breschau said:
Retail price of a book is directly tied to the cost of production (including printing costs). The wholesalers take 70% of retail, giving the 30% to the publisher for each copy. That 30% has to not only cover the cost of production, but have some amount of profit. I've been in publishing for years. I've dealt with printers, costs, and pricing. This is how the industry works.
But you've conflated the issue based on the flow of money. Yes, that price has to hand 70% of the revenue to the wholesaler and still provide enough money to the publisher to cover their costs and provide a profit. But that's not the point.
Hypothetically, if WotC could sell their books without wholesalers, they wouldn't (necessarily) knock 70% off the cover price. They'd just make more money. Why? Because they know what people will pay for the game.
Now, it actually gets a lot more complicated than this, because WotC sells to the wholesalers, who take their costs and profit, and then turn around and sell to retailers, who turn around and sell to customers. But the cover price is set, not by the retailer, but by Wizards of the Coast.
Wizards knows everyone needs their cut, so they've set that price to cover their costs (and everyone else's), but the price itself is probably the result of extensive market research (and years of industry experience) into determining what people are willing to pay for a gaming book. A lot of the costs Wizards incurs are about making sure that the book will be seen as valuable by the customer.
For instance, compare the 3.5 splatbooks with the 3e ones to see this in action. The later books cost only a small amount more to make (more expensive to print, bind, and ship) but were more successful for the company, because people were willing to spend more for a hardcover book than they would on a paperback. The fixed costs probably didn't change. But the variable costs went up slightly.
Were the books priced higher because they were more expensive to make? No. Instead, they were made higher quality so that they
could be priced higher, because the
perceived value of the higher quality book allowed them to charge a higher price. Yes, they cost a bit more to physically produce (print quality, binding), but the higher cover price they could carry allowed Wizards to more easily recover their fixed costs (and make a profit).
Moreover, in general book publishing, most books are basically commodity products. All paperbacks are priced roughly the same, regardless of who the author is, with the prime differentiators being page count. Now, of course, even in publishing, they
have found a way to price segment the market. That's where hardcover releases come in.
Honestly, that perceived value thing is partly why D&D is produced in 3 volumes, rather than just 1 like so many other games. While most gamers will only pay $40 or so for most RPGs, they're clearly willing to pay $100 (or even a little more) for
Dungeons & Dragons.
breschau said:
You purchase a single copy of a pdf, not the rights to duplicate it. That's the very attitude that scares the hell out of publishers and prevents them from releasing pdfs.
Maybe you do. Every pdf
I have ever purchased included the right to download
several (5, usually) copies of the document in question. Clearly, the publishers have decided that to make it worth the money, they need to provide more than a single copy. Since the marginal cost of giving me 5 copies instead of one is insignificant, they give me five for the price.
I'd be violating the terms if I duplicated them for others to use. As it is, I just use the copies I download.
breschau said:
If you think the cost of products has nothing to do with supply chains, distribution, and markups, then you don't know anything about business.
Digital media does a great job of reducing costs in certain areas (printing, retail locations, wholesalers) but it still has to be distributed. Itunes takes a cut, just like every other distributor. There are different factors involved, but it's basically the same. Your income from a sale has to cover the cost of production (printing, art, studio time, etc) and include some profit. If you sales don't cover production cost, you're losing money with each sale and you won't last long as a business.
Gee, I'm sorry, I thought we were talking about
price, not
cost.
See, I know a fair bit more about business than you think. Product pricing is a fairly complex topic that companies spend a lot of time researching and setting up. Ideally, you want to charge enough that you're getting as much money as possible from your highest value customers (the people who would pay almost any price), and yet still selling to every last customer that will make you a profit. This is called "price discrimination." And while it's theoretically illegal to charge different people different prices, there are plenty of legal ways around it. Perceived value, or time of access is one way. That's the hardcover book thing again, but it also applies to movie theater ticket pricing, seats to concerts and symphonies, airlines, rental car companies, and so forth.
Cost of production establishes a floor for what you can charge, not a ceiling. No respectable business prices at cost. It's retarded. Moreover, the whole point of marketing is increasing the perceived value of your product. On top of that, we'd have to discuss the difference between fixed costs (in the case of D&D, that's staff, design, development, typesetting, and marketing) vs. variable costs (how much it costs to make a book). In the case of D&D, variable cost is, I imagine, a tiny portion of the cost of the game. And the price isn't set based on what it costs to produce the game, the price is set based on what you believe people will pay. If you go through your research and realize people won't pay enough to make it worth your while, you don't produce a product. Yes, one of those things you consider is whether the revenue will cover your costs, but it also has to make a reasonable profit.
Case in point. Coca-Cola costs no more to produce, distribute and what have you than does, say, "Generic Cola." However, Coca-Cola spends a fair amount on marketing that's designed to make people believe Coca-Cola is more "valuable" than "Generic Cola." That marketing costs money, but it also raises the perceived "value" of Coca-Cola, allowing it to be
priced higher. Obviously, if it cost you $100 million to raise your revenues $100 million, you wouldn't bother.
Economic theory has all kinds of theories about pricing. But it isn't necessarily safe to assume that a price should be radically cut simply because the marginal costs on a particular copy have dropped. Yes, you want to sell that copy to people who would buy the expensive one as well, but you probably also want to sell it to people who maybe wouldn't buy the more expensive one. To the first set, it's a value-added product, and worth something, but probably not as much as the first copy of the rules. However, to the second set, that pdf copy IS the rules. So you want to price it cheaply enough to be considered a worthwhile addition, but expensive enough that it still captures most of the value it gives people.
It may be the case that the right price for a pdf is about 30% of retail...but it may also turn out to be much higher than that. I'm just making the point that determining what that sale price should be is far from simple.
