D&D Insider - how many subscriptions? (and speculation on profitability)

[Mercurius]

Do we know the answer to this question?

I'm just trying to get a sense of how much of WotC's D&D sales is from DDI. Now of course I have no idea what WotC's D&D sales are, but maybe we can guess. Things have been pretty whacky since last summer, but how many books do we think WotC sells in a given month? Maybe we can convince Erik Mona to give us a general idea of how much Pathfinder stuff sells.

I guess what I am really wondering is if DDI sales make up for lack of book sales. Everyone assumes that 4E is suffering because book sales have gone down, but it may be that they are doing OK because of DDI. I would assume that the profit margin is higher on subscriptions than it is on printed books, at least after the initial cost to design the software.

So if, for example, there are 50,000 monthly DDI subscriptions with an average cost of $8, that's $400,000 in monthly sales at a relatively good profit margin. If in a typical month WotC comes out with two paper products for an average of $30 each and sells 20,000 of each, that's 2 x $30 x 20,000 = $1,200,000, quit a bit more. But how much of that $1.2M is profit? The distributor and bookstore get about half of that, the cost of production is probably half of the remaining, so I'm thinking WotC makes about $300,000 on it, which of course must pay for the writers and artists. $400,000 in DDI sales might be roughly equivalent in value.

Thoughts?

 

[Mithreinmaethor]

Do we know the answer to this question?

I'm just trying to get a sense of how much of WotC's D&D sales is from DDI. Now of course I have no idea what WotC's D&D sales are, but maybe we can guess. Things have been pretty whacky since last summer, but how many books do we think WotC sells in a given month? Maybe we can convince Erik Mona to give us a general idea of how much Pathfinder stuff sells.

I guess what I am really wondering is if DDI sales make up for lack of book sales. Everyone assumes that 4E is suffering because book sales have gone down, but it may be that they are doing OK because of DDI. I would assume that the profit margin is higher on subscriptions than it is on printed books, at least after the initial cost to design the software.

So if, for example, there are 50,000 monthly DDI subscriptions with an average cost of $8, that's $400,000 in monthly sales at a relatively good profit margin. If in a typical month WotC comes out with two paper products for an average of $30 each and sells 20,000 of each, that's 2 x $30 x 20,000 = $1,200,000, quit a bit more. But how much of that $1.2M is profit? The distributor and bookstore get about half of that, the cost of production is probably half of the remaining, so I'm thinking WotC makes about $300,000 on it, which of course must pay for the writers and artists. $400,000 in DDI sales might be roughly equivalent in value.

Thoughts?

There is roughly 45,000 DDi subscribers signed up to the forums at WOTC. I would figure that this number is anywhere from 1/4 to 1/16 the actual DDi subscribers.

 

[Mercurius]

So you think there are between 200,000 and 800,000 DDI subscribers?! Wow. If true, I think that answers my question for me: That the rumors of D&D's impending and inevitable demise are untrue, that what we are seeing is merely a transition to DDI-as-core.

 

[Mirtek]

There is roughly 45,000 DDi subscribers signed up to the forums at WOTC. I would figure that this number is anywhere from 1/4 to 1/16 the actual DDi subscribers.

I think the number is more to 75-90% of total customers. Whoever is invested enough in D&D to find the WotC website and subscribe to DDI would surely log into his WotC account (which needs to be created to subscribe to DDI in the first place) at least once. And after that he's automatically part of the DDI group.

I seriously doubt they're even close to have a 5-digit number of subscribers

 

[Mercurius]

You mean 6-digit Mirtek? Not "even close" to 5-digit would mean significantly less than 10,000 subscribers; I'm pretty sure there are many more than that.

(It also crossed my mind that "5-digit number" in Germany might mean "6-digit" in the US, if you are only counting 0s...?)

 

[Mengu]

Reverse engineer it. How many people do they have on full time staff to run DDI? 20? How much do they get paid on average 50k? How much would they budget per year for equipment, services, office space etc? 800k? That's about 1.8 mil. Yearly subscription to DDI is $72? They would need 25,000 subscribers to break even. I expect they have a little more than that.

And, before anyone asks, I have no clue what I'm doing and made up all the numbers for what I think an operation of this size would need. In corporate world these numbers are probably on the low side because bureaucracy adds an extra 50-100% to time and budget needed to do anything. But if they had 200,000-800,000 subscribers, DDI would not be in its current state. I find those numbers to be unrealistic.

 

[Mirtek]

You mean 6-digit Mirtek? Not "even close" to 5-digit would mean significantly less than 10,000 subscribers; I'm pretty sure there are many more than that.

(It also crossed my mind that "5-digit number" in Germany might mean "6-digit" in the US, if you are only counting 0s...?)

No, you're right. I somehow just lost a digit Meant 6-digit of course

For an indication how D&D is doing, just take Hasbro's last annual report and look how often D&D is mentioned as opposed to how often all other brands of Hasbro and it's subsidiaries are mentioned. On the Hasbro Investor Fact sheet, which is supposed to highlight Hasbro's attractiveness D&D isn't even mentioned at all (MtG is).

 

[Dice4Hire]

Another way to look at it is profit. How much profit (at let's assume 9.99 per month) does WOTC pocket, as opposed to a 30.00 book? From the book, they probably get 10-15%, os it is, say, 5.00 pr book an that is probably too high but 100%, so say 2.50 per book.

They probably get 75% profit off the DI people, as the costs are a lot lower as there are not 5 middlemen taking slices of profit (like Amazon, which buys books from publishers at 40% of suggested retail. And the cost to produce content is probably roughly similar, I would guess.

I have no hard numbers, but it seems DDI is far more profitable for WOTC, I don't see much way to argue it.

I still argue about whether it is the best way for the hobby to proceed, though. That is arguable. I don't see how WOTC can ever go away from digital again, though. I just hope they keep enough non-digital for people like me.

 

[AbdulAlhazred]

Reverse engineer it. How many people do they have on full time staff to run DDI? 20? How much do they get paid on average 50k? How much would they budget per year for equipment, services, office space etc? 800k? That's about 1.8 mil. Yearly subscription to DDI is $72? They would need 25,000 subscribers to break even. I expect they have a little more than that.

And, before anyone asks, I have no clue what I'm doing and made up all the numbers for what I think an operation of this size would need. In corporate world these numbers are probably on the low side because bureaucracy adds an extra 50-100% to time and budget needed to do anything. But if they had 200,000-800,000 subscribers, DDI would not be in its current state. I find those numbers to be unrealistic.

Well, having run IT/development shops, your overhead + G&A generally runs somewhere in the vicinity of 100% of salary. hard to say what they pay, probably somewhat below industry average on the whole, but that could be wrong. Call it $50k and I think you're not too drastically far off. What is the size of the staff though, that's a pretty hard question to answer. 20 seems like it could be on the high side. There are other costs though, hosting, capital equipment, software licensing, stuff like that. Those costs are probably not a huge chunk, but significant. Possibly bigger is the cost of content generation for Dragon and Dungeon magazines and costs for media (licensing art).

I agree, there's no way DDI has north of 200k customers, that doesn't seem realistic. The 45k in the DDI group or some significant fraction of that sounds more likely. The thing is with these numbers and uncertainty we really can't say if the thing is actually profitable or not. Even if we were to just pike 40k at $72 each for a year, that would be $2.8m/yr. At a rough guess with 20 staff you'd be marginally profitable. For a rough check on this kind of thing Wikipedia with a staff of around 150 has a budget of around $15m/yr. In other words as a rule of thumb multiply the size of your staff by $100k and you're in a ballpark realm. This means if they have say 30k active subscribers or a staff of 25 or 10% higher costs than we've guessed then they're losing money on it. OTOH it could be quite profitable. The only issue there is the SCALE is small. A company the size of Hasborg may just not be interested in such a small revenue stream, especially if it basically doesn't go too far beyond breaking even. They'll be looking at things like return on net income, internal rates of return on investment, etc. Bean counter stuff, but not raw numbers.

 

[Mercurius]

I know nothing about IT or websites but 20 full time people to run DDI seems very high. What would twenty people do?