theotherbaldwin: (omg)
As I first talked about over a year ago, Palladium books, publisher of the classic RIFTS system and other RPG sourcebooks, was in dire financial straits. This was thanks to a combination of business mistakes, licensing deals that fell through, a declining RPG market, and one trusted employee embezzling funds from the company coffers.

To help save the company, Palladium's CEO himself appealed directly to the fans in a campaign called "SAVE PALLADIUM" wherein he asked for fans to donate to help keep the company afloat. He also sold special edition art prints, held a donation contest where those that gave would get one's name printed in a RIFTS publication, and the like.

In addition to donations or donations-in-kind, the company also apparently wasn't above some questionable pricing on issues of the Rifter that weren't sold-out or otherwise more collectible.

So in the latest official press release, here's what Kevin S. has to say:

There is no denying that with the help of our fans, we have accomplished the impossible. Palladium has survived the equivalent of a nuclear strike or Katrina Hurricane level devastation. Survived it and been busy rebuilding at lightning speed. The efforts and the result have been nothing short of miraculous.

Our battle is not yet done
There’s no denying Palladium is stronger than it was one year ago. We are holding our own and we are full of ideas. Our problem is we are feeling a bit worn out and struggling with insufficient funds to do everything we need to do to get completely back up and running at 100%.

....

In many ways, Palladium’s formula for success and survival is a simple equation: New product = new sales. The more product the greater the sales. New product generates the sale of back stock titles. New product generates excitement and buzz, and attracts new customers which results in growth. We are doing all of that, only not as quickly as we need to.

...

Rifts® & the Megaverse®: The Art of John Zeleznik: I am terrified about this magnificent book. Hobby distributors have had poor success with the sale of “art books” over the years. For every one that sells, there are 20 that don’t. Thus, most (as in 98%) have decided Palladium’s art book will not sell either. Instead of having 1000 or 1200 copies pre-ordered, we have less than 200 ordered by distributors. Likewise, sellers of “art books” won’t buy, because in their experience, “art books based on RPGs don’t sell.”

...

I believe in John Zeleznik and this art book so much, that I pushed ahead with it despite the fact that distributors are afraid to touch it. I’m trusting that the fans will find it, want it and purchase it – directly from Palladium/online/mail order if necessary – and/or by pestering their store and telling them they want this book!
...

A color book of this quality is expensive. We’ll need to sell as many as possible, as quickly as possible, direct to fans at full retail, ideally 400 copies, just to make back HALF our printing cost. Then we need to get distributors to order an additional 900 copies to break even.

Leaving aside the rather tasteless Hurricane Katrina comparison, this doesn't bode well for a number of reasons. Palladium needs an influx of cash to pay it creditors. It needs to drum up money as cost-efficiently as possibly. When you're in that sort of position, you want to make sure that you watch what short term risks you take very carefully.

An art book is a product gamble in the RPG market-- they're not very useful for actual play-- namely because a large chunk ot the fanbase already HAS the art featured on all the other products they've already bought. So an art book will appeal to a smaller fraction of the fan base, right out of the gate. That's not the kinda roll of the dice they should be making when they're trying to battle back near-bankruptcy. Especially not a roll of the dice to the tune of $18,000 that distibutors have been reluctant to take on because art books haven't sold.

Have we seen a focus on Palladium getting their core business-- tabletop gaming systems and sourcebooks--  back in operation? I've just seen some novelty trinkets (art prints, laser-etched glasses, etc), an art book full of reprinted (if pretty) content, and a project that they haven't even confirmed the license to yet (Harmony Gold's Robotech).

This makes me sad; some of the most fun I've had was playing a RIFTS game in high school, or Heroes Unlimted games here that [profile] master_kenneth has run. But what I'm seeing now is a company that has been simply coasting on the fumes of past success while frittering away energy in projecs that aren't going to recoup losses. While Kevin S.'s  obviously had success in the past, pointing to the Palladium of today and saying he doesn't need some good advice is.. just pretty contrary to the facts at hand. Palladium's financial crisis isn't just a matter of theft (which falls under bad business decisions because there clearly wasn't sufficient internal oversight), but hasn't been helped by choices regarding product that also haven't done well in the market. There's a point where "Kevin's been in the business for over two decades" gets totally swallowed by the current reality of "Kevin's begging his customers to save him and is taking unnecessary risks for a company that is as financially unsound at the moment as Palladium is."

Palladium needs an influx of cash, right? I can think of something that will have a large profit margin, draw upon the existing back catalog they already have and bring them in extra sales and revenue. Ready?

SELL PDF VERSIONS OF RIFTS BOOKS.

Palladium has a HUGE catalog of material. There are publishers that are not in the RPG industry, with  back catalogs that are nowhere NEAR the size of Palladium's, who make a few thousand a month on their back product through PDF.  Sales of a print version work pretty close to sales as a PDF: there's an initla surge at release, but there's always those customers who  didn't have the money earlier, didn't show interest in the product earlier, or are just finding out about a product-- and that's how the PDF products are sold.

Now, there are some technical hurdles. If what Eric Burns said in the first entry I linked to is true, most of there books of old were done on pasteboard, much longer than other publishers were doing layouts on desktop publishing software--.which would mean that  there are no electronic copies to make pdfs of.

But this is a BUMP in the road, not a roadblock! Take some time to grab a RIFTS book, get a fan or intern or part-timer or what-have-you to PDF 'em through Adobe Professional by bookmarking files the old fashioned way  (straigh scann, bookmarks dividing up the various sections) and you'd still have something that could sell well. Hell, considering the ever-growing PDF market, it would be worth it to hire a company like DriveThru to redo the layout entirely, using the raw text and original art files (make the text searchable, images manageable, etc). The long term benefits versus short term costs would almost certainly prove to have a larger margin than novelty laser-etched glasses!

I've heard tell that Kevin S. is reluctant to sell PDFs because he's afraid of either losing book sales, wants to wait until he can reprint the actual print books, or is afraid of rampant piracy.

Loss of book sales? WHAT loss of book sales? I haven't seen  other publishers who sell print and PDF complain about this. Why? Well, because a new market (the pdf market in this case) does not necessarily exist ONLY by cannibalizing other markets (in this case, print/books). The profit margin is MUCH higher for PDF versus print, since you only have to pay to scan and convert them once-- after that, you can sell a digital file over and over. And instead of having to sell via distributors at below cover price, you can eliminate the middle man and get a higher percentage of list price . As it stands right now, instead of getting 50%-60% of list price by selling them as PDFs he's making 0% by not being able to reprint them.

As for fears of "well, what's to stop someone from putting up pdfs of sourcebooks on file sharing networks", well guess what? People are already doing that; there's already a demand for it. Just go to The Pirate Bay or your torrent site of choice and search for "RIFTS". You can't lose sales you're already not making, and selling your OWN branded PDFs will give you nothing worse than what the situation already is by default.

When a company is BEGGING for cash, and when the company wonn't take logical steps on its own to increase cash flow/ profit margin before holding its collective hat out, it's really just big fart in the face to those same fans and consumers. Selling PDFs or RIFTS books is one such step of MANY--even a few thousand dollars made mean that's a few thousand dollars more that can be given to the people Palladium frigging owes money to!

Unfortunately, I don't know if Palladium is going to be around for 2009, or even 2008. In a post on his company forums, he said:

An unexpected check from the book trade and the sale from this first Palladium Collectibles and Art Auction, will enable Palladium to make rent and cover all the remaining bills for the month of June, except for one printing bill.
...

I think we’ll do our next auction July 9-15, after the 4th of July and Origins.

...

And while the auction is doing very well, online sales have been sluggish and down the last two days... Hopefully, they pick up for the weekend.

So, reading what Kevin himself has written, he clearly did not expect to be able to cover his monthly expenses for June. June had barely a week left to go!

Kevin tries to make the online sales dip sound like it's a recent occurence or a blip on the radar, but he's commented about sales being low for the last several months. That doesn't bode well for Palladium's third quarter, and certainly poses some serious hurdles to making anything close to a decent year-end.

In fact, despite an unexpected source of income, it looks like he still won't be able to cover his monthly expenses.

Not being able to cover your monthly expenses is a clear sign you won't be around for very long, and at the least, are not in a healthy place, business-wise.

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theotherbaldwin

May 2009

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