Another thread at rpg.net had me answering a question about the cost of PDFs (in this case a PDF from White Wolf that cost $18). I know that the cost of electronic media comes up a lot, and there is a perception that above a certain point (usually around $15) that most games are too pricey...although we tend to grant exception to the ones we're really dedicated to. Anyway, I put so much effort into my answer there I thought it was worth presenting here, in expanded form, as well:
Scenario: a book, published by a major publisher (White Wolf, in this case) that costs $18 for the PDF.
Now, assuming that a book of this size is averaging 64,000 words, even assuming some of the lowest rates in the industry for a per-word deal on a flat rate (i.e. no royalty) basis of around 3 cents per word then the publisher needs to pay the author(s) at minimum $1920.00. If that seems like a good deal, then I suggest sitting down and writing a 64,000 word manuscript that is mechanically coherent and relevant to the game in question, as well as readable. (EDIT: And I should note that all commissioned products I've done in the past paid more than this figure I am quoting, and I'm basically a no-name author, so if I could command a higher price without any name recognition, you can bet my example here is a lot less than White Wolf pays one of its authors).
So at this point, the publisher needs to sell 164 copies to pay the underpaid and overworked author (assume two or three times more for a real author working for real pay with a big publisher).
Then we have the art. Art can get expensive, unless you're a small press publisher with no budget, in which case art is precisely as expensive as you're willing to pay for. I can demonstrate from my own projects an average art budget of about $300, which is enough for a commissioned cover from a small-time (usually decent) artist, and a few royalty-free generic art packages. Odds are that a product like the one you bought is getting professionally commissioned art, however. The artists are probably collectively actually costing more than the author. We'll conservatively say $3000 in commissions for the art pieces.
So they need to sell 256 PDF copies to pay the artist, more if he's good.
All of this assumes no one is getting royalties. For a big publisher like White Wolf I would expect a royalty situation is in place, usually.
Then we have an editor. He's probably staff, and gets paid by the hour. Maybe he spends most of his work month editing the product (and others). So he has a salary to cover. If he has any self respect I would imagine he's making around $2 grand a month or better, and if its a real business they may be paying $1,000 or more a month in benefits, health matching 401K and all that....but this varies heavily; a lot of game publishers are "part time" affairs these days, with very few full time staff, and people doing this more for love of gaming than money. Odds are strong that the editor, if he exists, only appears in Grade A publications anyway....editing is usually the first spot that smaller press publications skip over to save money.
There maybe advertising (which could get expensive). There might be more than one author (which can dramatically increase costs) or the author may be a relatively well known person so commands a lot more than the measly 3 cent/word minimum I estimate above. There may be artists involved who are much, much more expensive (but worth it).
There are other incremental costs...and of course the costs ramp up with the print publication which will always have a lower margin of profit due to distribution and retail costs.
I do tend to agree that PDFs often look pricier than they should be if you factor out printing/shipping/retail add-ons to the price, but there are other factors that overwhelm these considerations in the electronic format. The number of copies sold for PDFs will be lower; piracy will automatically eat into your sales, sometimes dramatically, and there is virtually nothing you can do about it except console yourself with the idea that maybe the pirates would never have bought it in the first place. People see electronic media as ephemeral and "free" because it lacks a place in meat space, so its automatically devalued in the eyes of many, and the sort of "culture of free information" online means that inevitably your product will be regarded with the same purpose and place as a Wikipedia article, given enough time. Consequently, the ability to make money on PDFs depends heavily on the willingness of the fan base to actually place value on the product and to support it with the recognition that, should the product become devalued completely that it will cease to exist as a viable enterprise in time. That leads us to situations sort of like the OSR movement, where lots of content floats around, bought by the same dedicated handful of people, but almost no one makes money on it unless they get insanely lucky.
Among small press publishers selling 500 print copies is awesome. Selling 1,000 or more is big business. Among big-name publishers these days selling 5,000 print editions is awesome and selling 10,000 or more is fantastic. PDFs do not typically sell like that, although there are exceptions, and if you're particularly savvy about how you market your game, you can potentially give away your product and still turn a profit; this is very rare (Eclipse Phase and possibly Stars Without Number) but possible. It's not something you can normally do with supplements. It is also possible to make a tiny profit on something by treating it like cheap advertising (Legend core) and potentially reap some profits from the follow-up books, but I have no way of ascertaining if this model has worked.
I believe that the world of F2P computer games online demonstrates a similar principle to the way PDF sales of RPGs work. They offer the product for free to all, but count on occasional so-called “whales” to actually do the buying....as it turns out 95% of people don’t pay anything, but 5% pay far, far more than is normal. In a sense, the crowd that decides "I will support this" ends up paying for the freeloader's experiences. In RPG PDFs I think a similar phenomenon happens, in which the pirate crowd all gets a free copy, but the much smaller portion of dedicated and honest fans actually end up paying a cost that is disproportionate to the perceived worth, precisely because there is almost no price point that can beat "free." Thus that $18 price tag is set in the hope that 500 real fans with money will buy the game over time, even though 4,000 others have downloaded it at Demonoid or something. The 4,000 pirates will never buy a game, plain and simple (or at best a very tiny percentage of them may cave in to guilt). And meanwhile, ventures like the $1 Legend rulebook will generate a ton of cheap sales, but the revenue is pathetic; it’s actually turned into an advertisement for the game's other more reasonably priced line of $12 PDF supplements, in the hope that some of those $1 sales will hook people onto more books bought legitimately. Not a bad strategy....but also quite a gamble.
FUN FACTS ABOUT PDF SALES FIGURES
Interested in seeing how many downloads a fairly well-known product's PDFs get over time? Places like Rpgnow don't usually offer up actual figures to anyone except their participating publishers, but two other sites do. Chaosium offers a download figure for its PDFs right here (to show off the BRP listings). Note that it's Big Gold Book PDF of BRP has had 904 total downloads to date, and another 514 from a separate listing for another release of the PDF (one which I think was revised with bookmarks?)
Then take a look at Outpost 19, a module for BRP. It's had 198 downloads. Curiously it's free PDF of handout (stuff to use with the module) has had over 2100 downloads. Maybe because its free, or people wanted to get a sense of what the module is like based on its supplemental offerings (Chaosium doesn't offer free previews like rpgnow and e23). Hopefully not because 1900 people pirated it and needed the handouts....but based on some figures I've seen, I'd believe it.
Magic World now has 199 downloads as of this time. That's very heartening to know that that many people are interested even before a print edition is out.
Steve Jackson Games offers a similar tracker on their site. You can check it out here. This one lets you play with the parameters a bit, but its interesting that over an eight year span the best selling PDF is GURPS Starships with 1,802 copies. Don't let the fact that the 20th most popular book in that same period is GURPS Supers with 978 downloads. This means that every other product on e23 has sold less than GURPS Supers.
Yes....just under 2,000 copies for the top selling PDF for a game that I think could arguably be considered one of the iconic Big Five of the RPG hobby (D&D, Hero, GURPS, World of Darkness and Pathfinder....my list, definitely open to interpretation), and the #20 spot holds at 978 copies sold, which means that the 150+ other books on the site, plus all the affiliate publishers with products on e23, are under that 978 number.
If you're interested in doing the footwork sometime, go dig through some torrent sites that host downloads with RPG PDFs, and which track number of downloads. It will be very sobering.
There are a lot of gamers out there. But most of them are cheapskates and pirates (at least, in netspace). *
Anyway, if you think big publishers are still selling five digit sales regularly....or that PDFs regularly even break four digit sales numbers, looking at some stats like this can be sobering. Given that the majority of GURPS PDFs are priced at $10 or less (and only the core 4th edition manuals are more expensive) it's hard to suggest their figures are low entirely due to price point.
I do wonder if Steve Jackson Games would have better sales numbers on One Book Shelf, though. Worth thinking about.
*This may be a bit harsh. There's another blog's worth of discussion on the nature of our hobby and why piracy is so common. Maybe next week...