Will said two provocative things in the article.

One, he claimed that while the core market (meaning hobbyist buyers and internet retailers) provide most of the sales (so now we know!), the “broad market retailers” (B&M stores) provide a disproportionate amount of the profit.  What does that mean?  If he is getting the same wholesale price from both types of retailers how can one assign a higher proportion of the profit to one channel?

I think and infer that what is going on is that *games which sell into the broader market* provide a disproportionate amount of the profit.  Games that sell only to the “core” market can cover their fixed costs, while a breakaway game that reaches a wider audience provides the gravy.  But if this is correct, it implies that the big sellers are to be found in the games with broad appeal rather than those that are superstars within the hobby.  Variance of sales for “gamer’s games” may be modest.

The other provocative statement was that Mayfair “refuse(s) to give Internet discounters subsidies and other undue advantages.” This seems to imply that some competitors do give Internet discounters subsidies.  Really?  Can someone confirm that?  If it were true, we might expect to see lower discounts on Mayfair games than on games from certain other publishers - and we don’t see that.

Jonathan, you inserted an assumption that might not be true, specifically this: “If he is getting the same wholesale price from both types of retailers.” I would imagine that Mayfair and other publishers use different distributors for different markets, which would affect discounts offered and therefore the margin the publishers receive. The comic industry, for example, has two broad distribution systems: newsstand and direct sales. Under the direct sales system, the retailer can buy comics on a non-returnable basis at discounts of 40-60%. (The discounts might have changed since I last worked in the industry.) Under the newsstand system, retailers receive only a 20% discount, but they can return comics they don’t sell for credit.

Which system works better? Well, around 1990 several direct-sales-only comics companies went bankrupt or lost a ton of money after trying to expand into the newsstand market. They had to supply thousands of comics with payment due many months down the road so that casual readers who had never heard of these titles might start reading them. At the same time, Marvel, DC, Archie and a few other companies continue to appear on newsstands because (1) they still sell a familiar product to interested readers and (2) they want to keep their product in a visible location, thus spurring future readers.

Tom Powers of Boards & Bits talked about wholesale prices on the Geek recently, and in passing he asked whether a company would prefer to sell 40 games or 10 games to earn $200. The answer is 10 games because you have smaller labor, postage and handling costs, among other things. If, hypthetically speaking, Mayfair sells 40 copies to the core market and 10 to the broad market and earns the same profit for each batch, then the company would naturally want to expand the broad market, which requires support of B&M stores since online stores probably don’t generate new customers.