WotC Estimating D&D’s Revenue, Teos Abadia crunches the numbers.

[Echohawk]

I guess $30 is probably too high for the average, but essentially yes

I think you are probably right. I checked my own average purchase price and it's $24. Reducing the estimate to match this, I get:

Year 1: $6m
Year 2: $23m
Year 3: $45m
Year 4: $59m
Year 5: $86m
Year 6: $71m

 

[Alphastream]

My only gripe with the article is one of numbers - we retailers get more like 40-45% off on D&D books from distributors. I've also heard from distributors that their margins aren't anywhere near what ours are, so @Alphastream, your later conclusion that WotC probably gets more than 25% jives with what I would expect. It's not Retail 60 Distributor 30 WotC 15. It's probably more like Retail 60 Distributor 35 WotC 25. With a big chunk of WotC's profit being lost to printing and shipping costs (shipping from the printers, the other shipping costs are passed on to us, much of the time).

This is really useful to hear. My understanding is that it can vary by product type and segment. So, like this might be different for board games, and different again for a WotC D&D themed board game, and different again for miniatures... but on average might be that split you mention?

 

[Alphastream]

I think you are probably right. I checked my own average purchase price and it's $24. Reducing the estimate to match this, I get:

Year 1: $6m
Year 2: $23m
Year 3: $45m
Year 4: $59m
Year 5: $86m
Year 6: $71m

This is really interesting, Echohawk! Is "Year 1" 2017, or something else?

There is also the potential for numbers to change. From my various consulting projects I have seen cases where inventory/sales numbers like that can sometimes be reset or used for some other purchase (every third Tuesday, someone runs a test using a block of numbers, then marks those numbers as used). But, this is really interesting. If we had wide enough user data we could figure out a better average. Even knowing on a particular prerelease day (say, the first day or two for Planescape) how many numbers were processed... that would be really interesting.

 

[Parmandur]

This is really interesting, Echohawk! Is "Year 1" 2017, or something else?

There is also the potential for numbers to change. From my various consulting projects I have seen cases where inventory/sales numbers like that can sometimes be reset or used for some other purchase (every third Tuesday, someone runs a test using a block of numbers, then marks those numbers as used). But, this is really interesting. If we had wide enough user data we could figure out a better average. Even knowing on a particular prerelease day (say, the first day or two for Planescape) how many numbers were processed... that would be really interesting.

It really shocks me if it is sequential like that, thoughbitnisneasily possible. My own personal business experience is using non-consecutive strings of randomized alphanumeric characters precisely so that nobody can get this sort of sales info.

 

[FitzTheRuke]

So, basically numbers that make the D&D Beyond purchase price seem like a solid deal.

I've always thought that it sounded high, but this puts it into perspective!

 

[FitzTheRuke]

This is really useful to hear. My understanding is that it can vary by product type and segment. So, like this might be different for board games, and different again for a WotC D&D themed board game, and different again for miniatures... but on average might be that split you mention?

Yeah, I think so. Our discount can fluctuate (and bigger retailers can get a few more % from volume) but it's usually in the 40s (in % off). I don't know what the distributors get, but they have said that their margins are worse than ours, and they make up for that in volume (they process a LOT on average, obviously, when compared to a single store!) So I would expect it to be in the 30s (or worse). Which gives the publisher more than 25% of MSRP, but probably not a lot more.

I've always assumed that Amazon very likely pays distributor prices, nor retailer prices, and they clearly love to make small margins with big unit-sales, and quite often (to our dismay) not only beat our retail prices, but beat our distributor's prices as well.

 

[Alphastream]

It's not Retail 60 Distributor 30 WotC 15. It's probably more like Retail 60 Distributor 35 WotC 25. With a big chunk of WotC's profit being lost to printing and shipping costs (shipping from the printers, the other shipping costs are passed on to us, much of the time).

Oh, wait. 60/35/25 is over 100. What did you mean to propose as the split? Retail 40%?

 

[Echohawk]

This is really interesting, Echohawk! Is "Year 1" 2017, or something else?

DDB launched in August 2017, so year 1 is August 2017 to August 2018 (roughly).

 

[FitzTheRuke]

Oh, wait. 60/35/25 is over 100. What did you mean to propose as the split? Retail 40%?

Sorry that wasn't percent. That was a $60 MSRP nets the distributor $35 and WotC $25 or thereabouts. It's probably more like $36ish and $23ish, but I was making them nice-looking numbers. Point is, WotC likely gets (a little) more than a third of MSRP.

 

[Alphastream]

Sorry that wasn't percent. That was a $60 MSRP nets the distributor $35 and WotC $25 or thereabouts. It's probably more like $36ish and $23ish, but I was making them nice-looking numbers. Point is, WotC likely gets (a little) more than a third of MSRP.

Thanks. To make sure I follow, do you mean the following:
$60 retail price, which is what your FLGS charges you.
$36 is what the retail store paid to the distributor.
$23 is what the distributor paid to the gaming company.
$23 is what the gaming company gets for all of its work. This must cover salaries, printing, art, editing, marketing, etc.