Being a Johnny come lately, I've only recently stumbled on an interview with John Tynes about the gaming industry. In his interview over at Ogrecave.com (http://www.ogrecave.com/interviews/johntynes.shtml) he was asked what he would do differently when he started Pagan Publishing.

Here's what he said:

Set it up as a not-for-profit corporation instead of a for-profit corporation. The key difference in this regard is that a for-profit corporation expects to provide rewards to its owners, which has never been an expectation we've operated under; being not-for-profit doesn't mean you can't still hire freelancers, pay salaries, sell books, etc. We could have set this up as a not-for-profit instead and saved a lot of paperwork and taxes over the years. Also, I would have done a new RPG years earlier. We wasted a lot of time.

Awesomizer wrote: Has anyone else ever thought about operating this way? Do the pros of a not-for-profit acutally outweigh the cons? I was floored when I read it, but it seems to make a lot of sense in a D20 entrenched market.

Hello,

Welcome to the Forge, Awesomeizer.

[Side note: b_bankhead, terse and flip commentary is never welcome here. Especially not to a new poster. Where're your manners! Seriously.]

I was surprised to find that for-profit expectations are rare in role-playing publishing. Given that, I suppose Tynes' notion is superficially valid.

However, I've always taken a profit-oriented approach to Adept Press (even before it was Adept Press), and to date, it's been successful.

Best,
Ron

Ron Edwards wrote: Hello,

I was surprised to find that for-profit expectations are rare in role-playing publishing. Given that, I suppose Tynes' notion is superficially valid.
Best,
Ron

At risk of stirring the pot a bit further, all while being totally unaware of whether a non-profit group is feasible for publishers of RPGs ...


What if a consortium of game publishers / designers formed a non-profit group for the publication, fulfillment and distribution of their games? It might be rather like an co-op, perhaps. Members pay dues, then the co-op "board" oversees the production and publication of a book. The book could be nominee one, or -- better yet(?) -- could be a compilation book of several games in one. All profits of the publication go to compensate an editorial staff (editing, layout, fulfillment, marketing, etc.), or even more simply roll back into the next book or project.

I'm not really suggesting we -- or anyone -- DO that necessarily, I'm just tossing it out there as further consideration for the non-profit idea.

I started but abaonded a post on this before... my thinking is that as a profit making industry RPG is too small, and the fact of the matter is that, given how much is self-authored, we have only been going down this route to have something printed and distributed.

So, I too think that it is possible that, on the basis of print-on-demand and PDF and whatnot, a volunteer umbrella group which acts to consolidate resources (bulk purchase effect) and ccordinate activity is quite possible. Big voluntary groups do exist and do work, they just need a clear social contract and official elections and so on.

But there are some downsides; this is the death-knell of the FLGS as we would no longer produce physical product. Maybe thats no big deal, maybe it is.

Matt, I hinted at this idea in the Wallis thread with John. I think its a great avenue to explore the possibilities of. Order taking and payment collection for direct sales have become incredibly easy via technology. Its fulfillment that's still a labor intensive PitA (save for PDFs which if their use was universally accepted would make even fulfillment incredibly easy).

Seems to me that every group I've heard of that will "handle fulfillment" for you does so as a third party looking for a profit. Obviously...

But it also seems to me that there ought to be a way that a number of like minded small and mid tier companies could combine their fulfillment needs in such a way that they aren't duplicating the same cost center functions. By spreading out the expenses and charging realistic amounts for shipping and handling, there should be a way to pay for space and a fulfillment person so that it essentially breaks even. That is doesn't incur the excessive cost of trying to establish a fulfillment center by your self and doesn't involve giveing some distributor a large chunk of your potential revenue to handle something as routine as shipping.

I've just been throwing ideas around in my head, but it seems to me that if each publisher through 100 copies of their product into a central "warehouse" (likely just a closet at first) and payed a $1-2 stocking fee; and shipping and handling were charged at an appropriate rate, that between those two sources, the entire fulfillment center operation could be paid for free and clear (with a sufficient number of participants for economies of scale).

At that point you have a system that is efficient and has access to a sizeable liabrary of games, particularly if they are games by designers with name recognition among retailers and fans. Not all, but a sufficient number of retailers should become willing to order those games from your website to be fullfilled by your fulfillment center directly...cutting out the distributor and their cut entirely...the retailer can get a bigger cut and the publisher can keep a bigger portion. The added profit per book should go a long way towards making up for those stores who continue to refuse to order that way.

If you have enough product with enough quality with enough hype with enough designer cred being only available through such an alternative source, game stores will have to get on board or explain to their customers why they can't get game X that everyone is excited about. But if the retailers make more money per book too, eventually that number should be less.

At the very least I think if enough "name people" got involved, the distributors would be forced to take notice and make some changes in their business practices...which would be a success in an of itself.

I don't know enough about the mechanics of it to know how every detail would work...but conceptually I don't see a reason to assume out of hand that it wouldn't.

Ron Edwards wrote: Hello,

Welcome to the Forge, Awesomeizer.

[Side note: b_bankhead, terse and flip commentary is never welcome here. Especially not to a new poster. Where're your manners! Seriously.]

Ron Edwards wrote:

However, I've always taken a profit-oriented approach to Adept Press (even before it was Adept Press), and to date, it's been successful.

Best,
Ron

Hi b_,

Yeah, I forget occasionally that you haven't been around here long ... several recent games illustrate a new level of success in role-playing publishing.

It begins by defining "success" as "staying in the black" relative to your costs. It continues by adding "... time unit" depending on the publisher's own plans and needs. I like to add "people continue to play the game" as a corollary or underpinning, because I'm idealistic that way.

Sorcerer is, in these terms, very successful. Adept Press makes enough money to fund its new products. Occasionally things are tight; this past year, I blew a lot of bucks on the big GenCon Forge booth, which largely promoted the success of others at the expense of Sorcerer (in terms of booth sales), and that redline corresponded unpleasantly with the demand for my second print run. But in the main, I do very well, both in direct sales and at the stores.

Sorcerer's sales profile is to sell slowly and consistently. Persons A and Q buy it, and over the next couple to six months, they play it. Some or all of their players buy it during that time. Word of mouth about these games percolates across friends, and eventually persons B and R buy it, and start up their groups. This continues steadily without evident slacking.

Another good example is Obsidian, from the Apophis Consortium. Another is Little Fears. Another is The Riddle of Steel. Another, although with a proviso or two about its own production costs, is Orkworld. All of these games have demonstrated enough store and direct-market power to meet "success" in my terms, or rather, in the respective publisher's version of my terms.

However, "success" in my terms (staying in the black, can afford the next book, people play the game) doesn't mean jack shit to most retailers. To most of them, "success" means Pokemon, for a couple of months. Or it means everyone who already owns D&D buying the next D&D book. They think in terms of relative quantity, comparing games against one another, rather than in terms of long-term use, comparing games against their own costs.

Sorcerer therefore is perceived to do well in stores which track customer satisfaction over the long-term and pay attention to continued sales based on that satisfaction. Role-playing takes a long time to organize and carry out; word of mouth about real play takes months to occur and more months to have an impact. Store owners who track "spike" sales only and fail to re-order anything else, if they think about it at all, think Sorcerer is a little by-product which ought to have vanished by now, and if they wonder briefly why it hasn't, maybe they incorrectly assume that it's vanity press (funded by some external source) and forget about it.

So basically, Adept Press is a hobby (insofar as it's part-time) and a business (insofar as it's profit-driven). It's a fine source of cognitive dissonance for people, but it's viable, and it's not a fluke.

As a thought-experiment, I suggest that you consider which "success" you are using. Considering the fairly high level of bitterness and disillusionment you've expressed in previous threads, I suspect that the store version has embedded itself, perhaps without your full consent, into the value system you're using.

Whups - this has been something of a detour from the post's topic. Back to the non-profit idea, eh?

Best,
Ron

So, if I have it correctly, the advantage of the non-profit company idea is that you only get taxed once on the income? Do I have that right? If so, why haven't more companies gone to this model. I thought that you couldn't legally hide profits from taxes this way. That to qualify for "non-profit" status that you had to be a charity, or public service (CPB) of some sort?

I think a lot of confusion here is that I'm not sure we're all on the same page as to what "non-profit" means. Can we get some clarification?

Mike

Mike Holmes wrote: That to qualify for "non-profit" status that you had to be a charity, or public service (CPB) of some sort?

I think a lot of confusion here is that I'm not sure we're all on the same page as to what "non-profit" means. Can we get some clarification?

I am definitely *not* an expert on non-profits, however, it's my understanding that there is nothing wrong with a non-profit orgainization making a profit. Regulations governing non-profits deal with how surplus funds are used.

I've been browsing the Nonprofit FAQ at the Internet Nonprofit Center: http://www.nonprofits.org/npofaq/
In particular, checkout the section on "Can a nonprofit be a business?", http://www.nonprofits.org/npofaq/01/01.html

Your friendly librarian at work,
Julie

Looks good.

Two Basic Types of U.S. Business Organizations:
For-Profit and Nonprofit

For-Profit Organizations
A for-profit organization exists primarily to generate a profit, that is, to take in more money than it spends. The owners can decide to keep all the profit themselves, or they can spend some or all of it on the business itself. Or, they may decide to share some of it with employees through the use of various types of compensation plans, e.g., employee profit sharing.

(We'll read later about the legal forms of a for-profit, including sole proprietorships, partnerships and corporations.)

Nonprofit Organizations (the following information, in large part, was developed by Putnam Barber, President of the Evergreen State Society in Seattle, Washington)
A nonprofit organization exists to provide a particular service to the community. The word "nonprofit" refers to a type of business -- one which is organized under rules that forbid the distribution of profits to owners. "Profit" in this context is a relatively technical accounting term, related to but not identical with the notion of a surplus of revenues over expenditures.

Most nonprofits businesses are organized into corporations. Most corporations are formed under the corporations laws of a particular state. Every state has provisions for forming nonprofit corporations; some permit other forms, such as unincorporated associations, trusts, etc., which may operate as nonprofit businesses on slightly (but sometimes importantly) different terms.

--

So the actual What To Do would be find out how to file papers under state, federal and potentially international levels.

The major distinguishing feature is that there is no owners equity, no extraction of revenues based on having invested. There can be pay and benefits (but not for the board it seems). You can't have performance-linked pay. The board should be composed of the clients served by the NP; this would be a point of making a clear distinction as to the role of publisher I guess.

I reckon it could be done; it would take work, some of it legal. There would have to be a very clear mission statement and articles of association.

H'm,

Is anyone else thinking "fulfilment house" thoughts, especially in terms of small press direct to consumer?

Best,
Ron

Small press sure. That might be the place it HAS to start with people who don't already have vested committments to the status quo.

But for it to ever become something more than a small time experiment (potentially a very useful and successful experiment for those of us using it) it would really need to attract interest from the mid level players.

Ultimately if the "success" of such an endeavor is to be broader than "did it allow me to get my game to my customer" it would have to grow to the point where it provided a "proof of concept". In other words, once the pioneering had been done, the distributors would be forced to reevaluate their business model to account for this new alternative.

This sounds like a great idea, but I don't think the prospects for meaningful nonprofit (that is, tax exempt) status are good. There's more to nonprofit than not earning a surplus; there are a whole raft of strict rules for what types of activity can be engaged in.

From a business services Web page:

What purposes are valid for a nonprofit?

To qualify for federal tax-exempt status, the nonprofit corporation must be organized and operate for some religious, charitable, educational, literary, or scientific purpose permitted under 501(c)(3) of the tax code.

[snip]

The literary purpose includes writing, publishing and distribution of books which are directed toward promoting the public interest rather than engaging in commercial book writing and selling.

The educational purpose is a broad purpose that allows instruction for both self-development and the benefit of the community.

To be more specific, the test for a 501(c) is that your primary source of revenue cannot also be your group's primary activity. That makes the publishing company idea somewhat dicey.

I think a better bet would be not to worry about "not for profit" in the IRS sense at all.

Rather how does one design a fulfillment center that is not intended to be a profit center for the business. The biggest downside to using a distributor or even a service like Wizard's Attic is that they (rightly so) expect to make a profit.

Can the essential fulfillment services piece of distribution be organized in such away that it mostly or completely pays for itself, but isn't owned by an independent third party looking to make a profit off of providing the service.

I'm thinking the answer to that is no for individual mid-tier companies. Its too much work for the designer/owner to do on an ongoing basis (and not wind up like James Wallis) but the company is too small to afford to hire someone full time to do it.

I'm thinking the/a solution lies in the willingness of small and mid tier publishers to pool their resources into a common fulfillment center. By combining several companies there would be a better chance of having enough product being moved to justify and afford the expense of hiring a person responsible for handling fulfillment. A centralized place to place orders rather than every company having their own direct sale website would also serve to enhance cross selling and make the site more of a "first stop destination" the Wizard's Attic site is for me (or at least was before it became d20 central).

Since the fulfillment center would be essentially owned by the publishers it wouldn't need to generate a seperate profit to pay a third part, and those profits that usually accrue to the third party would instead be captured by the publishers.

Eventually if the number of member publishers (and recognizeable personages of industry repute participating) were to grow, it would be become a viable alternative for retailers to place orders across multiple companies and product lines.

Ron Edwards wrote:
Is anyone else thinking "fulfilment house" thoughts, especially in terms of small press direct to consumer?

hmm, me too. I suspect it would be difficult to claim that the NP is doing pro bono work if all it is doing is acting as facilitator between established market movers. I would expect the response would be "so why donl;t you just do this as a business, if you think there is demand?". An organ aimed at writer-support, or as a hobby advocacy body* whic, as it happened commissioned printing of games that otherwise would not see print, might have a better case to make.

* Considering the degree of slander directed at RPG, I think we could easily make the case for an advocacy "gamers rights" (shudder) group. To work for the ability to game free from harrasment and persecution. The only problem I see is it is rather unlikely the gamer community would cohere around such a body. But that doesn't necessarily matter.

Non-profit organizations have filing requirements beyond those of for-profit businesses. You have to have a board of directors, by-laws, board meetings...it's a real pain in the behind.

Unless you are planning on both not making any money, and putting a lot of effort into soliciting donations, it is not worth it. That's beyond the question of defining rpg's as "educational" or "religious" material.

If you want to run a company that happens to not make money, that's easy. Just run a company that happens to not make money. If you don't make money, you don't have to pay taxes.

MK Snyder wrote: If you want to run a company that happens to not make money, that's easy. Just run a company that happens to not make money. If you don't make money, you don't have to pay taxes.

You can ask for, and recieve, donations; and many large corporations offer matching funds for employee donations. The donors in return get a tax break.

Plus there are government contracts available, or grant monies from foundations and universities and churches and what-not.

For none of which I foresee an RPG publisher or fulfillment house being eligible, unless it was linked to an artistic or cultural small press house, or psychological services for homeless youth, or the First Church of Gygax. All of which would have to be convincingly documented and I woul dhate to see the newspaper stories that could result.

MK Snyder wrote: You can ask for, and recieve, donations; and many large corporations offer matching funds for employee donations. The donors in return get a tax break.

Plus there are government contracts available, or grant monies from foundations and universities and churches and what-not.

For none of which I foresee an RPG publisher or fulfillment house being eligible, unless it was linked to an artistic or cultural small press house, or psychological services for homeless youth, or the First Church of Gygax. All of which would have to be convincingly documented and I woul dhate to see the newspaper stories that could result.