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Kickstarter games price breakdown

Andrei Novac
Poland
Warszawa
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In a recent post I talked about board game prices, how they are constructed and who retains part of the value of these games. In the comments section there were a few requests about a breakdown of the pricing of Kickstarter games, so that's what I am trying to do here today. But I must start with a disclaimer...

Disclaimer: Board&Dice has run more than 20 crowd-funding campaigns, over 7 years, however none of our campaigns have reached more than 0.5M USD. Companies like CMON Global Limited or Awaken Realms would probably be able to offer a different perspective on how profitable a multi-million-dollar campaign can get. All that I can cover is "regular" campaigns, which raise between $100K and $500K, with no more than 5000 backers. The principles remain the same, but the advantages of really large campaign are there, undeniable. I'll get back to that towards the end of the post.

The Model

To make the numbers look easy, I will use a model based on a $100 game, this way the math will look clean and clear. To back up my assumptions, I will use real like examples of Snowdonia: Deluxe Master Set, Yedo: Deluxe Master Set, Dark Ages: Holy Roman Empire, and other titles - games which we wither crowd-funded ourselves or have direct knowledge of.

My theoretical model starts from a simple assumption: a publisher raised funds via Kickstarter for a game with a listed price of $100. The MSRP will be bigger - as backers always rightfully expect a discount - and there will be no addons, just to keep math simple enough.

Fees

From the overall funds raised, Kickstarter retains a fee of 5%, which accounts for the first $5 collected from every $100 game box. On top of that, the fee processor - Stripe - retains 2.9% + $0.3, for a grand total of another $3.2.

These fees are identical whether the creator uses Kickstarter or Gamefound. I will not discuss other crowd-funding platforms, as the overwhelming majority of board games which go through this process do not use another platform. However, for everyone's piece of mind, Indiegogo has very similar fees.

After drawing the line: from your $100 game (that's as much as backers pay) the creator retains $91.8 after fees.

Designer Royalties

Since any game has a designer (or a group of designers, which I will henceforth still name "a designer"), that designer needs to be compensated for their work. A typical designer fee is 6% to 10% of the net sales of the publisher. Most designers we work with have their royalty level set between 7% and 9%, but this covers the classic distribution + retail model. For crowd-funded games, designer's royalties can be set differently, usually as a percentage of the funds raised, but publishers (us included) have also used more complicated approaches, like simulating the classic model.

I will analyze two scenarios: one with royalties set at a percentage of funds raised, and a second using a simulation of the distribution model.

In the first scenario (percentage), designers will usually get between 3% and 6% of the raised funds. Assuming the average of the two (4.5%), the overall cost for the publisher per copy is $4.5.

In the second scenario, the math is a bit more complicated, but not a lot more. We assume that, if that $100 Kickstarter game had an MSRP, it would be about 6 times its production cost (and I have to anticipate here, the production cost is going to be $25), so $150. From that, the publisher retains 35% (with a usual 65% discount), from which the designer gets a royalty of 8%. The overall formula becomes: Prod_cost x 6 x 0.35 x 0.08, in our case $25 x 6 x 0.35 x 0.08 = $4.2.

The difference to the percentage model is not large, so for simplicity sake, we will assume that a royalty level of $4.5 from a $100 game is realistic. So, after deducting the designer's royalties, the publisher still holds $87.3.

Pledge Manager

Kickstarter offers the possibility to collect backer's delivery data free of charge, but their surveys are still rather basic, thus a lot of projects use an additional platform called a pledge manager to collect addresses, while offering various add-ons and charging for shipping (collecting shipping fees outside Kickstarter is one way to minimize the fees paid, but not a reason in itself to use a pledge manager). Pledge managers are not a must, but for anything but the simplest campaigns, are an incredible tool to keep track of shipped pledges, provide tracking numbers to backers and even communicate. As of today, the last 10 projects run by Board&Dice have used BackerKit and, honestly, I cannot imagine running a project without this tool.

Pledge managers also must make a living and thus collect a fee for services provided. The usual rate varies depending on multiple factors between 1% and 3% of the value of funds raised. For us the average we paid in fees was 2.5%, so I will use this value for calculations. For our $100 game, $2.5 are spent in pledge manager fees. Drawing the line again, the publisher still has $84.8 left.

Production costs

We've just entered the heavy weight category. So far, the other costs seemed meager, and now we're hitting perhaps the biggest one of all. How much should a game prices at $100 on Kickstarter cost to manufacture?

For a game sold in retail, the rule of thumb is production cost:MSRP = 1:6. Since crowd0funding allows us - publishers - to cut off the middlemen, like distributors and retailers, we should also reduce the amount of burden on our backers, who provide us funds in advance to produce the game. A fair ratio in this case would be 1:4. So, for a $100 game, the production cost should be $25. Let's fact check this!

Snowdonia: Deluxe Master Set had a price point of $88 on Kickstarter, with a manufacturing cost of $24. The ratio is 1:3.67. We planned it to be 1:4 but... stretch goals.

Yedo: Deluxe Master Set had a Kickstarter price point of $71 on Kickstarter, had a price point of $16.38 (planned at $18 initially, but our manufacturer made us a nice surprise) so, our ratio was 1:4.33, above expectations.

The average of the two comes up with a ration of exactly 1:4.

When we crowdfunded Dark Ages, the situation was a little bit different. The game was priced at $88 on Kickstarter, but our cost estimation was far off, so we ended up with a manufacturing cost of $33 per copy, for a ratio of 1:2.67. But we'll assume that publishers are infallible and make no such mistakes. We'll stick to our 1:4 ratio, in which case our virtual publisher pays in manufacturing costs $25 for their virtual game. Drawing the line, the publisher still have $84.8-$25=$59.8 left. Not bad after having paid all the fees and producing your games.

Overseas shipping costs

Most Kickstarter creators use fulfillment centers on multiple continents to send rewards to their backers, so that their cost structure if efficient and that backer do not have to pay import tax, customs, VAT/GST, etc.

But how does one decide where to ship stuff from? We need to take a look at the spread of backers throughout the world to make such a decision.

From gallery of anovac

This is a print screen for the Dark Ages campaign page, and the next one is from Etherfields.
From gallery of anovac

While there is huge discrepancy in backer numbers, the countries listed are pretty much the same. Most backers come from the United States, followed by the European Union, and then, in much smaller percentages: Canada, UK, Australia.

I've made a breakdown by region using 3 projects run by Board&Dice and I've used a project of another publisher to validate the data. Here is where we stand:

From gallery of anovac

*Asia: Japan, South Korea, China, Hong Kong, Macau, Thailand, Singapore, Malaysia, Vietnam, Indonesia, Philippines.
**Oceania: Australia, New Zealand
*** North America's 58% of copies are split: 51% USA, 7% Canada

So, fulfillment centers in USA, Europe, Canada, and Asia+Australia make the most sense, so that 95% or more of backers get their games worries-free. I mention Asia and Australia together because there are dedicated fulfillment centers that cover the aforementioned Asian countries as well as Australia and New Zealand.

To continue we must make another set of assumptions: the size and weight of the game, and the overall number of copies. Since this is a game worth $100, a safe assumption is that the size of the game is roughly twice the size of a Ticket-to-Ride box. This assumption is needed to figure out what is the best way to ship to fulfillment centers. The second assumption is the number of copies printed. A successful campaign (not a record breaking one) should allow the printing of 4000 copies. So, let's distribute those copies between the fulfillment centers, proportional to the numbers in the graphic above:
- USA: 51% x 4000 = 2040
- Europe: 32% x 4000 = 1280
- Asia + Oceania: 8% x 4000 = 320 copies
- Canada: 7% x 4000 = 280 copies
- remaining copies for all other regions can be added to the shipment to USA or Europe (we choose Europe) and shipped from there.

For a game of the mentioned size, it's safe to pack up to 3500 in a 40ft container, up to 2200 in a 20ft container and about 100 games per pallet. So the shipments are shipped as follows:
- USA: 1x 40ft container
- Europe: 1x 20ft container
- Asia + Oceania: 4 pallets
- Canada: 3 pallets

With current prices (as of 29-Sep-2021), the costs are as follows:
- USA (assuming fulfillment center on the West Coast): $21500
From gallery of anovac

- Europe (assuming Germany or Poland): $19000
- Canada (fulfillment center in Toronto): $2200
- Asia+Oceania (fulfillment center in China): $600

The total cost of overseas shipping: $43300. Passing shipments through customs, any physical checks by the customs authorities, and associated fees, will most likely drive this grand total to $44000 (and that's still a bit optimistic). Dividing the total cost by the number of games shipped, the average per copy is $11.

After factoring in overseas shipping cost, a publisher will still hold $48.8.

Fulfillment costs

The majority of Kickstarter projects charge separately for shipping, so this amount should not put a serious dent into the collected amount, however most publishers subsidize a part of that cost, so that shipping costs do not appear completely unreasonable. I could go into a lot of details here, but that would be really boring math, a lot of tables and a lot of averaging. The policy we adopted at Board&Dice is simple, and we share this with a lot of other publishers: we subsidize in average the first $10 from the overall fulfillment cost (which in EU for example cover the picking, packing, shipping costs and VAT). Therefore, to keep calculations simple, we will continue with this assumption: $10 is the amount that publisher subsidize from the actual shipping cost.

We draw the line again and we're left with $38.8.

Marketing

I am not a marketing specialist myself, so I can't go into many details, but I am a big fan of numbers, so I looked at our past campaigns, and I also chatted often with other publishers about this, so I have an idea how much money must go into marketing to make a campaign as successful as we previously assumed. We talked about 4000 copies (so $400K raised through crowd-funding), which would require a marketing effort of $25K (unless someone's a marketing genius and has some totally out of the box ideas). Of course, this amount invested can raise a lot more awareness or it can simply not help at all. We're looking at an average case scenario. We're down to $6.25 per copy in marketing and drawing the line again, we're left with: $32.55.

Art

Nowadays, ugly or average-looking games are hardly material for crowd-funding. I know that beauty is in the eye of the beholder, but to make a successful product, you need to invest in quality artwork. Knowing how much a few publishers put in art, it is a safe assumption to say that a hundred-dollar game would require at least $15K investment in artwork. Dividing this by 4000 copies, we get $3.75 per copy. We're left with $28.8.

Development and running costs

Again, I will not go into all the grueling details that no one wants to know about. Instead, I will use the data we've collected over the last couple of years, for games like Snowdonia: Deluxe Master Set, Yedo: Deluxe Master Set, or Dark Ages. Each of these games needed about 1800 hours of work invested in them, spread over game development* and testing, art direction, marketing, sales, administration, etc.

*To develop a game it's safe to assume that you're going to spend at least 500 hours of work. To develop a big game, you'd need twice as much time. This includes internal and external testing, rules creation and proofing, blind tests, adjustment, etc. But a publishing company has a bunch of other costs, which I simply accounted for in working hours spent.

The second factor is the cost of an hour of work, and this depends a lot on your place of business. This can vary between under $7 in Bulgaria to over $45 in Denmark.
From gallery of anovac


The official hourly cost of labor in the European Union is €32.5= $37.6 and in USA it is $36.5. But we'll use a more conservative estimation of $25. With 1500 hours spent, the total is $37.5K, and spread per game box accounts for $9.375.

We draw the line again and we're left with: $19.425.

Other costs

Returns, replacement parts, currency conversion are some of the few obvious other costs that are almost inevitable. You only get to learn about these costs a few years after a crowdfunding campaign ends, and we've only learned to account for them after several years of practice. An low estimation is $1 per copy, while a high one is $2 per copy. Let's take a number in between and go with $1.4. We draw the line one final time, as we're left with $18.025, rounding it down to $18.

Recap
The game cost on Kickstarter/Gamefound (without shipping): $100
Costs:
- KS/GF fees: $5
- Stripe: $3.2
- designer royalties: $4.5
- pledge manager fees: $2.5
- production: $25
- shipping to fulfillment centers: $11
- fulfillment (subsidized cost): $10
- marketing: $6.25
- artwork: $3.75
- game development and company running costs: $9.375
- others: $1.4
Left after all costs: $18 (in fact $18.025, but we'll round down).
Taxes do kick in, and in Poland we'd pay 19% profit tax, leaving us with $14.6, for an effective profitability of 14.6%.

From gallery of anovac


Conclusions?

All the costs which do not scale up with the number of copies (art, development, molds for minis, etc.) are significantly diluted if your campaign gains more backers than you originally assumed. We've been fortunate to meet our internally set limits on almost every campaign, and we've had a campaign or two which exceeded our potential best outcome, but we've need be in the realm of tens of thousands of backers. I can only assume that profitability increases, but so does the effort of fulfillment, and other costs may arise.

This is a theoretical model, and I've heard of campaigns with a profitability rate of 30%, but I've also heard of campaigns with more than $1M raised which ended up losing money. Stretch goals are the usual culprit in the later case, but soaring shipping costs have also made a few victims lately.

There is no certain success recipe, but crowd funding can be fairly profitable when done well, and it can allow small publishers to make a huge leap forward.
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