Friday, January 11, 2008

OGL Early Adopters

It's interesting reading various blogs from game company people discussing the $5,000 OGL early adopter fee. Some companies are in whole hog. Most notably Necromancer Games and Goodman Games have 4E products announced, mostly adventures and re-hashed supplement books. Blah.

Green Ronin and Mongoose are more on the fence, but both of those companies have viable non-D&D products that they've been relying on of late. They can afford to sit back and analyze a bit. Mongoose made some interesting economic observations about the license fee:

Under a 'typical' licence agreement, with royalties (which this deal is not), that $5,000 might be matched against 10% wholesale royalties, which is effectively claimed off each book sold. If you assume a $24.95 book has a 60% discount in the trade, you get $9.98 for each book sold - thus you need to sell $50,000 worth of books, or 5,000 $24.95 books if this deal is to match a 10% licensed arrangement with, say, Warner Brothers or Sony. Sell 10,000 such books, and the equivalent royalty rate is 5%, which is by no means a bad deal. Sell 20,000 and it becomes 2.5%, and so on.... So, the question becomes, can we sell the minimum 5,000-odd books to make this worthwhile?

Mongoose was established as a D20 company and they've done very well with D&D in the past, so no doubt they should be able to do well with 4E, provided customers don't balk at their shoddy publishing quality. We'll skip all of their 4E product unless they get their quality under control. Publishing books in house might save them money, but it won't do them any good if nobody will buy the product.

It sounds like with only 10 companies invited to throw their hat in the ring, we'll see few OGL products initially. That was likely the intent of the 6-month head start with the early adopter program. Wizards is trying to prevent a D20-like glut of product. I didn't have a store back then, but one of my distributors told me that at the height of D20, there were literally hundreds of new D20 products released every day. My guess is that in 2007 there was maybe one a week. I think a 4.0 glut was unlikely to happen however, as publishers and retailers weren't going to repeat that mistake.

The store has made a lot of money on the D20 glut of the past, buying up "dead" product for very little and selling it at a good margin at conventions and at the store. We started the store in late 2004, so we missed both the 3.0 glut and the 3.5 outrage and dumping of outdated product. It was the D20 glut that truly changed me from a gamer to a business man. I would buy what I thought were fantastic books, by the dozen, at pennies on the dollar, and sell them for less than half the cover price. It smashed any romantic illusions I had about role-playing games. Often I would buy RPG books blindly, by the pallet, by the pound, or in case quantities. I didn't care what it was, I only cared about the price, the quantities of each item and the shipping rate.

The stuff became widgets, rather than games that I loved. It was also a window into past mistakes and insight into future sales. When The Complete Book of Left Handed Gully Dwarves won't sell for a dollar, you learn not to invest too heavily in future books of that sort. You learn which companies have bad reputations, since you now stock large quantities of their remainders. Most of them are gone now. Some customers would apologize when they bought a $40 book from me for $12. What they didn't know is that I only paid $4 for it. That's a much better margin than if they bought something new from me.

Unfortunately, this year we will be blowing out solid D&D 3.5 product and related RPG road-kill that customers shied away from in 2007. These won't be cases of remainders, everyone is steering clear of that stuff, it will be straight off the shelf. Talking to various industry people, many books are getting dumped directly into the recycle bin, as they have little chance of ever being purchased at any price. I'm trying to come up with ideas to fill my empty RPG shelves. If this all sounds pessimistic, know that there's a lot of enthusiasm and predictions of strong sales for 4.0. Those awaiting the new game will hopefully find it satisfying, while those who refuse to move to the new system will find some great 3.5 bargains.

1 comment:

  1. "Mongoose was established as a D20 company..."

    That explains a few things... ;-)