure). And we pushed towards producing that no-setting-attached Fate system book we’d been promising our fans for years.

Honestly, it was a pretty messy time. We got some great work done in that time, and I at least started getting smart (I’ll let you know if I ever actually succeed at that) about running the company, by bringing Chris Hanrahan on towards the end of that time-span to help me chart a trajectory for the company’s growth. I was aces at implementing, at getting stuff that was ready to go out the door out the door, that sort of thing, but I needed help to do more than just fight the daily fires well. There was plenty of stumbling, and Chris had his work cut out for him, but he’d built other businesses before, and I knew he’d eventually compensate for enough of my stupidity that we’d start to get somewhere.

When Fate Core hit, we had another “Dresden-class event” on our hands, a big influx of funding that put us into a bigger weight class than before. This prompted the second pivot, the one where I started getting better about admitting that I was carrying too much on my plate and that we needed all sorts of help to have any hope of delivering what we promised. Chris, what with it being his job and all, blazed the trail, encouraging me to bring on Sean Nittner as our project manager (if you like how we manage to deliver our stuff on time and as promised, thank Sean, he’s the reason why we didn’t belly-flop after Core happened), and Carrie Harris as our head of marketing. This was our “and I’ll form the head!” moment, where the leadership of Evil Hat that we have today first really started to coalesce. If we hadn’t made this move, Core might have been the beginning of the end, instead of starting a new chapter of growth.

Since late 2013, then, we’ve been inside of Evil Hat’s third phase. We’ve expanded from making just books to also making dice and the occasional board game. We’re starting to realize that goal that Rob and I set for the company in 2010, and to push beyond it. A great bit of which culminated in the big success we saw with the Dresden Files Cooperative Card Game near the beginning of this year.

Which brings me to Origins 2016 and staying up late Saturday night there. I’d just finished trying out Tim Rodriguez’s excellent new deckbuilder design when Mark Diaz Truman came over and started talking about how companies in the “indie” space who are still around, like Evil Hat, should start thinking more heavily about the business side of things, and about how it might be time to transition from being indie publishers to operating at the smallest end of the “mid-tier”.

This dovetailed also with a conversation I had with Chris Badell from Greater Than Games where we talked about our different perspectives on risk (grossly oversimplified, me bearish, him bullish). And in the background over the past couple years leading up to both of these conversations, Chris Hanrahan, incrementally laying the groundwork for when I’d be ready for us to pivot again.

All of these conversations together started to get me clearer than I had been on how Evil Hat has still been running like an indie, and maybe shouldn’t be doing that any more, not at our scale of success, and certainly not with our ambitions factored in.

It didn’t really gel until I had a follow-up conversation with Mark a couple weeks later. I opened up the Evil Hat books to him and had him look over elements of cash flow and such, some deeper accounting stuff that I hadn’t really “got” before. Lots of light dawned with Mark able to point at specific numbers and such in our accounting to back it up — pointing out how we were keeping more cash on hand than we really needed to, for example — and then I had an afternoon eating call with Chris Hanrahan about all the stuff it made fall into place, particularly along the lines of realizing it was time to really, fully put people into jobs instead of treating all the work of running Evil Hat as something folks could just fit into their available time whenever. And so we realized we were now at the point where Chris had been trying to get us for a few years — so now it was time for us to start clicking everything into new positions, spinning dials, etc, to get all that happening.

The new pivot, the third-ish one, was here. And that started kicking off for reals around early July of this year. (Those paying close attention will notice that Evil Hat’s pivot opportunities have lined up with the biggest and most public successes we’ve had — DFRPG’s release in 2010, Fate Core’s big KS in 2013, DFCO’s big KS in 2016.)

The upshot of all of that goes a little something like this.

Thanks to the success of the DFCO KS, now is as good a time as Evil Hat will ever have for taking some risks to grow into the next-phase company we’ve been looking to become since 2010.

Chris Hanrahan, who was already acting as the company’s Vice President, has gone full time for Evil Hat. He’s working harder than ever at making sure that Evil Hat continues to grow and continues to seek new opportunities where we can find them (and where they fit our ethical and corporate and fans-of-games perspectives).

Carrie Harris’s head of marketing position has gone full time as well, bringing along with it an attendant increase in authority, scope of action, and marketing budget for the company. (Some time back we also brought on Tom Lommel to help us with our social media presence, freeing Carrie up to focus on bigger-picture marketing things.)

Sean Nittner continues to work for us in a part-time capacity, but we’re bumping his salary to pay him closer to what he’s worth (but it’s hard to pay someone whose work is priceless to the company what they are actually worth, let’s be honest). We’ll grow his project management team as needed, too. (We brought on Sophie Lagace and Chris Ruggiero a while back to help, already. Sean will tell us when he needs more help.)

We also brought on Brian Patterson as our “artist in residence”, generating original art for our marketing and product needs, as well as heading up our art direction efforts. Brian’s a multihyphenate talent, and he’ll be lending his support both to marketing and to product development.

That all said, this latest pivot isn’t just about putting people on the payroll and giving out raises & responsibilities. It’s also about shifting our perspective on how we handle our product releases, our crowdfunding strategies, and more.

We’re still sorting out what all of that means. The newest pivot is far from done with its “spin-up” really!

But, as one example, it does mean we need to stop doing things like this famine-or-feast release pattern we’ve been mired in for years. 2016’s been rough on the retail and distribution channel largely due to us focusing all of our releases into the recent Fate More kickstarter: folks looking for what Evil Hat’s releasing in 2016 have seen essentially nothing-nothing-nothing-nothing-nothing-OH HOLY CRAP HERE ARE SEVEN BOOKS ALL AT ONCE-nothing-nothing. Frankly that runs a real risk of undermining the individual books there — we’re having a tough time helping each one of them shine individually, if at all, when they’re all muscling through the doorway at the same time. (Mmmm, smell those metaphors mixing! It’s a heady aroma.)

That’s the sort of thing we absolutely need to stop doing if we want to continue to grow, and that means we need to stop the last few years’ pattern of trying to kickstart entire product lines — at least in scenarios where they all print, ship, and release at once. There are probably other things like that that we need to work on too, all part of this pivot, as we try to cement the company in that “small mid-tier” category and rise out of our indie, seat-of-our-pants roots.

It’s going to be a LOT of work. Work that I can’t, and shouldn’t, do myself. So I’m grateful as ever for the team we’ve been able to assemble to make Evil Hat’s continued growth and success a reality. It’s a scary time ahead, well out of my comfort zone as far as risk goes — but that’s what growing up as a company involves. I’m excited to see where the journey takes us next.

EDIT: In the original version of this post, I left out Leonard Balsera out of a concern to keep his day job as uncomplicated as possible. But now I feel I’m more able to cover that ground, so let me add this.

As part of this overall pivot, we’ve also brought Lenny on, more officially than ever before, as the Fate Line Developer for Evil Hat. Lenny has been with us nearly from the beginning — he signed on in 2006 and was instrumental in ensuring that Spirit of the Century actually saw the light of day (he’s on the cover for a reason), and ensured that the Dresden Files RPG had a strong backbone able to sustain the weight of the license, not to mention his truly groundbreaking work in reengineering the system represented in those two products into the newest modern form found in 2013’s Fate Core System. I’m pleased as hell that he’s a part of the company, as he really always has been over the past ten years, and I’m particularly excited to see how the Fate line continues to grow and develop under his guidance.

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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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Apr 012016
 
Harry Overcome FINAL

Totally not his fault. Totally.

The Dresden Files Cooperative Card Game (DFCO) kickstarter is coming in just a few weeks, and I’ve got shipping on my mind, as I always do when another Kickstarter campaign is rolling around. (DFCO’s KS will be the ninth I’ve run.)

One of the shipping models we’ve tried for our prior Kickstarters is to charge no shipping during the Kickstarter campaign, but then bill for it later via BackerKit. (I love BackerKit, particularly because we have a deep enough catalog that we can do pretty well with our add-on sales after the campaign.)

It’s gonna make sense to do that again, here. International shipping is just straight-up gross right now, and bound to get worse over time. (And our game won’t ship until next year in all likelihood… who knows what new horrible rate hikes will occur between now and then?)

We’re looking at a potentially 3-point-something pound package here for the base game, which is functionally identical to an exactly 4-pound package as far as most international shipping rates are concerned. And the US Post Office estimates around $50 to ship a 4-pound package to most places outside of the USA. Fifty! (That’s not an April Fool’s joke. Gods, how I wish it was.) That’s about five times what we want to charge our domestic backers for shipping, and costs more than the game itself ($39.99).

When it comes down to it, time and again, much as I would like to launch our KSes without international options, it’s clear that even with horrifying, face-melting shipping costs, folks outside of the USA still want us to offer the option. It’s never smart to ignore our fans and customers. So that leaves us with the need to figure out how to offer it without sinking our project in the process — effectively hiding failure inside the appearance of success.

(In addition, this far ahead of manufacture, it’s difficult to get a clear read on the product weight. They’d need to make it first, and in order to make it we have to have a funded Kickstarter, so… yeah. What if it turns out to be less than 3 pounds, instead of more than 3? That could be a significant cost break for internationals. Variables, we gots them.)

So, time for some math. Let’s say that to fund a game at about $40,000 (accommodating costs of manufacture, royalties to game designer and licensor, and Kickstarter + payment processing cuts), and the game I’m selling is $40. I’m gonna charge $10 for domestic shipping of that game. (I’m choosing a nice round numbers here to keep the math easy.)

If I could rely on purely domestic backers, I’d add $10,000 to that funding goal. ($10 per shipment x 1000 backers @ $40 each to make that $40k actual needed funds target.)

But if I open things up to international backers, I can’t rely on math so simple and stable. The absolute worst case scenario would be 100% international backing, which is super ludicrously unlikely, but imagine that scenario, imagine that I couldn’t get a rate better than $50 per package, and I charged shipping during the KS. Each International backer would contribute $90, but only $40 of that would actually be covering my intended costs. We’d hit $50k with just 555 backers, but over $27k of that would be shipping costs, and I’d have less than $23k of the $40k I actually need.

More realistically, I’d say that when we do open things up to international backers, we can run as high as 20% in international backers for a campaign. Sometimes it’s a lot smaller, sometimes not. But I’m mostly comfortable using 20% as the ballpark when constructing estimates.

So let’s 80/20 that. If 80% of my backers are domestic, and 20% of them are international, and each is paying $40 for the product plus whatever for the shipping, then I’m looking at 800 domestics, 200 internationals to get the $40k, but I’ll need to set the target at (800 x $10 + 200 x $50 equals) $18k higher to accommodate that scenario. If I’m lucky, by the time we reach a $58k goal, I have only 200 international shipments to worry about. If I’m not, then my 20% estimate was low, and every international backer past that takes money away from the actual project.

(In reality, it’d be more than an $18k boost, because that $18k is also subject to payment processing, Kickstarter fees, etc, so I’d need to pad it out a bit to make sure I’m getting the actual $18k needed for the shipping portion of the bill.)

This all gets a lot cleaner if I can set aside shipping costs for now, and bill them later when my variables are clearer. I’ll also be able to offer my backers the benefit of a few months more of efforts to get those shipping costs lower. (For example, I’ve found a solution for getting DFCO into Canada at just $25 per shipment. Maybe I’ll be able to find some other good methods for getting the games to other locations abroad. That said, please don’t drown me in suggestions here. I’ve heard them before!)

If I don’t have to worry about shipping costs at all my Kickstarter math starts clean and stays clean: $40k goal, $40 buy-in, we’ll bill you an appropriate shipping amount later, hopefully at a rate lower than what we’re currently getting quoted, and international backers won’t distort our funding simply by dint of participating.

On paper it looks pretty good. Reality, as usual, has other ideas. While this is a pretty solid approach for me overall, it does have its pitfalls.

First off is there’s nothing stopping backers from pre-committing the shipping cash as part of their pledge. The problem is, if they do this, while it has the appearance of pushing the project closer to its various funding goals, what it’s actually doing is “hiding failure in success” — if you pledge $80 because you figure you’ll have a $40 shipping bill later, all $80 of that goes towards the funding goal, and it won’t really emerge that what you actually did was move the needle $80 closer to the goal, while only providing $40 of actual funding to the project itself (as opposed to the shipping operation). To head this off for the DFCO KS, I’m going to be explicitly asking people not to engage in this behavior. (If you think this behavior is unlikely, think again; I saw exactly this behavior in prior KS that used the deferred shipping model.) Hopefully they’ll listen and comply, because it really does undermine the entire point of deferring shipping costs to later.

Secondly, there’s a simple reality that many people don’t read closely enough, and this leads to surprise, outrage, and general sticker shock when the deferred shipping charge comes due. Again, this is based in experience. There’s not much I can do about it except communicate the message in as many places as possible, as often as possible, so people keep it in mind, and so when the shipping bill comes due months later they aren’t suddenly infuriated for things going exactly as I said they would. That’s a hell of a hang-time effect, though, and while it didn’t happen a lot the prior times I did this method, it happened enough that I felt a little sour about having used the model. That sour feeling has faded, though, and the rationale for bill-it-later shipping has remained strong, so this simply goes on the list of hurdles I need to make sure we clear.

Bottom line, bill-it-later shipping continues to make sense for us, and with a potentially big project like DFCO we need to use our best-of-breed strategies to make it all work. And hopefully, if we continue to use this model, the potential for sticker shock and undermining backer behaviors will fade due to it becoming a more familiar feature of our campaigns.

Fingers crossed! And stay tuned for the impending Kickstarter campaign. We have some fun reveals in store for the time leading up to the launch, too. Hope to see you there.

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Feb 122016
 

Generator-20071117This 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

Paranet Papers
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.

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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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