As we wrap up the production of the first of what I hope will be several (hah) print runs of Havoc: the Hundred Years War, it is time for Sunriver Games to reflect on the economics of this whole business. I’m not comfortable disclosing 100% of the financials of the whole operation, but I can certainly share a lot and I think many of you who have toyed with the idea of self-publishing are interested in this sort of information.
Let’s look at the cost side of the equation on a per-unit basis. This will help understand what the unit cost per Havoc copy is. Note that this analysis doesn’t include any company-level expenses, marketing, etc. This is just production cost.
Total Unit Cost
So about $5 per unit. As some of you may have seen, we did all of the assembly ourselves, and there’s no labor cost factored into this equation.
Those of you buying the game at $18.95 might be thinking “Wow! That’s a pretty good margin!” The truth is we will probably be barely profitable as a company this year because there are a significant amount of marketing expenses involved in getting this game to market that count as company expenses. Some of these are very enjoyable marketing expenses: Essen Spiel and BoardGameGeek.CON. And did I mention that nobody takes a salary? We only wish…
Later this year I’ll disclose some company P&L information for your perusal. Our big challenge right now is how to bring two games to market next year when we really only have the cash to produce one. There are a few things that can change this equation:
- A second print run of Havoc happening early in 2006.
- The partners (KC, Rita, Chris) put in more cash.
- We borrow money from a bank. Or from our kids.
- We enter into some sort of joint publishing venture.
- We take some outside investors.
We aren’t sure whether our year-over-year goal is to add one new game each year or to double each year. We need one more number in the series to get a clue about that, assuming we do 2 games in 2006. The economics of this whole business is such that:
- It is hard to make much money on small print runs. Or rather, small volume sales. It is easy to LOSE a lot of money on a huge print run with very low sales.
- It is even harder to make much money on small print runs of low MSRP games. While the profit margin % might be about the same for a larger board game, the unit margin in absolute value is much higher, sometimes double or triple that of a small game. There’s also substantially more risk in producing a bigger game.
Because of point 2, we are considering doing one “real” board game next year.
Well, that’s all for now. Feel free to ask questions in the comment section. I hope you find this information useful and with appropriate prodding I’ll continue to disclose this sort of information.