"Economy of scale" is a popular phrase in the business world. The notion is, you make more of something, you can do it more efficiently, so it costs less per unit. This sounds good on the outset, less cost per unit means more profit per unit, right? Yes... sort of.
Last month, we had an imaginary printer willing to make us 1,000 copies of our game for $6.00 apiece, a total of $6,000. We then added in a bunch of fees and shipping costs that increased that number, but let's forget about all that terrible business for a moment. We'll say that $6,000 would cover your production, shipping, fees and everything (i.e., $6,000 is your break-even point).
Let's say that same printer also gave you a number that they can produce 2,500 copies of your game for just $4.00 per game. That's a grand total of $10,000. So, if you hit $10,000 do you pull the trigger on the larger print run?
PRO: REDUCED COST PER UNIT
The most obvious benefit is the lower per-unit production cost. At only $4 per game, you're saving $2 per unit sold, so for those first 1,000 units, that's $2,000 added to your profit margin.
CON: MORE UP-FRONT COST
The first problem is that you need to hit $10,000 to make the bigger print run happen in the first place. This is the main reason you wouldn't just start at a $10,000 goal. If you can fund at $6,000 and make a profit, why risk only making $6,000 on your campaign and not funding? The lower your goal can be with you still being successful, the better.
PRO: MORE INVENTORY
The next pro is that if you can make that money, you have an additional 1,500 units to sell. And because those units are produced at the $10,000 mark, that means your remaining copies are making you profit as they sell. If you make $15 per copy of your game after all costs are considered (selling direct to consumer), you could make an extra $22,500 on inventory you wouldn't have had at a smaller run.
CON: HIGHER BREAK-EVEN POINT
The next con, however, is that increasing your print run means you need to sell more to make the same amount of profit. "Whaaaat?" you say. "But I've already sold more at a better margin? How can this be?"
Well, say you hit your $10,000 and you pull the trigger on a higher print run. Now you're getting 2,500 games instead of 1,000, but you've spent all your funding on those games. If you stayed at 1,000 copies, every copy after your break-even point is profit for you. The math looks like this.
- You get 300 backers of your game to hit your $6,000 goal.
- Every backer after that, makes you $10 in net profit after shipping and fees.
- You hit $10,000 with another 200 backers.
- At your shorter print run you have, $2,000 in profit, with 500 copies of the game left to sell versus zero profit and 2,000 copies to sell at the larger print run.
PRO: MORE PROFIT?
But with 4x the inventory, that's 4x the future profit right? If you can sell them, sure. This isn't meant to be disparaging against your game, but most games are considered successful around 1,000 copies sold. Most games never even reach that.
CON: MORE UNCERTAINTY
The blessing and curse of Kickstarter is that your campaign is some of the best marketing you'll get for your game. Even if you get 500 backers in your campaign, it might take you another year or more to get another 200 sales. So now, you have 2,000 copies of a game that are sitting in inventory. You could always sell them to a distributor and let them take that risk, but now you're selling your $20 game at about $6 or $8, so your $10 profit becomes about $2-4 dollars.
Even if you sell all 2,000, you're making $8,000 on those copies. Whereas, if you just sell your 500 copies direct, you make $7,500 per game, without the hassle of distribution and storing thousands of games for a time. Worst case scenario, you don't sell any more games and you're stuck with a bunch of unsold games and a squandered profit margin.
In the end, though a bigger print run could mean more copies of your games on store shelves and on gamers' shelves, and that's more visibility. But the moral of all this is that you should not just jump right into a bigger print run thinking it's going to make you a lot more money. It can increase your profits, but it comes with a lot of uncertainty and responsibility.