Challenges and Solutions for the RPG Market

[Sean P. Fannon]

"Once more unto the breach, dear friends..."

Long have I heard the muses whisper of this place, and long have I listened to the bards tell tales of the magic that abounds within. Thus, I have at long last endeavored to find the passage and make my way here.

Hope I don't spill too much stout on the carpet and get tossed out.

Those who know me (and I do see some familiar faces around the place) know that I've been plugging away at this business in some fashion or another since 1988. I now have what I believe is a fairly special viewpoint from which to observe and share what I've learned. I am both full-time employed in our industry (as the Events Coordinator and Clubs & Organizations Coordinator for GAMA/Origins) as well as working still as a game designer and writer (see signature below). In my own efforts to bring Shaintar: Immortal Legends to market, I've had a chance to see how business can be done effectively at the ground level for a small publisher.

Really, for any publisher.

I've taken this education and applied it to an initiative I've launched in my role as an employee of GAMA, and I'd like to share it here to give you all a heads-up on it, as well as get your impressions.

What follows this post is the "one page" that was constructed for review by publishers, distributors, POD printers, PDF sales sites, and retailers. It is meant to point at a possible way to do business that will not only allow smaller publishers to have books in stores again, but also alleviate the sense that retailers feel they are being unnecessarily cut out of the market.

I've been looking forward to coming into this community and participating, but I figured I should come armed with something worthwhile to talk about. I do hope you agree this is a worthy topic.

[Sean P. Fannon]

RPGs, PDFs, POD – Putting Games Back Into Stores

The RPG industry has been in a steady decline, with virtually every publisher facing great difficulties in bringing products to market. Many have chosen to forego printing books altogether, instead relying on electronic versions (PDFs) to sell either directly from their sites or through such online stores as RPGNow, DriveThruRPG, Paizo, e23, and others. Some of those same publishers, alongside others not going the PDF route, have turned to the latest iterations of POD (Print On Demand) to produce highly limited runs of their books, mainly for sale from their sites or at conventions.

These evolving technologies and practices offer an extraordinary opportunity for publishers, distributors, and retailers to all regain some ground in the market. Books can be printed and sold through the available channels, just as before. Distributors and retailers can get a piece of a market that has been held apart from them up to now. Consumers can get real printed versions of the game books they want, which is their main concern with PDF transactions currently.

The gist of the process is to incorporate the availability of PDF content and the advanced capacities of POD operations into an adapted three-tier business-to-business chain that functions much like the one currently in place.

PUBLISHER --> PDF-TO-POD DISTRIBUTION SOURCE --> RETAILER --> CONSUMER


The PDF-to-POD Distribution Source can be expressed in one of three general models:

1) The POD as Distributor Model, whereby the Print On Demand shop handles both the printing and distribution of product to the retailers.

2) The POD + Distributor Model, whereby either a POD house marries up with a Distributor, or the Distributor starts up a POD operation in-house.

3) The PDF Seller as Distributor Model, whereby an Internet PDF seller, using whatever POD options they have, handles the distribution of product to the retailers. Alternately, such an operation can work with Distributors, acting more as a fulfillment house.

GAMA is working to help coordinate efforts to maximize efficient communication, exchange of ideas and needs, and cooperative efforts towards mutual revenue goals for all tiers. This can be accomplished through facilitated meetings and dialogues and other educational efforts.

Sean Patrick Fannon
Events Coordinator, GAMA
614-255-4500
events@gama.org

[Luke]

Hi Sean,

Welcome!

I'm not quite an "industry veteran," but I do have a fairly popular game printed on a traditional press that is carried in distro. That said, my gut reaction reading your one-page is "pdfs are not responsible for the decline in rpg sales." I'm not even certain there has been a shrinkage in the rpg market, but if there has been, I suspect that it's been caused in part by the three-tiered model rather than in spite of it.

Burning Wheel is in Alliance distro and for reasons I cannot fathom, I have been relegated to the fabled, "Alliance reports your game is out of stock" status. Retailers who know about BW and who regularly order it have trouble getting it through distribution. These retailers then lose sales as the customers look for other venues to purchase the product. THAT, to me, seems more of a problem than pdf/pod production methods. In fact, POD/pdf production and distribution seems more of a reaction to the failure of the three tiered model than anything else.

-Luke

[Joshua A.C. Newman]

Hi, Sean.

From my own, limited research, I would have to sell some four times as many books to retailers as I sell myself. If a distributor could make that happen, awesome: sales lead to sales, so that would eventually make the game more popular. But I have some rather profound doubts along those lines. My first game is a very weird one, like so many here, and I'm competing for shelf space with more mainstream products.

Even my next game, Shock:, is unlikely to be able to compete on a shelf with (unnecessarily) thicker books. And I still have to sell four times as many. I have deep doubts that a distributor would see it worth the effort to promote it above something that's a more obvious sell.

Man, I hope I'm wrong, though. I'd love to have my game in stores if it was really selling. I'd love to see a way to support my FLGS, have my books in places I hadn't thought of, reach people I otherwise wouldn't.

So I'm all ears. My skepticism is purely defensive and not necessarily reasoned.

[Ron Edwards]

Hello,

I have done some serious investigation of the three-tier system and its operation, or mis-operation.

Bluntly, it is a broken model. The notion that customer demand drives store demand, then store demand drives distributor orders, is simply inaccurate.

The communication among retailers and distributors is best described as Brownian motion of hearsay, to the point where repeated insubstantialities become agreed-upon as substantial, annually.

Publishers make money mainly by convincing retailers to deep-order, and they do so by manipulating the process described above.

Decisions which optimize the stability and profits of the distributor are not those which suit the market as defined by customer usage. Since those distributor-decisions essentially put the retailer in a position of no choice, the customer demand is literally strangled at the store. Store customer "culture" is largely defined by agreement with the retailer, which requires denying any actual acknowledgment of what makes play fun or not fun.

The chief victims are the retailers, the smaller publishers, and the customers, who respectively go out of business, go out of business, and abandon the hobby, in droves for all three. The chief beneficiaries are the distributor and the larger publishers (usually subsidized through outside funding!) who practice scorched-earth publishing, launching "new again!" lines on a regular cycle. It is, effectively, a large-scale confidence game marked by generation after generation of throwaway coffee-table books.

The model followed by the more successful publishers who participate at the Forge is much, much more effective and basically closer to the economic bone. The beneficiaries are the creator/publishers, the customers, and those few retailers who discover to their shock that they can sell copies of, say, My Life with Master indefinitely, if not in handfuls. The latter are, bluntly, the most superficial and least necessary portion of the model (although I love'em for their efforts).

The three-tier is irrelevant, and frankly, dead on its feet. The internet and the few wised-up retailers are sufficient for the success of creator/publishers and people who love to play the games. To secure convenience for the retailers' ordering, fulfillment houses such as Indie Press Revolution and Key 20, who are not distributors, are sufficient.

Best,
Ron

[Sean P. Fannon]

I just want to thank everyone who has piped in so far. I certainly appreciate the comments I am reading, and I fully understand where they are coming from. I guess what I am getting at is that, through a combination of POD technology and teaching the retailers that these products exist and are worth adding to their stock (or at least offering to order them) is just extra sales for all concerned.

Two of the key components I intend to shop to the retail portion of the equation are:

1) Customers of the PDF market want physical books and print products and would be happy to buy them if they were available through a retailer.

2) Customers would be happier not paying up to 25% over the cover price of the book in shipping charges.

Now then, even those who generally feel that the Three Tier system is broken could benefit from the ability to sell into the retail chains, right?

[rpghost]

For what it's worth... RPGNow is doing exactly that. We will be releasing 5 or so books each month starting in Febuary 2006. They will all be POD based on solicitation orders and stored at distributors on consignment as to KEEP THEM IN STOCK at all times.

http://www.rpgnow.com/retailstore.php

I'll try to let you all know how it goes. We'll be at GTS if anyone cares to stop by and check them out.

James
P.S. We pick from the best/proven products on RPGNow and use them.

[Luke]

2) Customers would be happier not paying up to 25% over the cover price of the book in shipping charges.

What's the alternative? A costly in-store POD machine that going to require serious investment by the retailer and a possible mark up of the retail price of games? Or retailers who order POD books from a service like Lulu or rpghost? (which is no different than what is going on right now).

-L

[Joshua A.C. Newman]

You know, I've spoken to our local flgs dude, and this is what he said:

• "You guys aren't professional because the production values aren't high enough."
- This is true enough for a lot of our pieces, Under the Bed, included. It sure doesn't have to be, though. It takes editing, it takes design, it takes printing, in addition to the normal stuff.

• "Your volume has to be higher so you can afford to leave the "hobbyist" market and not have to charge so much."
- The output of this is true enough for him. He has to be able to charge a normal amount for his games and I don't want to give up that much of my cut for a couple of sales. Dunno how to work this one out.

• You aren't with a distributor, so I have to keep track of everyone's wife who drops off five copies at a time. I don't want to keep track of that.
- Fair enough! Let's sort that out, assuming we get the above one worked out. I bet we could figure out some sort of indie distro system like RPGNow is doing.

[Adam]

- Fair enough! Let's sort that out, assuming we get the above one worked out. I bet we could figure out some sort of indie distro system like RPGNow is doing.

Err, don't Indie Press Revolution and Key 20 already do that for a number of companies?

[LloydBrown]

Publishers make money mainly by convincing retailers to deep-order, and they do so by manipulating the process described above.

In my experience with Alliance, ACD, Gameboard, GAMUS, Premier, Centurion, and Excelsior, this is so patently untrue as to be ridiculous. If by "deep", you mean A SINGLE COPY, then, yes, you are exactly correct.  With a distributor, a retailer can restock on a daily basis.  You don't need to stock deeply.  The only RPGs I carried more than one of were the PHB and maybe 2-4 top-tier core book titles.  That's right:  fewer than 5 titles in the entire store. 

The goal for a retailer is to stock as thinly as possible while avoiding stockouts.  Distributors know that.  If you choke a retailer's cash-flow by selling him more copies of something than he needs, you lose a customer. 

Distributors offer an excellent service for the retailer.  If it weren't for distributors consolidating vendors, a retailer could easily spend 50 hours per week just in ordering, which is only one element of store management.  Yes, it's the largest and most important, and I would go outside of the distribution system for sufficient cause.  Example:  I found a dice company that cheaply produced dice in bags carrying my store logo and information pre-printed.  Furthermore, I could make at least a fair margin (46%) on some of their products, and an outstanding margin (70%) on others! 

The chief victims are the retailers, the smaller publishers, and the customers, who respectively go out of business, go out of business, and abandon the hobby, in droves for all three.

I can't imagine how distributors lead to customers leaving the hobby, since they don't interact with customers at all.

It is, effectively, a large-scale confidence game marked by generation after generation of throwaway coffee-table books.

Ah, I think I begin to see a part of the problem.  With your scornful reference to "coffee-table books", you seem to still think that RPGs dominate the gaming industry. Even at War Dogs, which was known for its role-playing, and has its number skewed by my presence (I sold 80+ Kalamar titles because I wrote it, which is about 20 times the average RPG sales figure), RPGs accounted for no more than 32% of sales in any given calendar year.  I'd say that for most stores, the number is 20%.  CCGS & miniatures make money and contribute more to a retailer's success.   

These things affect a retailer's ordering decisions.
1.  Potential profit
2.  The success of prior releases (if a mfr I know).
3.  Customer demand (if new)
4.  Other stores reporting success (if new)
5.  Availability

(you'll notice that most Indie titles fail on 3-5 of these issues)

Less important (but still considered issues )
1.  Fit with other products in the store
2.  Shelf space required
3.  Packaging & size
4.  Appearance

(here Indie does better)

[LloydBrown]

You know, I've spoken to our local flgs dude, and this is what he said:

• "Your volume has to be higher so you can afford to leave the "hobbyist" market and not have to charge so much."
- The output of this is true enough for him. He has to be able to charge a normal amount for his games and I don't want to give up that much of my cut for a couple of sales. Dunno how to work this one out.

The retailer afraid of a high price is missing the point.  If the product sells with a reasonable velocity, a high price is not bad.  The key question is, as always, how fast will this product sell?  Accurately predict that one, and you have the knowledge to win the game.

[Sean P. Fannon]

This discussion is going exactly in the directions I hoped it would.

First off, I want to thank James from RPGNow for piping in; I am personally grateful to him for participating in our efforts. He's right - he was already headed in this direction, which just goes to show that the time has come to start exploring these options.

Please bear in mind that there is a string of elements that should be in play to make this really work. The only way it's worth it for a publisher to invest energy in this direction is if they are already investing the "sweat equity" into producing a print-worthy PDF. Once that's done, the many POD options that exist more than facilitate the next step for them.

There are a few ways this "system" can work, to include relationships involving combinations of POD printers, PDF sales sites, fulfillment houses, distributors, and the publishers themselves. We will be talking about this at great length at GTS (GAMA Trade Show), but I am hopeful that such processes will be well underway for at least some folks so that we can look at how it is working already.

I hasten to point out that I am not seeing this as a miracle cure for what ails us. I see it as a means to open up additional revenue streams while both assuaging accusations in the retail sector about being "cut out" of sales opportunities and making it possible for customers to go into an FLGS and get the print version of a product previously only available as a PDF.

One possibility I see is this: Once the distributors are more fully vested in the process of adding POD products, as needed, to the list of products they can ship as requested from retailers, all of the publishers will be on a more even playing field.

At that point, it goes back to the old standards of competition - create a quality product, and spend the time and money needed to promote and sell that product. It won't matter if you've printed 10,000 and they are sitting in a warehouse, or if you have a file stored on a machine at RapidPOD or on RPGNow. The customers will demand what they want (from what they know about), and the retailers will be able to order them just as easily.

That's the ideal, anyway.

[Ron Edwards]

Hello,

The discussion is going where you wanted, Sean, because you are not understanding what is being said. Based on what you've replied to me, I don't think you grasp anything I'm saying. "Deep order," for instance, means lots of books, and it can refer to a line rather than a single title. If you think retailers are not pressured to deep-order lines, then you must not be paying attention. They are using comics-based (periodicals) strategy, and it's killing them.

Similarly, PDF can be part of a given publisher's strategy, but it does not "replace" books. That's a red herring.

Finally, do not try to use the kind of childish, flip statements that routinely score points on the WHEEZ-L. This is a different sort of place. "Distributors cannot affect customers because they do not meet them" is a moronic statement, inadmissible in the most basic economics class. When you type something like that, you make it more likely that any of your other points will be dismissed.

Perhaps it would help if we examined what industry means. The conceit among the participants in the three-tier system is that existence of stores is the "industry." When stores stumble or their staff is confused about what to order, people cry out that the "industry" is in trouble. However, as I see it, stores or fulfilment houses or distributors are middle-men, who can exist successfully only when the publisher-customer relationship is real and sustainable. To me, an industry exists when that relationship permits middlemen and other auxiliary professionals (artists, etc) to make money as well.

In other words, all these years, it's been a mere "industry" as publishers and customers stumble about in confusion, and a few middlemen became skilled at nipping a few profits out from whatever happened to be "failing slower" at the time. A very few publishers manage to persist only through outside subsidy and scorched-earth (con-man) tactics. That situation persists today, and as I said, it's so dead that it stinks, despite the constant mutual reassurance among its participants. GAMA persists as a vehicle to suppot that mutual-reassurance process.

The current model followed by Adept Press, Burning Wheel, and others is different in every respect, because it is an industry - people buy our games and play them, then encourage others to do the same. Profits are sufficient to fund future projects and also to pay artists, etc, up-front and without constant fear of cheating (unlike the "industry").

Now, it is certainly a cottage industry, which as I see it represents exactly what the product is, at present, in our society. As with most cottage industries, customer satisfaction has to be the first priority, or the publisher fails. To date, apparently, customers get their books without whining or bitching about shipping costs. Those costs can also be cut by sharing them among publishers (here is where IPR and Key 20 help, again), or as I've done in the past, taking a certain percent of them upon myself because my copy-print cost was low, keeping margins nice and high. We also provide support and interaction beyond the imaginings of other companies. These are the same tactics used by many small businesses, and they work.

Best,
Ron

[LloydBrown]

Hello,

The discussion is going where you wanted, Sean, because you are not understanding what is being said. Based on what you've replied to me, I don't think you grasp anything I'm saying. "Deep order," for instance, means lots of books, and it can refer to a line rather than a single title. If you think retailers are not pressured to deep-order lines, then you must not be paying attention. They are using comics-based (periodicals) strategy, and it's killing them.

Finally, do not try to use the kind of childish, flip statements that routinely score points on the WHEEZ-L. This is a different sort of place. "Distributors cannot affect customers because they do not meet them" is a moronic statement, inadmissible in the most basic economics class. When you type something like that, you make it more likely that any of your other points will be dismissed.

I *think* you're mistakenly attributing my statements to Sean, but it doesn't affect the discussion.  Let's continue.

You're right in that distributors urge stores to carry product lines.  There's a reason for that: product lines make money.  Single products generally don't.  That's the reason why so many retailers seem hostile or at best, unappreciative of indie pubs--there's no money to be made.  I sold Amber at War Dogs.  Once, maybe twice, I made a customer giddy with glee because I had it on the shelf.  Once or twice more, I sold a copy to somebody who had heard of it and wanted to give it a try.  Yes, I made $65.50 off of that game in 5 years of ownership.  Why did I carry it, then?

I considered carrying small-press titles not a product to sell but a sign that War Dogs is a large, well-stocked game store.  I did it to reinforce a brand that I deliberately cultivated.  It's clearly not a profit-generating measure on its own.  Even given that strategy, however, I only carried the titles that were best-know, or at least, best-recommended by other retailers who had success with them.  There are hundreds of small-press RPGs, and to accomplish my goal, I only needed a handful. 

(In that same vein, it's easier and more profitable to carry a stand-alone game by a known publisher available through distribution than to pick up an indie pub game I'd have to order directly from a publisher who, from the tone of *some* of these posts, doesn't see a need for my existence and resents every point of discount I require.)

Indie publishers claim that their games are "better" than what's on the market.  I absolutely cannot measure in any quantifiable way how much fun my customers have with the games that I sell them.  I absolutely CAN measure how much they spend on follow-up titles for games that they buy IF those games are available for them to buy...except with most indie games, because there's little or no follow-up product to buy.

As far as your comment about WHEEZ-L, I've heard of the list but never seen it.  If you're accusing me of pandering to the masses, go ahead and say it.  If I've made an unclear post, point it out.  Drawing another inaccurate conclusion because of a comment I made doesn't give points to your own credibility. 

One last thing:  disagreement doesn't imply disrespect, Ron.  I think you do what you do very well, and I respect your opinions.  I just don't agree with all of them.