>>Where'd these numbers come from? Also, how do pre-orders and re-orders affect the profit margin? I thought the margin was set by cogs and distribution and shipping costs. I'm not being critical here, just curious. This is like, the most interesting thread I've read on ENWorld in years.<<
Margin is a complex thing and not easily calculated. In truth, you can never arrive at your true margin for producing and selling a product until you have both produced it and are totally done selling it. Everything before that point is a projected based on formulas and/or experience.
ALL COSTS that go into the design, production, printing, warehousing, advertising, PR, marketing, shipping, and overhead like leases, insurance, salaries, etc, etc, are all part of the figure. This all comes together as Cost of Goods Sold (COGS).
You then take all revenues from ALL the different ways you sell the product. Sales to distributors at 60% off or whatever your terms are, sales directly to retailers, sales direct to consumers over the internet, sales via conventions. You may chose to lump in royalties from licensing if you happen to have any licensing, just depends on the structure of the overall business plan. Anyway, to lump all these revenues together and get your "Gross Revenues".
Comparing your total costs vs your gross revenues and if your gross revenues were larger, then you at least turned a profit. How much larger will determine your "Margin".
This is obviously something you can not declare definitively until you have 1) all your costs and 2) all your revenues.
Now, realistically speaking, experienced publishers know how many sales they can project for and they use this to guide them when deciding what their budget for production and marketing will be. If they sell less than what they project, then they can easily lose money. If they happen to get surprised and sell more, then at the end of the day their project will end with with a higher gross margin.
Now, obviously, with some experience in publishing you can get a fair prediction of the market's response to a new product will be. I've been doing this 13 years and can peg a new release within within a couple dozen on projected sales over its first year. So you get get a realistic expectation of what your gross revenues will look like within a reasonable amount of time. That is the figure you have to play with with projecting and budgeting for your costs. It is based on all those projections that publishers must make the difficult choices of where to prioritize limited resources.
Someone on here commented that its clear that a publisher needs to re-prioritize its resources towards more editing efforts when everyone one here that is anticipating a new release from that publisher is discussing how bad the editing will be. However....based on their past prioritizing of resources, perhaps putting more of them into marketing, artwork, expensive hardback productions, convention support, etc, they have already achieved winning all of those customers. And those customers are "anticipating" their next new release. I gotta say, it sounds to me that the manufacturer in question has previously done a pretty good job in making those hard choices in resource allocation or else they would not a large customer base anticipating any new release, editing mistakes or no. Something to think about.
Ryan S. Johnson
Guild of Blades Publishing Group
http://www.guildofbades.com
http://www.1483online.com
http://www.1483online.com