the "supplement treadmill"

[ryand]

This does not match my experience. Not at all.

I think your experience probably is right on the spot.

The problem I think is that the distributors have two slightly conflicting needs.  They need a company to have enough products to generate enough profit to make the effort of stocking and selling that company's whole line worthwhile.  They also want the individual products that are being sold to have a fairly high volume.

They're not set up to handle a company with just one or two products that sell really well, even though a strict analysis of that company's business would probably show that it was more than worthwhile to support.  The rare exception isn't enough to counterbalance the vast number of small, limited line publishers who end up costing more in administrative and warehousing overhead than they generate in net profits.

The distribution tier also has a problem with how to sell stuff (as opposed to take orders for) as a business model.  Alliance, for example, regularly solicits for thousands, maybe tens of thousands of SKUs.  They know they have a limited amount of time to talk to any given retailer, and cannot possibly "stock check" even the top 100 SKUs.  So instead they focus on hot, high volume frontlist sales, and expect that a store moving the frontlist will de facto move enough backlist to motivate the store owner to do their own stock checking an restock analysis.  Clearly, in many cases, for many unique products (like Amber) this system is a failure.

I think the ideal configuration in today's market for an RPG focused publisher  who wants to use the 3-Tier system is probably a company with one core book that has evergreen sales, coupled with 3-4 significant releases each year, spaced far enough apart to generate frontlist sales across a significant percentage of the year.  Ideally, some (or all) of those releases should also have "evergreen" potential, creating a sizable library of regularly re-stocked items (and thus steady monthly cash flow) over time.  This, in my opinion, is the state that Palladium has evolved into, and it seems to be working well for them.  It may also be the end state that White Wolf is evolving towards as well.

For what it's worth, when I was operating RPG International in the early 90's we regularly moved 1 copy of Amber a month, and it was unusual in that it was the only book from a "small publisher" for which we had such repeat sales - unusual enough that I still remember being surprised by it nearly a decade later.  What Amber managed to acheive was pretty amazing.

Ryan

[Ron Edwards]

Hiya,

Ryan, I'm in complete agreement in all particulars with your post.

New questions include:

How long the tactic you describe continues to be viable, in terms of years

Whether actual profits stay high enough as re-printing costs for the core book and especially-popular supplements kick in

(related to above) Whether there's an identifiable point in which one is better off re-printing the canon rather than adding new items

Whether a game with the kind of in-play popularity that makes this tactic possible would do better with primarily direct sales (not abandoning the store sales, just not relying on them as the #1 priority)

What sort of communication and reinforcement by the publisher would help retailers recognize that the game sells in this fashion (experience teaches me that many retailers don't track sales in a time-scale that can catch it)

Best,
Ron

[Paul Czege]

Ryan,

I think the ideal configuration in today's market for an RPG focused publisher who wants to use the 3-Tier system is probably a company with one core book that has evergreen sales, coupled with 3-4 significant releases each year, spaced far enough apart to generate frontlist sales across a significant percentage of the year.

Very interesting.

What do you think of the viability of this alternative: a publisher with a core book with the potential of evergreen sales, and one or a few related supplements (i.e. Amber) who partners with the best indie designers to publish three or four various co-branded games a year (each one in small quantities)...covering costs but taking no profit for himself on these entirely stand-alone games. The advantage to the indie designer is exposure to the retail channel for a game that would otherwise not garner the attention of distributors (and a small profit, of course). Does the publisher's own core book and supplements benefit from this as in your ideal configuration?

Paul

[ryand]

Effectively, the distributors have (at certain points) exerted exactly this kind of control over publishers, for example, when they pushed for and received full voting membership status in GAMA. To claim that the subsequent, extreme reduction in the number of new core books over the next five years, and the explosive increase in supplements-per-line is a coincidence, would be very naive, as I see it.

Let me offer an alternate suggestion.

The evolution of the "supplement treadmill" is linked to the fact that as the RPG business matured, publishers discovered the substantial difference in buying patterns between players & game masters - which generated an explosion in the number of different SKUs offered by RPG publishers, and helped introduced the so-called 'front list mentality' that affects the retail channel.

Also consider that prior to the late 1980s, most RPGs were sold as boxed sets.  A handful (like D&D) were sold as books, but D&D had become the exception rather than the rule.  When Palladium started publishing, one of its selling points was that the whole game came in one book, rather than an unwieldly box set that could easily disintegrate or lead to the loss of needed components.  This was a distinct difference with most of its competition, distinct enough that some of the same language survives all the way to the present in some of Palladium's advertising.

Virtually none of the "supplement treadmill" companies publish boxed sets.  They all publish on the corebook/supplement book model.

Consider that the largest percentage of RPG sales pre '90s were through non-game stores.  The "hobby game store" we now know as commonplace was still an unusual exception in the 1980s.  A "hobby store" was a place that sold crafts like macrame, model trains and planes, woodworking materials, etc. and maybe a few RPGs in the back.  The combination of bookstores and comic book stores were the largest venues for sales, then toy stores, followed (for a handful of publishers) with true mass market distribution via outlets like Toys R Us and Spencers.  (I bought my copy of Q1 at the Spencers in Alderwood Mall - the #1 place for AD&D modules when I was a kid looking for content.)

(Note that as the '80s ended, thousands of independent toy stores were driven out of business by consolidation in the form of TRU and KayBee (and then Wal*Mart and Target), and a whole venue of locations once popular sales channels for RPGs vanished due to no fault of the RPG publishers - in many cases taking sales volume with them that was never recovered elsewhere.  Also note that starting in in the early 90s and continuing to today the specialty book store has been under intense competitive pressure from big box stores - pressure that included their own mall based chains which have been substantially reduced in size and scope.  This loss of book stores had a similar effect to the loss of toy stores.)

As the 1980s turned into the 1990s, this is what happened:

1)  Publishers started to make products targeted to game masters and players separately (splat books evolved out of the "Complete XXXX" series of books for AD&D2E, for example).

2)  Boxed sets got more and more expensive to produce as publishers entered into an "arms race" to see who could stuff the most components into each box - meaning that smaller publishers couldn't keep up and had to turn to something else as a way to launch the business, an situation that diverted many into the "core book/supplement book" treadmill.

3)  The "hobby game store" became a viable business model and proliferated, taking market share away from the more traditional outlets and concentrating it into a much more focused, but also much less trafficked venue.  The more hobby game stores there were, the smaller the total number of people seeing each new release became.

Impacts:

The "treadmill" business model gained widespread acceptance.  Virtually any publisher crossing the decade boundary between 89 and 90 was on the treadmill.  Also, costs of production continued to rise - making those boxed sets more and more expensive.  The concentration of customers into the specialty stores was creating a price resistance working against the ability of the publishers to raise prices to keep up with cost inflation - price savvy customers were more able to tell each other (and the retailer) that something was "too expensive" and create a competitive disadvantage to publishers who tried to raise prices.  Total unit volumes started to fall dramatically as the number of active purchasers seeing the products declined as the specialty stores increased marketshare.  As unit volumes declined, the fixed costs of those boxed sets ate up a larger and larger part of the gross margin.

The first overt signs of trouble started in late '92 and early '93.  Sales at most of the major publishers dropped off a cliff.  By estimates we generated at WotC, nearly half the volume of the RPG business was lost before the summer of '93.  The rise of TCGs in '94 didn't help matters, either.  And the TCG bust of '95 killed off a lot of speciality retailers, but the customers they were servicing did not go back to the old mass market outlets - they just stopped buying new products altogether.

(We estimated, at WotC, that between the toy & book store consolidation, and the '95 TCG bust, the number of stores selling RPGs was only 10% of what it had been in 1980 - every one of those lost stores cost our industry some volume, and the combination of all the consolidation was vicious).

The cost inflation got too large to bear even in book product and publishers were forced across the board into raising prices, which started in '98 (partially triggered by the TSR collapse in '96).  A series of $30 hardcovers proved successful, which lead the way to abandoning the boxed set model and its broken cost basis.  Pushing the price envelope of the hardcovers to $40 happened from '99 to '01, and enough companies did it successfully, and no company managed to market "cheaper price" to competitive advantage, which is how we got to the current price model.  I suspect we're going up to $50 now, and that the $50 price point will become the standard price for a 300 page, full color core RPG book by 2006.  There has been no noticiable unit volume decline as a result of these higher prices - demand has proved inelastic so far.

The "supplement treadmill" killed a lot of RPG companies when volume dropped off in '92/'93.  Big names, GDW, Chaosium, FASA, and others failed to survive.  After the dieback, everyone in the business was pretty aware that the "supplement treadmill" was a dead end and something better was needed.  The twin innovations of widespread PDF sales and the D20/OGL project provided a way out of the dead end, and a proliferation of new business models.  Most of the companies still on the "supplement treadmill"  (and those who moved into it out of ignorance) are actively trying to move to a higher margin, "evergreen/big release" model, or are moving down the value chain towards PDF distribution.

Almost none of this was the direct result of distributor agitation (though as I mentioned in my post to Erik Wujeck, the distributors did have an impact on the class of publishers who developed one or two products but not an entire line or a regular frontlist release schedule.)  I think that the move towards $40 core books followed by a chain of expensive supplements was driven by the decrease in total customers, the rise in production costs, and the recognition that the "supplement treadmill" was a dead end.  It is a natural reaction to a market that has consolidated down to the hardest of the hard core, who generally have a large budget for RPG purchases, but who are increasingly picky about how they spend that budget, rather than an orchestrated plan by any tier or group of companies.

Ryan

[ryand]

Ryan,
What do you think of the viability of this alternative: a publisher with a core book with the potential of evergreen sales, and one or a few related supplements (i.e. Amber) who partners with the best indie designers to publish three or four various co-branded games a year (each one in small quantities)...covering costs but taking no profit for himself on these entirely stand-alone games.

I think that the distributors and retailers don't believe in many company brands.  There are some (White Wolf, Mongoose, Green Ronin, Wizards of the Coast), but most other companies live and die by their game brands first.  Stuff from an "off brand" doesn't sell at all well in comparison to the "lead brand".

To make your concept work, I think the Indy designer is better off partnering with a larger company rather than a smaller company (because the small company is more likely to have a "game" brand rather than a "company" brand).

I think that the best way to publish a standalone, one or two book line like "Amber" may be to do so direct - bypassing the logjam of the distribution tier completely.

I do like ( and would probably buy ) the idea of a regularly published "anthology" of Indy RPGs, especially if such an anthology was headed by an editor with excellent credentials (take Johnathan Tweet for example).  Such a product would be an interesting diversion from the normal purchasing routine, and would probably regularly produce a few ideas that got incorporated into larger games.

Downside, of course, is that the contributors to such a work would probably be paid game-industry magazine rates of a few pennies a word, and they wouldn't be developing any "publishing" infrastructure.  Such an "anthology" could become a trap for a certain kind of game/designer.

Ryan

[mearls]

(Note that as the '80s ended, thousands of independent toy stores were driven out of business by consolidation in the form of TRU and KayBee (and then Wal*Mart and Target), and a whole venue of locations once popular sales channels for RPGs vanished due to no fault of the RPG publishers - in many cases taking sales volume with them that was never recovered elsewhere.

But were the venues that went through this period of consolidation truly viable as RPG retailers? From personal experience, a lot of the toy stores around here, including KayBee, placed their RPG on clearance during the mid-80s.

I think this gets back to Ron's contention that early 80s D&D was a fad-driven event, and to some extent I can see that in terms of the retailers that carried it. Was there some other pressure, aside from low sales, that made toy, book, and mass market game stores drop D&D and other RPGs?

[Matt Machell]

I do like ( and would probably buy ) the idea of a regularly published "anthology" of Indy RPGs, especially if such an anthology was headed by an editor with excellent credentials (take Johnathan Tweet for example).  Such a product would be an interesting diversion from the normal purchasing routine, and would probably regularly produce a few ideas that got incorporated into larger games.

Ryan,

interesting you should mention this concept. Have you heard about the various anthologies being worked on on the Forge? Nopress RPG Anthology, due out for Gen Con, was born of a similar idea.

I know Luke Crane (the editor, abzu on these forums) is looking for somebody well known in the gaming biz to do the foreward...

-Matt

[Erick Wujcik]

I'm back from Los Angeles, so I'll respond to a couple of points.

First, let me add to the comments about the change in the RPG industry from the early 1980s to the late 1990s:

1. For Palladium, in addition to the stores described above, quite a few sales came through comic book stores. It started when TMNT was a black and white comic with an infrequent schedule, and encouraged quite a few comic sellers to stock other products in the Palladium line.

2. From 1991 to 1998 virtually all the 'mid range' distributors went out of business. Greenfield Hobby, for example, had a salesforce that was excellent at helping stores with re-stock. Those 'mega' distributors who survived, specifically Alliance and Diamond, took on a model that emphasized 'new release catalogs' and de-emphasized keeping steady product in stock for the long-term.

The distribution tier also has a problem with how to sell stuff (as opposed to take orders for) as a business model.  Alliance, for example, regularly solicits for thousands, maybe tens of thousands of SKUs.  They know they have a limited amount of time to talk to any given retailer, and cannot possibly "stock check" even the top 100 SKUs.  So instead they focus on hot, high volume frontlist sales, and expect that a store moving the frontlist will de facto move enough backlist to motivate the store owner to do their own stock checking an restock analysis.  Clearly, in many cases, for many unique products (like Amber) this system is a failure.

100% Correct... and a real warning to anyone interested in starting out small.

For what it's worth, when I was operating RPG International in the early 90's we regularly moved 1 copy of Amber a month, and it was unusual in that it was the only book from a "small publisher" for which we had such repeat sales - unusual enough that I still remember being surprised by it nearly a decade later.  What Amber managed to acheive was pretty amazing.

Thanks!

As I tried to point out to distributors, to no avail, Amber Diceless never lingered on store shelves.

TMNT is definitely not typical, by dint of the TV show alone.  But I think its supplement support was pretty significant for the time period in which is was made.

Again, let me point out that the TV show killed the TMNT role-playing game! The great sales of the TMNT RPG happened before TMNT went mass media, not after.

...but I agree that the supplement support was significant for the time period.

Erick

[daMoose_Neo]

Was there some other pressure, aside from low sales, that made toy, book, and mass market game stores drop D&D and other RPGs?

Correct me, but wasn't it about the mid-80's there, when the fad-based D&D caught, the whole deal with it being satanic cropped up? I was a wee lad of like 1 when D&D was in its 80's prime with the figures and cartoons and what not.
And, as I've said elsewhere, because D&D is at the forefront of role playing and most gamers minds role-playing itself was possibly considered "satanic"? I remember starting my role-playing group in highschool in 97/98 and getting looks from people and the comments "isn't that satanic?"
Those few incidences did leave quite a mark on the field. I often end up explaining it to people as acting with rules (but in highschool acting simply ment you were gay in the eyes of the jocks) and they still try to connect D&D "satanism" to role-playing as a whole.
Just saying that stigma on D&D did have an effect and probably influanced the clearancing and dropping of titles in the major chains. Look at the backlash Wizards took on a Pokemon card- a japanese symbol was considered offensive and upset A LOT of people quite unreasonably because it resembled a swatstika (I think it was the same general form but still appropriate in the context) and it was never actually released here.