Report To The Stakeholders

[Sindri]

Originally Posted by robkelk

There is something very special about net profits: Unless a business is a charity or a non-profit organization, "net profits" are the only reason that the business exists. What the business does is just a means to reaching that end. This is as true of SJGames as it is of Ford, Kodak, Microsoft, or the local corner store.

You are arguing a straw man. I'm not saying anything about company wide profits.

Projects that the company undertakes however do not need to make net profits. It would be nice if they made money, but if you have irrecoverable investments that prevent the entire project from turning a profit that means literally nothing as to whether you should complete it. What matters is whether you are making money on each individual product as compared to variable costs. Reducing the loss of a project is the same thing as gaining money. A company is about making money not collecting stickers for how many net profit projects they finished.

That is what it means for net profits to not be special. Not that a successful business won't be having them but that the net profit status per se is meaningless on a project leve.

Originally Posted by robkelk

Then what does support static costs? They need to be paid somehow, and (AFAIK) products are the only revenue source that SJGames has.

The budget supports them. Static costs make back their money across the company by increasing efficiency but slapping a single company-wide static costs tax on every product produces warping effects. They do not need to be supported through siphoning off a bit of money from each product because they are already a smart investment.

Originally Posted by robkelk

Exactly what are SJGames' needs?

"Selling product today" is an important need, but it is only one of a for-profit company's needs. Another important need is "maintaining and expanding the customer base", which leads to "selling product tomorrow" (arguably a more important need than "selling product today" is). This need is difficult if not impossible to do without points of presence in the target markets. For the game industry, game stores are those points of presence.

Cutting off the game stores is like killing the goose that lays the golden eggs - you get all the gold that's available now, but you get no gold later.

Game stores are a product distribution tool that gives bonus passive advertising. Either they are or are not an effective tool for distributing product. On the other hand their efficacy at passive advertising is limited and even if functional is targeted at a non-ideal demographic for GURPS. A company could decide to use game stores even if they are not terribly useful for themselves as an attempt to help the industry but this needs to be recognized as the same sort of behaviour as running a contest for new designers without getting any IP out of it. A luxury expenditure.

[Sindri]

Originally Posted by philreed

You're referring to cash flow, which we absolutely understand. We review cash flow reports regularly and use those reports to adapt, plan projects, and move the business forward. Steve has mentioned our cash flow reporting in a previous report.

Owen Smith is, and I hope he will correct me if I am wrong here, referring to contribution margin.

[Refplace]

Originally Posted by DouglasCole

There's also the carrying cost for holding inventory in a warehouse. Once the print run is completed, I believe that there is a bookkeeping, is not literal, cash flow that is charged every time.

Inventory stored in Wharehouses are now taxed as well. That was a huge nail for the book coffin.

Originally Posted by David Johansen

I was in the mall today and wandered through a billiards and games store. They had an entire rack of Munchkin products and not a single rpg. I'm firmly convinced that rpgs need to find a model that will allow them to sit on the shelf next to Monopoly and Settlers of Catan if they want shelf space.

Makes sense to me.
Physical stores encourage impulse and random purchasing where online you tend to get what your specifically looking for.
That is one reason what Phil says about retail stores makes so much sense.
Even if there is no demo seeing physical product can help sales, and if people are seen enjoying the game so much the better.

[Refplace]

Originally Posted by Sindri

That is what it means for net profits to not be special. Not that a successful business won't be having them but that the net profit status per se is meaningless on a project leve.

Generally its a smart thing to try to make a profit off each product.
You can have loss leaders that benefit the overall bottom line, now or planned as an investment to the future. However its more a gamble and exercise in prognostication then an always smart move.

GURPS makes a profit so it continues, even though other products make a higher return on investment.
That may not be the smartest business move but at least its not suicidal or high risk.
Putting out a product .... Say GURPS Discworld that is expected to lose money is simply not smart. Trying to put it out in a manner that will make a profit is smarter. We do not know anything about the ticking liscence you speak of so no idea on how urgent the need to recover any costs already paid.
And if publication means losing more money then your just wasting more by doing it.
Hopefully they will figure out something.

[David Johansen]

Originally Posted by Refplace

Makes sense to me.
Physical stores encourage impulse and random purchasing where online you tend to get what your specifically looking for.
That is one reason what Phil says about retail stores makes so much sense.
Even if there is no demo seeing physical product can help sales, and if people are seen enjoying the game so much the better.

That's why I'm always on about cardboard buildings, battle maps, and miniatures: tactile toy value, shake value. GURPS Lite is within the outer limits of the realm of acceptable board game rule book lengths. I'm afraid we're living in an age where thick books are frightening and intimidating rather than enthralling and images of space ships and dragons are common place and mainstream.

I wonder if we'll ever see peak Munchkin. Fantasy computer games are a perennial favorite and most of the tropes Munchkin lampoons map to World of Warcraft. I think we've got a ways to go before tactile and shake value are invalidated by computers. Even 3d printers, while they are a threat to miniatures companies, are a long ways from being a Star Trek replicator. Card games are pretty safe. Printing out scanned cards is less than satisfactory. Unlike scanned books which are an endless problem for the rpg industry. Though, I did know a guy who hand copied the rules for Warhammer 40000 Rogue Trader to avoid buying it so there's no stopping a cheapskate.

[Sindri]

Originally Posted by Refplace

Putting out a product .... Say GURPS Discworld that is expected to lose money is simply not smart. Trying to put it out in a manner that will make a profit is smarter. We do not know anything about the ticking liscence you speak of so no idea on how urgent the need to recover any costs already paid.

The point is that Discworld has lost money. Money has been spent regardless of what anyone does now. That lost money doesn't appear when Discworld is on the shelves, its extant right now. Whether it makes a profit in the end is something of interest for future actions but completely irrelevant to decisions now because SJ Games doesn't own a time machine and can't go back and change things. The money is lost.

Now is time to decide whether the price per item compares favourably to variable costs and how that comparison compares to other possible investments. Obviously its good to try to increase profits but it was always good to increase profits. Perhaps holding Discworld and trying to find a way to increase profits with it is the correct decision, but if it is it would also have been correct to do so if Discworld was projected to have made a net profit. Framing this as a response to a projection of net loses paints a picture of unhealthy concern with adding successful projects to SJ Games's list instead of making the most money.

[Refplace]

Originally Posted by Sindri

The point is that Discworld has lost money. Money has been spent regardless of what anyone does now.

Just because a project has cost money is not a good reason to keep throwing more money t it though.
Printing is a significant cost, and likely liscensing is in part based on volume so that also increases cost. Then storage, shipping, taxes, etc.

PS David I did not reply to your last post here as new products were declared off topic but see my post in the spin off,

[Sindri]

Originally Posted by Refplace

Just because a project has cost money is not a good reason to keep throwing more money t it though.
Printing is a significant cost, and likely liscensing is in part based on volume so that also increases cost. Then storage, shipping, taxes, etc.

What part of "variable costs" do you not understand?

[David Johansen]

Originally Posted by Refplace

PS David I did not reply to your last post here as new products were declared off topic but see my post in the spin off,

I thought it was on topic as it's about the business model and gaming stores while relating to the discussion at hand.

[adm]

May I point out that SJGames produces these reports as a courtesy to those of us who support the company, if it becomes a flame war and massive time sink, they are likely to stop. Everyone has given an opinion, now let them run their company as they see fit.