Please note that Denny said he profited $1.40 per sale. This is not $1.40 revenue, this is $1.40 after expenses have been covered. I have worked for several large retailers, they normally pay about 50% of suggested retail for a product. This is not to say they are making $20 on a $40 chunky dungeon set, the majority of this money goes to pay the lease on their space, utilities, payroll, any required insurance, supplies and other expenses, etc. If you look at the financial statements that large successful retailers release to investors, most are lucky to be making 5-10% profit on each dollar of sales. Most of this is turned right back around into growing the business. If for some reason a product doesn't sell and the retailer needs to mark it down, they will almost always lose money on the product overall.

If Denny is having to go through a distributor instead of selling directly to the retailer, the distributor will also need to take a cut to afford their expenses. Wal-mart can sell so cheap because they buy direct from the manufacturer, not through a distributor.

I have a few friends that run a FLGS, they all keep second jobs, I don't think any of them take home paychecks from the store. I have no problem buying from them at full cover instead of from an online retailer for 30-40% off, because they also provide a service - the provide a space for people to get together, play games, and socialize, and I can much more easily browse products to make informed buying decisions. I don't think they gouge me or the manufacturers. The only gouging that may be going on is at the distributor level; since there is really only one gaming distributor left (Chessex and Armory merged to form Alliance), there is no competition at that level.

The retailers are just trying to make a buck, just like the manufacturers. I know a lot of people (myself excluded) that think PDF producers are gouging the consumer because their production costs are so much lower than more traditional media, out of proportion to the price reduction. Having worked with a game publisher in the past, I can tell you that it can cost many thousands of dollars just to get a print run set up to produce a book (depending on color vs. b/w, binding option, paper type, etc.), this is separate from the cost charged to print each book. Even after the development costs are covered, each copy of a physical book still has a manufacturing cost associated, limiting the possible return. In the case of PDFs, after the development costs have been covered any sales are almost pure profit, the cost to produce Chunky Dungeons PDF was the same regardless of whether Denny sold 10 copies or 10,000,000 copies.

PDFs allow smaller publishers to get their foot in the door without having tens of thousands of dollars in capital to spend before being able to make a single sale. For a couple thousand dollars, you can get fully set up to produce PDFs, and if you already have a computer, you can get just about everything you need for free (OpenOffice, GIMP, etc). This isn't a bad thing, but it definitely makes for a different business model than traditional publishing. It means that you can make a profit from selling a couple hundred copies, rather than having to sell a complete 20,000 copy print run, and can cater to smaller audiences. With the exception of high dollar items, it isn't that manufacturers make a lot off each item they sell at retail, it is that they make a little on each and sell a lot. Denny would probably be happy making $1.40 profit per copy of Chunky Dungeons at retail if he was selling 100,000 copies a month, but if he is only selling 50 copies a month it does seem pitiful.

Just my 2 cents.

Consumer --> Distributer --> Publisher --> Denny, with each step roughly doubling the one previous one.

This is one of the major reasons I prefer buying PDFs, the chain is generally Consumer --> Distributer --> Author/Publisher. RPGNow takes a smaller chunk than their main competition (Drive Thru RPG and SV Games). Direct sales of course shortens the chain even further.

Folks like Denny or Phil Reed would not be able to survive in the print medium.

The Auld Grump

What is RPGNow's cut? We heard about the small profit of $1.40 above from a pre-printed product, but I am still wondering about PDF distribution and that part of my question hasn't been answered yet.

Once again I say this, Denny. You should consider print-on-demand for those folks who want hard copies. With the right printer (read: a smaller, short-run printer) you can turn that $1.40 per $40 into $20 per $40. True, you're not in the stores with them, but print-on-demand means no inventory, no stock - no paying for runs ahead of time.