Pricing a product can be tricky and without the right experience you may end up selling your game at a price that just doesn’t work. It is made harder by the fact there is no correct approach and different people will tell you different things based on their own situation.
Today I’m going back to the beginning, I’m not going to talk about how I would price my next game, but rather how I would, and how I did price my first game.
The first game
Your first game will always be the hardest as less people will know who you are, and you must plan around printing in smaller quantities.
You may have heard others mention the 5 times multiplier before, where you multiply your costs by 5 to arrive at your MSRP. But a print run of 1,000 games could easily cost you $2, $3, $5 or even more extra per unit, over a print run of 10,000 games. This is why experience and situation matters, as a $50 MSRP ($10 * 5) is very different to $70 ($14 * 5), especially if you’re trying to get your foot in the door.
Our base costs
Let’s start with manufacturing, you can learn about picking a manufacturer here.
For this example, I will be using a quote that was shared with me by a first-time creator last year.
- 1,000 units: $11.23
- 2,000 units: $9.77
- 3,000 units: $8.91
- 5,000 units: $8.32
The other major cost we must consider is our logistics, shipping the games from China to our warehouse. This is a little harder to generalise as the size of your game box will decide the costs as much as the quantities will.
For this example, I will be using a common box size (30cm x 30cm x 8cm) and shipping to the USA.
- 1,000 units: $6.50
- 2,000 units: $5.75
- 3,000 units: $5.33
- 5,000 units: $4.80
Note. For the past 6-12 months logistics costs have been the highest they have ever been due to the pandemic and other world events. I strongly advise you to get up-to-date quotes and not rely on the above data to be accurate.
The most important factor that will decide your final cost is whether or not you want to get into distribution. If you plan to run a crowdfunding campaign and then only sell directly you will be able to work with a cheaper price. However, I strongly advise planning for distribution as while it may seem far away right now, it will eventually be the difference between a successful Kickstarter and a successful game.
At the time of writing this article the 2 Kickstarters for The Isle of Cats account for only 6% of sales of the base game.
A distributor will require a discount of 60-65% off your MSRP, so they can sell your game to a retailer for 40-50% off MSRP. These numbers aren’t negotiable, they are the bloodline of the industry and like it or not, with your first game these are the numbers you’ll be working with.
Let’s look at some options:
- With a $90 MSRP a distributor will pay you $36 per game
- With an $80 MSRP a distributor will pay you $32 per game
- With a $70 MSRP a distributor will pay you $28 per game
- With a $60 MSRP a distributor will pay you $24 per game
- With a $50 MSRP a distributor will pay you $20 per game
Calculating your price
We now have the raw numbers we need to decide on our final cost, let’s add the manufacturing and logistics costs together:
- 1,000 units: $17.73
- 2,000 units: $15.52
- 3,000 units: $14.24
- 5,000 units: $13.12
If we were to multiply $17.73 by 5 we would have an MSRP of $88.65 which isn’t going to work, so let’s be creative and consider the final variable:
Your situation is key to the final part, how much money do you need? Do you have royalties to pay designers, how much was the artwork, local taxes, what are your other expenses? I believe when you first start up a business you shouldn’t expect to make profit early on, but not everyone shares this mentality, and your personal situation may not allow for it. Afterall, you’re spending considerable amounts of time on this and you need to be able to cover your costs as well.
I said right at the start of this article, you need to plan around a small quantity, so we will start with 1,000 units.
With a cost of $17.73 and a MSRP of $50, we would make $2.27 per game. With every game sold you would end up with $2,270 to cover everything which isn’t likely to work unless you have your own money you can invest.
With a cost of $17.73 and a MSRP of $60, we would make $6.27 per game. After selling all the games we would make $6,270, would this cover your costs?
You now have a choice, is $6,270 workable or is there too much risk?
If it is workable, perhaps it is very tight? In this case we can consider 2 extra parameters:
- We’re working on minimums, if we were successful enough to sell 2,000 units our costs would go down and our profits would go up. With a $60 MSRP and 2,000 units sold we’d make $16,960, over $10,000 more than selling 1,000 units.
- Are we going to be running a crowdfunding campaign? These costs are all based on selling to distribution and typically we can make more per game on Kickstarter. If we sold 500 on Kickstarter, and 500 in distribution, the $6,270 may increase to $8,000 or more.
With these 2 things in mind, you can now decide, is this is a workable price point with enough profit to cover your costs based on your situation.
Or, do you need to jump up to another MSRP point?
Only you can make this decision, but hopefully this article has helped prepare you with some of the tools and calculations needed for working out your own price.
As someone who has released multiple games and has been doing this for a while, I can afford to take a more business focussed approach. I have to make a profit to be able to do this for a living and re-invest into bigger and better products.
As someone who started out completely unknown and without any experience, I had to take the resources I could find and create my own approaches. You should never put yourself in financial risk, but you should be realistic, start small and aim big.