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From: bzs@world.std.com (Barry Shein)
Newsgroups: alt.sys.sun,comp.org.sug
Subject: Re: Sun User's Group & COPS
Message-ID: <BZS.91May17222651@world.std.com>
Date: 18 May 91 03:26:51 GMT
References: <25429@as0c.sei.cmu.edu> <1991May14.234340.15041@menudo.uh.edu>
	<1991May15.145403.22000@casbah.acns.nwu.edu>
	<6296@trantor.harris-atd.com>
Sender: bzs@world.std.com (Barry Shein)
Organization: The World
Lines: 96
In-Reply-To: chuck@pluto.Harris-ATD.com's message of 17 May 91 18: 26:17 GMT


(Note: I am SUG's Treasurer)

From: chuck@pluto.Harris-ATD.com (Chuck Musciano)
>     I didn't catch the whole thread, but I am concerned about the high cost
>of the SUG CD.  I contributed several tools to it, and I like the publicity
>it brings me and Harris, my employee.  I would like to see the CD reach as 
>many people as possible.

Well, the note you refer to did try to lay out some of the direct
costs involved. It didn't try to go into overhead if for no other
reason than this is tricky (for example, what percentage of our
various staff's salaries do we charge to the CD? It certainly has
taken up a fair amount of some of their time, and will, the paperwork
of filling orders, getting permissions, management of the project in
general, etc.)

>     I think CD pricing is currently in the "what the market will bear" range,
>rather than the "commodity item we want everyone to have" range.  With a CD
>costing about $2 to master, I can't justify $248 of overhead for each CD,
>especially since you'll probably sell thousands.

I would love to think we would sell "thousands", but I don't think
that's been the experience at all (with tapes.) A more realistic
projection, particularly if we bound it to 6-12 months, is "hundreds".

There tends to be this initial bulge of sales, then it slacks off as
most people who would want one have bought one, and finally the
software becomes more and more outdated and it trickles off.

>     As SUG members, can't we see our books, and see how much it cost to make
>the CD versus how much revenue was garnered?  If the money is put to good use,
>I think earning a small profit is fine.  I'd like to see the CD cost around
>$50 or so, or even less, depending on volume.  I have a hard time believing
>the CD cost more than $100,000 to produce.  You'd only have to sell 2,000
>at $50 a pop to break even.

And if we only sell 200 then we'd have to charge $500 a pop to break
even, using your assumptions.

Somewhere between $50-$100K is probably a reasonable estimate of total
cost of the project, I know we already have added up over $20K in
direct costs.

Even the oft-quoted calculation of $2 to master is way off on direct
production expenses.

The first (and perhaps only) 500 of them are probably over $2000 to
have in hand, or $4.

And I assume people are not coming here to pick them up?

So they have to be put in a mailer, and have postage attached, and
someone has to put them in that mailer, etc etc. I would say that
$15-$20 each for just those few considerations would be a low
estimate, but perhaps moving closer to reality. This is not a
high-volume business with cookie-cutter manufacturing plants etc.

(I get this sinking feeling someone is going to come back with "well,
if it's $15-$20 then how come...", go re-read this whole note,
please!)

So the most important factor is how many you estimate we will sell.

If you estimate "thousands", then you come to one conclusion. If you
estimate "hundreds", as I do, the conclusion is quite different.

Anyhow, I think if you correct your calculations for the above, and
throw in an overhead kicker, and something for us to return to our
members, which we certainly hope to do, I think you'll come to the
conclusion that the price is justified.

I think 500 sales is a pretty optimistic number to work with. At $250
each that's a gross of $125,000, if you grant my figures of up to
$100K in costs, with overhead, well, there's not a lot left over
(about 20% of gross.)

And if we only sell 350 of them we'll be lucky to break even.

That's not a lot of room for error. We certainly owe our membership
that if we embark on such a project there is a reasonable chance we
will not lose money.

>     Does the Houston LUG get paid for their work?  Were other LUGs allowed
>to bid the job?

No, they don't get paid for their work, so this isn't really relevant.
(I think we picked up for some pizza and cokes.)

Please feel free to send me (bzs@world.std.com) or the board
(board@sug.org) questions.
-- 
        -Barry Shein

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