Game Pricing and Terms?

Let's say you have an MSRP of $20 and you are going to use the mfr-distributor-game store model (traditional hobby game model).

You are generally going to sell your product to a distributor for $8, who will mark it up 10% or so and sell it to a game store for $10, who will normally sell it at the MSRP of $20. So your potential profit is the difference between your cost of production and $8 - right?

Well, yes and no. When you sell to a distributor, you sell for terms. Payment cycles being what they are in this economy, you will not likely see your money for 60-90 days. And this is measured from the day you ship to the distributor - you've probably spent a few weeks or months getting your game made or making it yourself, laying out time and cash well before you ship. So let's be optimistic and say that it took you 60 days from the time you got quotes and started paying suppliers. So now we're talking about 120-150+ days between when you invest in your game production and you see your return on investment. That's fairly optimistic. And distributors will try to pay you after the game store pays them. And as you likely know, some game stores don't pay. Factor this "bad debt" into your cost of doing business.

A FLGS closed unexpectedly near us a few months back. It was so quick we found out when we pulled in and the store was empty. Don't think we're going to see any money for our product in that store. A few years back when a major distributor closed down, they owed us a non-trivial amount of money. We didn't see any of that either. So it needs to be factored into the cost of doing business.

You mentioned shipping. Distributors tend to want you to ship to them for free. Game stores want free shipping too. And consumers are very sensitive to shipping prices too. Foreign customers must really want your game if you intend to sell it to them direct - if it's $20, they're going to pay at least an extra $10 for you to ship it, then any customs or duties in their own country. Just remember that anything you ship directly to a foreign customer you keep $20, not $8. And that will pay for alot of extra postage. And there are more hobby gamers in Europe than there are in the US.

You may set an amount for distributors - say "order $100 or a case of 12" and shipping is free. But it is very likely you will be paying shipping to your distributor and possibly from your supplier too. So that $8 still has to get split a few ways.

Nowadays, you have options. You can use a consolidator (someone who reps your sales and marketing to distributors/stores and also fulfillment too. There's real value in this service for some folks - you will of course be giving them a piece of your $8. But you'll also likely get into venues that you wouldn't on your own. It's what we do, and if you hook up with the right one, you are now on the radar screen of distributors and retailers globally.

Or you could truly self publish. Last year we made some games for a company that got a booth at Origins and sold out. They got a booth at GenCon and generated 3x the volume in pre-orders. So we got triple the order after GenCon. A major publisher noticed, and I believe they have a publishing deal now.

So good luck - just go in with eyes open.