How Much Should an RPG PDF Cost?
[I have not published RPG books or PDFs, but I do sell a couple of other RPG related products. That said, this is mostly speculation based on what information I’ve gleaned. Note that the main example is based on a 200 page print book that retails for $29.99. Two other examples are summarized near the end.]
I’ve been curious about Adamant Entertainment’s “app” pricing model. To get you up to speed, a couple of months ago, Adamant reduced all their pdfs to $1.99 indefinitely after a trial period. They (specifically G.M. Skarka, head of Adamant) initially proclaimed success but many observers were skeptical–not only if it would be successful for Adamant, but also if the model would change the general price expectations of people causing other companies to struggle.
Just a day or two ago Adamant reversed the decision to go with this pricing model after getting more data (March’s sales numbers) and comparing them and the prior couple of months’ sales in more detail. In short, the original success declaration wasn’t based upon an apples-to-apples comparison. When comparing the 1/2010 sales to 1/2011 sales, 2/2010 vs. 2/2011, etc., they were not considering that they had many fewer releases and/or less buzz-worthy releases in those same 2010 months.
Adamant says March’s sales numbers made this mistake much more apparent due to their normal GM’s Day sale in early March having less of an impact and (I’m guessing) some buzz-worthy books or more releases in March 2010 than January or February of that year.
So this all made me wonder, “How much should a pdf cost?” Let me append that with “if the publisher wants to earn the same gross amount.” To ground this, let’s break down the cost of a $29.99 print book. As many know, 50% of that cost typically goes to the retailer. That allows him to pay his staff, pay rent on the store, utilities, etc. Whether that’s fair or not is beyond the scope of this, but all retailers are bound by about this same percentage so if that’s too much, more retailers would pop up to get into that business and stay in business. If 50% is too little many would be going out of business prematurely.
So the publisher is down to $15. But the distributor gets another 10% of the $29.99. The distributor is the company that is responsible for receiving the product from the publisher and sending it to stores. So now the publisher is down to $12. Common advice in the game industry is to keep the cost of making the product to half of what the publisher gets after the retailer and distributor percentages are taken out. So $6 will be “profit” (but more on that below) and $6 will go to paying the writers, editors, artists, as well as printing costs.
The biggest fuzzy issue in deducing this is what part of that $6 goes to printing costs, and what part goes to costs that are part of the pdf. That probably depends on the print run (cost per unit goes down and the number of units goes up), page count of the book, and the quality (or more accurately the cost) of the writers, artists, editors, etc. Let’s say the print run is 10,000 copies (a pretty successful release from a mid-major publisher, based on what I’ve read) and the word count is 100,000 words (a medium size rulebook or a large setting book of around 200 pages) $.04/word is a common rate for writers, so that will cost $4,000. We’ll double that to be generous to $8,000. For the sake of argument we can set the art budget to $8,000 also and we’ll assume $8,000 will cover editing and layout. So $24,000 spread across 10,000 copies means $2.40/book (of the 10,000) goes to the non-printing costs. Again, we’ll be generous and round up to $3. (If anyone has better, more grounded numbers to plug in here, please post a comment. That said, the specifics don’t matter too much because we can cut back the art budget or not round up so much regarding the writer’s pay, etc.) Furthermore a couple of on-line printer’s calculators do give a price of about $3/book for a 200 page book with a 10,000 copy print run. That $3/book amount can be slightly more or less depending on how much is color, the paper quality, cover stock, etc. The point is these numbers seem to have some support.
So of the $6 that goes to the cost of making the book, we generously have half going to the non-printing costs. Back to the core question: If the publisher wants to make the same profit, he needs to factor in the $3 for the non-printing costs and the $6 “profit” (again, more on that below). If the publisher makes a sale on his own website, he needs to charge just about $10 to make the same profit. (The extra dollar is the likely paypal/google checkout transaction fee.)
However, that price point doesn’t consider selling through one of the major RPG pdf-focused on-line stores. They typically want 35-40%. Factoring that in, the publisher needs to set the price at about $12.50. ($9+$3.50.) Even if the publisher sells some copies through his own site, the on-line store won’t appreciate the publisher undercutting the store, so the price likely needs to be the same in both places. (To be fair, if the publisher sells it himself he may need to deal with some follow-up which has additional cost. For example, responding to queries like “I lost my file, can I have a new one?”)
Now it is possible this $12.50 number could be impacted by more potential sales because the cost to the consumer is much less. On the other hand, some people don’t want PDFs and most mentally discount the value of a PDF because one isn’t getting a tangible object. But it is probably a good starting point. From there, the publisher needs to go with his instincts and experience and reading the expertise and experiences of others. That’s where Adamant’s app pricing idea comes in. It was a bit of a gamble, likely based on prior discount sales and early results that one could sell 3x, 5x, or even 10x the number of copies by going to a low price point. But once you exhaust all the people who were on the fence about buying at the higher price and you compare truly apples-to-apples, Adamant seems to have found it was not sustainable.
Using the same basic formula for a print book that costs $10 in stores, the publisher gets $4 where $2 is “profit” and $1 goes to writing/art/editing and $1 goes to the cost to print the book. That maps to a $4 PDF ($2 profit + $1 writing/art/editing + $1 on-line store cost). For a $50 print book, the breakdown is $20 for the publisher where $10 is “profit” and $5 is writing/editing/art and $5 goes to printing. That maps to a $21 PDF ($10 profit + $5 writing/art/editing + $6 on-line store cost). I’d actually raise the price of the smaller book a little (maybe $5) because it may be harder to absorb some of the costs of art or editing at just $4… likewise the larger book might go down in price a little as some cost might not be as high a percentage. But it all depends… this is mostly a rule of thumb from a mostly outside observer.
Finally regarding that “profit” for the publisher: In this example, we haven’t put a cost to many things: running the website, advertising the product (which happens in both the print and pdf scenarios), research & development (working on upcoming books/games–even those that don’t pan out) attending conventions, paying business taxes, other business fees, etc. Also very importantly, often for a small operation the owner’s only pay for his time (often wearing many hats: project manager and/or writer and/or playtester and/or editor, etc.) is from the profit. Even for a larger operation many stakeholders put in extra hours that are essentially unpaid unless the product is profitable.
I hope this exercise is helpful to all involved: publishers, consumers, on-line stores, etc.
Interesting article. However, what this fails to take into account is the issue of time. The longer a product is on the market, the longer it has to recoup costs and generate revenue, and thus it’s unit costs decrease. This is because you have the one-off unit costs, which are the creation of the PDF, and the costs required for each individual PDF, which comes down to infrastructure.
What are the costs for duplicating a PDF file? In short, very little. Once you have a master file, it takes very little to create duplicates, and this is the minimum price. Everything else comes from the shared one-off costs, which are reduced as you make more sales. The cost of art, writing, editing, and so forth are shared between all the sales made.
Say it costs $100 to put together a PDF product. In a single sale, the unit cost is $100 – that’s a very steep price for a PDF. But in two sales, that unit cost becomes $50 each. For three, it becomes $33.33, and for four it becomes $25. As you sell more, the unit cost decreases – which means you can decrease the price. This has the effect of generating more sales.
If you consider “profit” as the unit cost – you have to ask yourself, “how much profit is fair?” $6 profit on each product, and you sell 100 products, that’s $600 in profit. Yet, you can leave the product out longer, reduce the price to receive $3 profit per sale, and still generate your $600 profit, only this time it is over 200 sales.
DVOID Systems is in a bit of a quandary right now though – all of these assume that the company has the capital to invest in the product to start with. That the one-off costs are done and dusted, and the product is simply released and forgotten about. However, what if this is NOT the case?
What if the per unit costs include not only profit from the product, but fundraising and reinvestment capital? As it stands, the claim is that for many small operators, this is actually turning the product into more of a product/service hybrid. The product won’t be forgotten about – it will be improved and updated for existing customers, further increasing it’s lifetime sales potential.
There’s a lot of discussion on PDF pricing on the basis that these are simply electronic format for print books, and as such, are essentially treated as an extension of print products. Yet they are not. If you are selling a PDF version of a print product, the PDF sales will share the one-off costs of the print sales, so pricing them exactly the same is basically ripping off your customers, and they know this.
When you are giving “free lifetime updates” for your PDF products, you need to make sure you know exactly what this means to justify whether or not this can be included as a price-inflating feature. In short, this has to mean new content, not just errata or typo fixing. Otherwise, you are essentially charging for customer service, and those that do not charge for the same features will be able to take away your customers.