Distributor margins

Distributors in the hobby game trade typically buy from publishers at around 40 percent of MSRP, though terms for small or unproven publishers can dip toward 35 percent. They resell to retailers at roughly 50 percent of MSRP. That 10 to 15 point spread is the distributor's gross margin, out of which they run warehouses, sales teams, catalogs, and freight to stores.

From the publisher's side, the math on a 40 dollar game looks like this: the player pays 40, the store keeps about 20, the distributor keeps about 4 to 6, and you receive about 14 to 16. If your landed cost is 8 dollars, you gross roughly 6 to 8 dollars per copy through distribution. That is the entire reason the 5x landed-cost MSRP rule exists. At 4x or 3x, distribution sales are break-even or worse.

What that deep discount buys you is scale you cannot build yourself: a single purchase order can move hundreds or thousands of copies, and every game store the distributor serves can restock your game without ever talking to you. Distributors also consolidate freight, handle store credit risk, and take returns headaches off your plate depending on terms.

Read the terms sheet carefully before signing. Payment terms of net 30 to net 90 are common, meaning you ship product and wait one to three months for payment. Some agreements include return rights or require you to buy back unsold stock. And watch for exclusivity clauses. Granting one distributor exclusive rights can be fine if they are strong in your market, and crippling if they are not.