Absolutely, and, you know, I can tell from the tone of his post that he's running out right now to purchase all those books he missed. Not to mention seeing the error of his ways and signing up for permanent DDI membership. WotC shoot, they score! All that extra money coming their wa... what? Oh. Oh, never mind, then.
Fact is, just as TaxeonZ says, what WotC have done is lost $40-$50 a year in revenue. Apparently they feel a principle is worth that loss, despite that the marginal cost per CB was zero. I could say "maybe they know best", but it doesn't sound like rocket science, to me.
Revenue <> Profit. I wish I could remember where I saw it posted here, but someone talked about how not every customer is profitable and that there are some customers you don't want along with a link to the outside reference. I found this: www.philldomask.com/blog/blog28.html While it is not exactly what he was talking about, if I squint my eyes a bit it's vaguely close. The basic concept (as i recall) was that it is not profitable for a company to do what is necessary to have every possible customer.
However, in this example, said customer WAS profitable to WotC!
Did his existence add anything to the development cost of the CB? NO.
Did he pay money into the WotC coffers? YES.
So, while your point is valid, that some customers cost too much to keep, it is not relevant to this particular example. Losing this type of customer is a loss in revenue, plain and simple.
Absolutely, and, you know, I can tell from the tone of his post that he's running out right now to purchase all those books he missed. Not to mention seeing the error of his ways and signing up for permanent DDI membership. WotC shoot, they score! All that extra money coming their wa... what? Oh. Oh, never mind, then.
Fact is, just as TaxeonZ says, what WotC have done is lost $40-$50 a year in revenue. Apparently they feel a principle is worth that loss, despite that the marginal cost per CB was zero. I could say "maybe they know best", but it doesn't sound like rocket science, to me.
Revenue <> Profit. I wish I could remember where I saw it posted here, but someone talked about how not every customer is profitable and that there are some customers you don't want along with a link to the outside reference. I found this: www.philldomask.com/blog/blog28.html While it is not exactly what he was talking about, if I squint my eyes a bit it's vaguely close. The basic concept (as i recall) was that it is not profitable for a company to do what is necessary to have every possible customer.
However, in this example, said customer WAS profitable to WotC!
Did his existence add anything to the development cost of the CB? NO.
Did he pay money into the WotC coffers? YES.
So, while your point is valid, that some customers cost too much to keep, it is not relevant to this particular example. Losing this type of customer is a loss in revenue, plain and simple.
There are far too many assumptions in your position for it to be hard and fast fact. For example:
Did he share his 5 monthly installs?
Would those people have paid $40-$50 for updates? (lost revenue)
His CB (seemingly) caused him to not buy books. Did his (potential) shared updates prevent his friends from buying books? (lost revenue)
Did his use of CB cause anyone to become interested in the hobby and buy books or DDI? (increased revenue)
etc.
In the end without hard facts you can't assert categorically that his money was profit or not.
Absolutely, and, you know, I can tell from the tone of his post that he's running out right now to purchase all those books he missed. Not to mention seeing the error of his ways and signing up for permanent DDI membership. WotC shoot, they score! All that extra money coming their wa... what? Oh. Oh, never mind, then.
Fact is, just as TaxeonZ says, what WotC have done is lost $40-$50 a year in revenue. Apparently they feel a principle is worth that loss, despite that the marginal cost per CB was zero. I could say "maybe they know best", but it doesn't sound like rocket science, to me.
Revenue <> Profit. I wish I could remember where I saw it posted here, but someone talked about how not every customer is profitable and that there are some customers you don't want along with a link to the outside reference. I found this: www.philldomask.com/blog/blog28.html While it is not exactly what he was talking about, if I squint my eyes a bit it's vaguely close. The basic concept (as i recall) was that it is not profitable for a company to do what is necessary to have every possible customer.
However, in this example, said customer WAS profitable to WotC!
Did his existence add anything to the development cost of the CB? NO.
Did he pay money into the WotC coffers? YES.
So, while your point is valid, that some customers cost too much to keep, it is not relevant to this particular example. Losing this type of customer is a loss in revenue, plain and simple.
There are far too many assumptions in your position for it to be hard and fast fact. For example:
Did he share his 5 monthly installs?
Would those people have paid $40-$50 for updates? (lost revenue)
His CB (seemingly) caused him to not buy books. Did his (potential) shared updates prevent his friends from buying books? (lost revenue)
Did his use of CB cause anyone to become interested in the hobby and buy books or DDI? (increased revenue)
etc.
In the end without hard facts you can't assert categorically that his money was profit or not.
Your insinuation was that this customer was not profitable to keep. I was merely responding to that part of your post, and my point still stands. WotC was getting income from this source with no difference in development or production costs.
As far as your conjecture goes, who knows? But I'll play too.
Let's assume (hypothetically) he did share his installs. Worst case scenario.
No, those people wouldn't have paid for updates because they were getting them for free. If the only guy in this hypothetical group who was previously willing to pay thinks it's not worth the price, the freeloaders aren't going to rush out and subscribe now that Mr. Moneybags has dropped the ball.
Using the CB may have increased revenue or decreased revenue at WotC, depending on his book buying habits and his ability to draw in new players. OK, agreed, revenue went up or down. So WotC may have received more or less profit as a result of his use of the CB. But, nonetheless, it was profit.
If you want to argue about whether this move will make them a greater profit from this customer and his group, go for it, I'll leave you alone on that one.
But back to the point. Because his subscription incurred NO ADDITIONAL development costs and because he made payment to WotC. I most certainly can --and in fact do-- categorically assert that his money was profit.
Your insinuation was that this customer was not profitable to keep. I was merely responding to that part of your post, and my point still stands. WotC was getting income from this source with no difference in development or production costs.
As far as your conjecture goes, who knows? But I'll play too.
Let's assume (hypothetically) he did share his installs. Worst case scenario.
No, those people wouldn't have paid for updates because they were getting them for free. If the only guy in this hypothetical group who was previously willing to pay thinks it's not worth the price, the freeloaders aren't going to rush out and subscribe now that Mr. Moneybags has dropped the ball.
Using the CB may have increased revenue or decreased revenue at WotC, depending on his book buying habits and his ability to draw in new players. OK, agreed, revenue went up or down. So WotC may have received more or less profit as a result of his use of the CB. But, nonetheless, it was profit.
If you want to argue about whether this move will make them a greater profit from this customer and his group, go for it, I'll leave you alone on that one.
But back to the point. Because his subscription incurred NO ADDITIONAL development costs and because he made payment to WotC. I most certainly can --and in fact do-- categorically assert that his money was profit.
By this logic every customer beyond the FIRST is PURE PROFIT, because each customer beyond the first incurred NO ADDITIONAL cost. I can play fun and games too.
Your insinuation was that this customer was not profitable to keep. I was merely responding to that part of your post, and my point still stands. WotC was getting income from this source with no difference in development or production costs.
As far as your conjecture goes, who knows? But I'll play too.
Let's assume (hypothetically) he did share his installs. Worst case scenario.
No, those people wouldn't have paid for updates because they were getting them for free. If the only guy in this hypothetical group who was previously willing to pay thinks it's not worth the price, the freeloaders aren't going to rush out and subscribe now that Mr. Moneybags has dropped the ball.
Using the CB may have increased revenue or decreased revenue at WotC, depending on his book buying habits and his ability to draw in new players. OK, agreed, revenue went up or down. So WotC may have received more or less profit as a result of his use of the CB. But, nonetheless, it was profit.
If you want to argue about whether this move will make them a greater profit from this customer and his group, go for it, I'll leave you alone on that one.
But back to the point. Because his subscription incurred NO ADDITIONAL development costs and because he made payment to WotC. I most certainly can --and in fact do-- categorically assert that his money was profit.
By this logic every customer beyond the FIRST is PURE PROFIT, because each customer beyond the first incurred NO ADDITIONAL cost. I can play fun and games too.
Actually if we say it took $1,000,000 to produce the CBC, then the first customer paid $10 so the cost goes down to $999,990, then the next pays $10 cost goes to $999,980 and so on and so forth. Until at some point it doesn't cost them anything to distribute it. At $440,000 per month minimum I'm sure they reached that potential within just a few months...
Note that they still have to pay for bandwidth (and I'd be shocked if the bandwidth costs are lower with the new model) and programmers to bug fix, and data entry of new material, so there isn't just one fixed cost, there's an ongoing cost. However, aside from bandwith, there's no cost PER UNIT, no cost for the creation of an individual copy of either model of the CB.
Revenue <> Profit. I wish I could remember where I saw it posted here, but someone talked about how not every customer is profitable and that there are some customers you don't want along with a link to the outside reference. I found this: www.philldomask.com/blog/blog28.html While it is not exactly what he was talking about, if I squint my eyes a bit it's vaguely close. The basic concept (as i recall) was that it is not profitable for a company to do what is necessary to have every possible customer.
Sure, it can be true that the revenue is less than the marginal cost - and tracking the total, real marginal cost can be tricky. But for a downloadable, digital product I can state with considerable assurance that the total marginal cost is well under a dollar. So, at very least, the vast majority of that $40-$50 is gross profit. This would not be true of, say, a book, where itactually costs money to make the book. There, any customer paying less than the cost to manufacture, ship and process the sale for that book is "bad revenue". But for DDI, provided the transaction costs for each subscription plus bandwidth costs are less than the subscription amount (not a big assumption), the rest is profit. That is not to say you have positive net earnings; overheads and fixed costs (development, writing, editing, etc.) still have to be covered - but you don't lose a dime of those if you lose customers. Fixed costs and overheads are the reason "stck 'em high and sell 'em cheap" works - because getting lots of small revenue margins works just as well as getting fewer large ones for covering those costs. Provided the margin (= selling price minus marginal costs) is positive.
Selling the same product at a range of prices (as with yearly subscriptions or occasional subscriptions for DDI) is a well-known marketing technique. For DDI I think it should work very well; the marginal costs is so low and the scope to provide higher-paying customers with enhanced convenience is so great that it seems almost made for it. The CBC seemed to be working fine that way - whereas now WotC offer a pay-for service that is worse in almost every way than that previously offered for less. I can parse no way that it wasn't a daft move. Recent speculation has new game material being published electronically and "debugged" prior to a 'final' version in hardcopy form. This might explain the online CB need for the "current" content - but still doesn't remove the market demand for an offline version with the book content. And market demands have a habit of getting satisfied - just look at recreational drugs (and Prohibition booze before them) to see that.
Revenue <> Profit. I wish I could remember where I saw it posted here, but someone talked about how not every customer is profitable and that there are some customers you don't want along with a link to the outside reference. I found this: www.philldomask.com/blog/blog28.html While it is not exactly what he was talking about, if I squint my eyes a bit it's vaguely close. The basic concept (as i recall) was that it is not profitable for a company to do what is necessary to have every possible customer.
Sure, it can be true that the revenue is less than the marginal cost - and tracking the total, real marginal cost can be tricky. But for a downloadable, digital product I can state with considerable assurance that the total marginal cost is well under a dollar. So, at very least, the vast majority of that $40-$50 is gross profit. This would not be true of, say, a book, where itactually costs money to make the book. There, any customer paying less than the cost to manufacture, ship and process the sale for that book is "bad revenue". But for DDI, provided the transaction costs for each subscription plus bandwidth costs are less than the subscription amount (not a big assumption), the rest is profit. That is not to say you have positive net earnings; overheads and fixed costs (development, writing, editing, etc.) still have to be covered - but you don't lose a dime of those if you lose customers. Fixed costs and overheads are the reason "stck 'em high and sell 'em cheap" works - because getting lots of small revenue margins works just as well as getting fewer large ones for covering those costs. Provided the margin (= selling price minus marginal costs) is positive.
Selling the same product at a range of prices (as with yearly subscriptions or occasional subscriptions for DDI) is a well-known marketing technique. For DDI I think it should work very well; the marginal costs is so low and the scope to provide higher-paying customers with enhanced convenience is so great that it seems almost made for it. The CBC seemed to be working fine that way - whereas now WotC offer a pay-for service that is worse in almost every way than that previously offered for less. I can parse no way that it wasn't a daft move. Recent speculation has new game material being published electronically and "debugged" prior to a 'final' version in hardcopy form. This might explain the online CB need for the "current" content - but still doesn't remove the market demand for an offline version with the book content. And market demands have a habit of getting satisfied - just look at recreational drugs (and Prohibition booze before them) to see that.
There are three scenarios for any given customer when it comes to D&D content and specifically Character Builder.
1) Buy the books and DDI sub 2) Books only 3) DDI only [optional] 4) DDI only, but not a continuous sub
Because DDI is just another delivery method for their IP the cost of DDI isn't just bandwidth, development, and servers. You also have to include IP development costs. Their old model was basically buy the books ($30-$40 a pop) or buy them all for $10. So for $10 you are paying for the development of every player (and monster) book ever released for 4e (2 years worth of products). It was a steal and they were losing their shirts (your assertion about a $1 marginal cost is laughable). Their new "smarter" model is you can now buy for $30-$40 a book the same as before or you can RENT everything for $10. This model at least has incentives for going either way whereas before if you actually bought the books you were being foolish (from a cost perspective).
I'm not saying there was no profit, but I'm sure not agreeing with the other extreme where all but $1 was profit. It's just not as simple as people are trying to make it out to be.
Revenue <> Profit. I wish I could remember where I saw it posted here, but someone talked about how not every customer is profitable and that there are some customers you don't want along with a link to the outside reference. I found this: www.philldomask.com/blog/blog28.html While it is not exactly what he was talking about, if I squint my eyes a bit it's vaguely close. The basic concept (as i recall) was that it is not profitable for a company to do what is necessary to have every possible customer.
Sure, it can be true that the revenue is less than the marginal cost - and tracking the total, real marginal cost can be tricky. But for a downloadable, digital product I can state with considerable assurance that the total marginal cost is well under a dollar. So, at very least, the vast majority of that $40-$50 is gross profit. This would not be true of, say, a book, where itactually costs money to make the book. There, any customer paying less than the cost to manufacture, ship and process the sale for that book is "bad revenue". But for DDI, provided the transaction costs for each subscription plus bandwidth costs are less than the subscription amount (not a big assumption), the rest is profit. That is not to say you have positive net earnings; overheads and fixed costs (development, writing, editing, etc.) still have to be covered - but you don't lose a dime of those if you lose customers. Fixed costs and overheads are the reason "stck 'em high and sell 'em cheap" works - because getting lots of small revenue margins works just as well as getting fewer large ones for covering those costs. Provided the margin (= selling price minus marginal costs) is positive.
Selling the same product at a range of prices (as with yearly subscriptions or occasional subscriptions for DDI) is a well-known marketing technique. For DDI I think it should work very well; the marginal costs is so low and the scope to provide higher-paying customers with enhanced convenience is so great that it seems almost made for it. The CBC seemed to be working fine that way - whereas now WotC offer a pay-for service that is worse in almost every way than that previously offered for less. I can parse no way that it wasn't a daft move. Recent speculation has new game material being published electronically and "debugged" prior to a 'final' version in hardcopy form. This might explain the online CB need for the "current" content - but still doesn't remove the market demand for an offline version with the book content. And market demands have a habit of getting satisfied - just look at recreational drugs (and Prohibition booze before them) to see that.
There are three scenarios for any given customer when it comes to D&D content and specifically Character Builder.
1) Buy the books and DDI sub 2) Books only 3) DDI only [optional] 4) DDI only, but not a continuous sub
Because DDI is just another delivery method for their IP the cost of DDI isn't just bandwidth, development, and servers. You also have to include IP development costs. Their old model was basically buy the books ($30-$40 a pop) or buy them all for $10. So for $10 you are paying for the development of every player (and monster) book ever released for 4e (2 years worth of products). It was a steal and they were losing their shirts (your assertion about a $1 marginal cost is laughable). Their new "smarter" model is you can now buy for $30-$40 a book the same as before or you can RENT everything for $10. This model at least has incentives for going either way whereas before if you actually bought the books you were being foolish (from a cost perspective).
I'm not saying there was no profit, but I'm sure not agreeing with the other extreme where all but $1 was profit. It's just not as simple as people are trying to make it out to be.
Even if you include the development of new material and all of those costs, it is a diminishing cost as more and more people subscibe to DDi. When you get into the range of $440,000 per month it really is less than a dollar per customer in cost...
Even if you include the development of new material and all of those costs, it is a diminishing cost as more and more people subscibe to DDi. When you get into the range of $440,000 per month it really is less than a dollar per customer in cost...
You really expect me to believe that Wizards has a 90% profit ratio? Even if we look at year subs as $6/month that's (6-1)/6 or an 84% profit ratio? Their stock must be through the roof with all that profit they are just raking in. Wait, what's that you say? Their stock isn't going up like that?
