Aussie money is some of the prettiest in the world and I’ve spent a lot of it on gaming products…

I’m going to step aside from the usual practice of talking to GMs about how to improve their game for a few weeks in favor of what used to be a popular subject around the watercooler-analogue – and still causes game companies angst and sweaty nights, even today: the perceived value-for-money of game products.

If your perceived value is too low, it will obviously hurt sales. If your perceived value is too high, it will hurt sales just as badly. (Don’t believe me? I’ll get back to that, next time).

This is a subject that Johnn and I discussed at length by e-mail long before we got involved in the Assassin’s Amulet project, and it’s one that affects us all, whether we’re a customer or a producer. But before we can get into the question of perceived value, we need to look at actual value, and get some appreciation for the complexities of the subject and to put the discussions into context.

Dead-Tree Products through RPG history

A good place to start is to look at established pricing practices and their relationship to costs, because that’s the foundation of deciding the minimum price that can be charged for a product.

AD&D

I started my gaming experience with AD&D back in mid-1981. At the time, the volumes cost around A$18 each, which at the time was equivalent to US$10 each, plus air freight to Australia – a not inconsiderable factor, amounting to about a third of the total. At the time, the exchange rate was about A$1 = US$0.80. This was close to double the price of a standard paperback, and about half the price of a standard hardcover through a bookstore. It was also about the same price that was charged by University bookstores for general textbooks, thanks to the mass-production discounting possible when a book is going to be required by a large number of first-year students. The pricing immediately defined who the books were aimed at, and the target market responded through word of mouth.

What was interesting was that the volumes of rules were considered standalone products. You needed the Player’s handbook, but the GMs Guide was not considered essential – just nice to have. The Monster Manual, ditto. Deities & Demigods, double-ditto.

These were hardcover volumes, well-bound, with high production values for the time. The printing was black and white, most of the artwork was excellent, the paper was good quality and thick.

At the time I started GMing, a change of attitude swept through the local marketplace. The slightly-more-expensive GM’s Guide became the “essential to-have” – so long as one player had a copy of the PHB, that was considered good enough for a gaming table. Prices had also gone up somewhat, to about A$24 – inflation was a hot topic in Australia at the time, and this was perceived as just another example of it. But the cost of playing a game was still, typically, $24 for the DMG and $22 split 4-5 ways amongst the players – or about A$3 a head for the entire group.

Original Champions

A couple of years later, Champions reached our shores. This was a softcover, again with artwork that was better than acceptable for the most part (though a couple of illustrations looked decidedly amateurish – as always, the standard I used was “do I think I could do better?”). Binding was just a couple of staples. It cost about $10 or $15 and it was fully self-contained. It also had fewer pages than an AD&D volume, or at least that was the perception. But notice that spread amongst 4-players-and-a-GM, the total cost was still about $3 a head.

What was interesting was the way the game system was perceived from a marketing point of view. The slightly lower production values at one-third the price resulted in a general impression that this was a far more amateur effort than AD&D was – the prices of AD&D volumes was now nudging its way towards A$30 a volume, and there was a growing perception that they were overpriced. There was a lot of discussion in my local gaming circles over the value of binding. Perhaps the biggest difference was that the AD&D volumes were designed to be sold in a regular bookstore, while the Champions volume was designed to sell through a specialist game or comic shop. Different standards had to be applied, and there was considerable debate about which was the better direction, and what it all meant for the shape of the future of the hobby.

Nor was champions alone – there were a whole heap of other games coming out, and they all had similar prices and similar production values.

GURPS

Then GURPS came along in ’86 and seemed to straddle the fence. Its volumes were square bound paperbacks, and priced midway between the Champions products and AD&D, and that was what most of my local RPGers considered to be its masterstroke of genius. By now, the AD&D volumes were about A$35 a volume, and definitely considered overpriced – but that didn’t matter because we already owned them, anyway. Champions products had stayed about the same price, and Champions II and III weren’t considered essential anyway – they were add-ons to the original volume, which was still required to play the game.

But GURPS wasn’t fully self-contained – it had a core rules booklet of really cheap construction that came along with each genre pack, and a lot of the rules were contained outside of that core booklet. For the first time, multiple books were therefore required in order to play the game – the fact that one was free and only about 8 or 12 densely-packed pages long didn’t seem to make any difference. The fully-self-contained-games had produced a subtle shift in thinking that no-one really appreciated at the time. GURPS seemed to be something of a slow-starter in terms of sales, as a result. It was a long time before anyone I knew started playing it – the best part of a decade, in fact, in the mid-90s – though a number of copies of the odd individual volume were bought and modified for use in Champions campaigns! How typical this was, I couldn’t say.

2nd Ed

That was the big change in climate when D&D 2nd Ed arrived in 1989. Instead of one book being seen as essential and the rest as either add-ons or community property, for the first time it was perceived by the local gaming community that you had to buy all three volumes of “The Core Rules”, now priced at about A$40 each. Fourty times three is A$120, divided five ways is $24 a head – Eight Times the price per head that we had been used to. (The D&D Basic Set never really got off the ground here – but it fostered and played into this sense of ‘the core rules’.)

That did not go down very well. 2nd Ed sunk like a rock on the local games market. Nor was there any giant leap in production values (one color plus B&W interiors) or page count to justify the price tag. Instead, people started looking to different games to play – games that had been published in the square-bound soft-cover format. D&D seemed to have priced itself out of the market.

Ch 4e

Also in 1989, Champions 4th edition became the first edition of the game to be published in hardcover format. At about 250 pages length, and costing A$60, it was half the price of a set of core D&D rules and had similar production values to AD&D plus a slick, modern look (a definite step up in that respect compared to the previous game) – and was right on the edge of what was considered fair value for money. There was a sense that this was what TSR should have done with 2nd Ed – which might not have been entirely fair to TSR, as anyone with knowledge of old-school printing will appreciate. But right or wrong, in the eyes of the local gaming community, they had gotten it right and TSR had not.

The 80s and 90s were a good period in Australia in a lot of respects. We had gone from seeing ourselves as a third-tier country to being the second-best nation in the Commonwealth (with apologies to Canada, who was viewed as dominated by the US) and pushing hard for the top slot. Rock bands like AC/DC, Little River Band, INXS, and Midnight Oil were proving that in terms of modern culture, we were equal to anywhere else; the rest of the Commonwealth regularly came to Australia to play cricket and get beaten by the best team in the world; we had a better public health system and welfare system than anywhere else in the world, Australian universities were world-class (with a lot of students coming from overseas for their education), and we had kicked the Yank’s tails in the America’s Cup and sold the TV-soap Neighbours to the UK where it was a monster hit.

Disposable income was up, and there was the sense that we could pick and choose from the best of the rest of the world and made it our own – without all the baggage. Even the occasional recession was nothing more than a stumble along the way. We were as good as anyone else in the world, and better per capita if our relatively small population base was taken into account. Our staging and telecast of the Formula 1 GP set new standards and the rest of the world had to lift their game in order to catch up.

All that culminated in the 2000 Summer Olympics in Sydney, which was the nation’s coming-out party, the event where we clued everyone else in on just how good we were. The ambition was to set a new standard in every aspect of hosting and running a major event. We didn’t just want to be told that they were ‘the best games ever’, we wanted to make it a self-evident fact to every athlete, official, and tourist. (Our national pride seems to have eroded a bit since then – or maybe we’ve become more realistic. Oh, well – it was fun while it lasted).

3e

That was the atmosphere into which D&D 3e hit the local markets. Full colour, glossy paper – and A$70+ a volume. The perception was still that you needed all three core rulebooks in order to play, and – what’s more – everyone had to have their own copies, rather than one shared set. But times had changed so radically in Australia since the release of 2e that none of this was considered excessive. We drooled and gosh-wowed over the production values, which set a new standard in the value-for-money stakes.

3e Supplements

And, with the new standard, came the OGL explosion. These redefined perceived value in physical products and set standards that still hold to this day. If a game supplement had full-page artwork and hardcover binding, on good paper, it was worth $50-60, even in Black & White – depending on the value of the content. If it had black-and-white art that wasn’t full-page, hardcover binding, and good paper, it was worth A$30-$40. And these were all of a similar physical size, and hence had a similar page count.

If it was soft-covered but square-bound, with full-page art, and a similar page-count, it was worth A$30-$40. Halve the page count, and you reduced the perceived value a bit more than 25%; double it and it increased by about 25%. If it wasn’t square-bound, it was worth no more than A$25 – depending on the content.

Note that word, Content. This is the first time it has really gotten a mention here. Prior to the OGL explosion, there was a general perception that all content was of generally equal value – it was a game system that you wanted to play, or it wasn’t. The perceived merits played into the decision to purchase, but not into the relative pricing expectations. Now that changed, and content desirability became a genuine consideration in determining perceptions of value for money. Instead of an all-or-nothing, there were nuances and value judgments involved – and that was ultimately the result of there being so much material being published that you had to pick and choose, most people could not afford to buy it all. heck, I Still don’t have all the 3e stuff that I want!

Ch 5e

These were the standards against which Champions 5th edition was measured when it was published in 2002. At 372 pages, it was as physically thick as any two of the AD&D 3e core rulebooks or game supplements. Hardcover, black and white, no full-page art – but it cost A$100, and that was perceived as a little on the high side, by about $10-20 – so much so that a lot of people held off on buying copies. In fact, I never did buy one – I was loaned one by another gamer who wasn’t using it because he could borrow another, and then inherited the one that he was borrowing when its owner passed away.

AD&D 4e

All sorts of factors that had nothing to do with production quality and cost impacted the success or failure of 4e. So much so that it’s not really worth going into in any detail within this discussion. Suffice it to say that the volumes are consistently a little thinner, the art a little better, and the prices a little higher – and all of that’s a problem when pricing expectations haven’t changed. Any two of those would have been fine, but the combination of all three created a predisposition toward negativity, an unwillingness to take a chance, given the general climate of negativity that was its overall reception. But these was just a part of a much larger set of problems (real and perceived) that afflicted 4e’s reception.

Ch 6e

There’s no denying that Ch 6e is big. In two volumes because it was too big for one, it totals something on the order of 600 pages, maybe more. All full colour, and on glossy paper – but generally, not full-page art on every page. One costs A$120, and the other A$100, from memory. The two volumes are thicker than all three 3.5 Core rulebooks, combined – and that’s without making allowance for the presence of an extra set of covers on the 3.5 side of the ledger.

During the writing, there was a lot of noise made about a complete top-to-bottom reappraisal of the system concepts that got a lot of people excited. The reality was ultimately disappointing. There’s a lot of better explanations and supplemental material included, but in terms of changed system mechanics there is not really a lot to justify the purchase. And in the context of not-a-whole-lot-that’s-new, despite the page count, the perceived value-for-money evaporated very quickly. That’s why the Pulp Hero campaign that I co-GM is still using 5e – and why only one of the participants has bought a copy of 6e.

If the rewrite had addressed some or all of the major flaws that have always existed in the Hero System game mechanics, and been published to a lower production standard and correspondingly lower price tag, we might have converted to the new system years ago.

Like 4e, then, there are external factors of disillusionment and unfulfilled hype that compromise the ability to extrapolate lessons concerning the perception of value-for-money from its release.

Pathfinder

That really leaves only one objective measurement source for assessments of Value-for-money: Pathfinder. Production standards are easily the equal of 3e, if not even better. The Core Rulebook weighs in at 575 pages – almost twice the size of the PHB. There are still three core volumes – add the Gamemastery Guide and Bestiary – plus a couple of supplementary volumes. The Core Rulebook costs about A$100, the others about A$80 – which is, like 4e was, still way too much to buy on spec (I have copies because I want to be able to write Pathfinder-compatible game materials, not to play – though I may migrate my 3.x campaigns to Pathfinder at some future point).

The secret to Pathfinder’s success is compatibility. I have, at current count, something on the order of 110 3.x/d20 game supplements; at an average value of A$60 each, that’s over six-and-a-half-thousand dollars worth of investment in my game. Of these, I have bought about 1/2, been given about 1/6th, and inherited the rest. In theory, Pathfinder lets me use all of it.

And that doesn’t count the investment in PDFs, easily another thousand or two dollars, which I’ll talk about in more detail a little later. Including the 3.x core volumes and the 5 volumes of Pathfinder core volumes, that’s about nine thousand dollars, new.

Unfortunately, that very compatibility contaminates the question of value for money, when we’re talking about game systems, giving it an artificial leg-up.

Crystal Ball Gazing

So the six-million-dollar question (possibly more) is how the perception of value-for money is going to affect D&DNext when it finally comes out? After all, anyone who got into gaming with 4e and has bought all the books for it has probably made an investment of A$2000 or more in that section of the hobby – on a par with what I had invested in 3.x when 4e came out. If WOTC are to succeed in wooing the marketplace with D&DNext on the scale of a 3rd Ed success, they have to respect the investments of three diverse groups: the Pathfinder players, the 3.x die-hards like myself, AND the 4e players. They can’t simply repackage either 3.x or 4e and expect it to fly off the shelves. That’s an incredibly difficult task to pull off.

The secret to success will probably be a conversion process bundled with the D&DNext rules that make it possible (but slightly inconvenient) to employ all that existing material – creating the capacity for each game company (including themselves) to release an updated edition of each book that has all the conversion done, and that cleans up any outstanding issues or things that didn’t quite work out as intended. Some game companies will no longer exist to update their materials, but others – if the licensing permits – will be able to publish new D&DNext-compatible supplements to take their place. Is that what they have in mind? I have no idea.

The problem is that it has been over a decade since 3.0 was released, and in all that time, there has been no clear indication as to how the public perception of value-for-money in dead-tree products has shifted. That it will have shifted is almost as certain as anything can be – but trying to quantify the change is almost impossible. And that makes it incredibly hard to determine what price the market will support for D&DNext dead-tree products when they appear.

Overpricing will inevitably lead to failure. People will just keep playing pathfinder and 3.x.

Underpricing will eat into profits – but might be a smart move. Kids who were just entering school when 3.x was published will be in Universities and junior members of the workforce when D&DNext is published – targeting that market with lower-priced materials, even at an initial loss, would permit room for people to buy the system on spec, to take a chance. Once it has an established reputation and market, the losses can be made up with the release of updated supplementary materials. Just as printer manufacturers price their printers at or below cost, and make their profits on the inks, WOTC could price the core rules at or below cost – possibly even publishing a plain (“cheap”) and a deluxe set of editions, and sell the same books to the same people twice (assuming the system is any good, of course). Buy the black-and-white cheap paperback versions on spec, then upgrade to the full-colour deluxe versions.

This would also be cognizant of the elephant in the room, whose impact on perceived value-for-money of dead-tree publications has not been appraised – but which will also inevitably play a part – the rise of the online world and the PDF.

A Breakdown Of Production Costs – a comparison for an online world

The cost of producing a game supplement can be easily broken down into several categories. A comparison of the costs of dead-tree product costs in an online world makes for some very interesting reading and some startling insights.

1. Writing

It takes just as long to write 1000 words for use in a dead-tree publication as it does to write them for a PDF. This is one cost that doesn’t change in an online world.

That’s not to say that new efficiencies can’t be found. Wikipedia makes it much faster and easier to do basic research. Name generators can make it quicker to create characters, as can RPG software. Other utilities can make your work more efficient, or more professional – automated spellchecking, for example, makes it faster to write because accuracy can wait. But all of these have a relatively small effect; writing creatively, ultimately, is about the speed of developing ideas and the effectiveness of organizing and structuring them, and those have not changed very much.

Naturally, that means that the production cost of writing remains unchanged.

2. Art

Art in the internet age is almost as unaffected as writing – except that you can produce artwork online, if you know how. Sometimes, that can take longer, or be less effective than art using traditional media. The real savings offered by digital art stem from the things that no longer need to be done to it in order to use art in a game product: embedding the art directly in the manuscript for printing without the need for photography and related processing. While this is not an insignificant savings, its absence simply means that more art can and will be included in any given game supplement – the overall art budget will be exactly the same.

3. Editing, Revision, and Layout

Almost every advance in terms of the writing of a body of text falls into one of these categories, so this production cost would seem to have diminished as a result. That’s not necessarily a good thing; it can take time to polish any communication to make it function properly, and sometimes the editing is so quick and easy that you scarcely has time to realize what isn’t explained very clearly, never mind exploring alternative ways of phrasing the message you are trying to impart. Version control becomes a new problem with its own set of headaches, as well. Finally, counteracting the impact on production costs is the need to prepare material in multiple formats and handle conversion problems.

When we were working on Assassin’s Amulet, I compiled the final draft of the text in Word, adding the graphics as necessary. Johnn was using a different version of Word, adding to the complexity of the operation, and meaning that it all had to be done by the one set of hands. The results proved too large for Word’s built-in export-to-PDF function, so we turned to external conversion software. The software that I use most frequently for the purpose kept crashing due to the size of the finished product. A second insisted on saving the graphics as separate PDFs to the text, heaven only knows why. A third worked, but frequently introduced typographical corruption into the finished PDF – you had to convert the source document two or three times to get a usable product out the end. It also failed to preserve embedded internal links, and could not cope with external links spread over more than one line, which required re-editing the document. The ideal solution would have been to use Adobe Acrobat to perform the conversion, but it’s expensive – and additional costs were to be avoided if at all possible.

To publish in the Kindle format, the pages would also have needed to be saved in html5 format – and that’s a standard that neither Johnn nor I was familiar with. The book might also have needed reformatting, and there was an unresolved question about color graphics.

To publish as a dead-tree product, further questions about image resolution would need to be answered.

All this adds up to needing to do the task more than once – so technology needs to make this operation at least three times as efficient as it used to be just to break even – and that’s completely ignoring the time requirements of learning a new format. I still have occasional nightmares about it. :(

4. Printing & Binding

This is the first production cost that modern PDFs completely bypass. And it can be a big-ticket item. The more copies you print of something, the lower the price per unit through economies of scale – but the more you have to invest up-front, money that has a good chance of being wasted if the product doesn’t sell (see Remainders, below).

Actually, I should probably say “almost completely bypass” – because there’s a new kid on the block in this category called Print-On-Demand. But what are the formatting and layout requirements? Suddenly, a question that was hopefully settled back in the previous category comes back again. Like doing a Kindle version, this was something we wanted to get into with Assassin’s Amulet but never had the time to do. And then we had the question of how to handle some of the maps that couldn’t be simply printed and bound into a print-on-demand book – a problem we never found a solution for.

5. Distribution

Electronic distribution is a lot cheaper than dead-tree product distribution – in fact, it’s virtually free – so long as you sell through someone who already has their website and shopping cart systems set up. E-commerce can still get expensive to set up, configure, and debug, but it’s getting cheaper and more user-friendly all the time.

Compare that with the expense of shipping physical products around. Weight becomes a big factor, and then there’s warehouse space, and the administrative needs of distribution. Small wonder that specialist organizations used to deal with the headaches – for a fee.

6. Marketing

Marketing. Supposedly, it can be done on a shoestring for nothing but time. Don’t believe it.

A decent marketing plan requires advertising; it requires contests (which have administrative costs and also cost in free content, and every copy you give away is a potential sale that you don’t get paid for); it requires investments in public relations, and press releases, and so on and on and on. If we were physically in the US and had a dead-tree product, we would be looking a booth at one or more conventions, and those aren’t cheap, either. Then there are the production costs of marketing materials like fliers and advertising and, well, it just keeps going on and on.

These days, even if you’re talking about a dead-tree product, you have electronic freebies and samples that you need to produce – effectively, a whole new electronic book, probably smaller. Then you have to remember that reviewers will base their opinions of your real product on the quality of those freebies and samplers – so you need to make darned sure that the goodies are representative without giving away the best bits.

None of this changes very much when you’re talking about an e-book instead of a dead-tree publication. It’s still a nightmare.

7. Management

Everything that goes on needs to be managed. Communications are easier than ever, these days – which simply means that you are expected to spend more time communicating. And that’s all dead time when you aren’t being creative. The bigger a project, the longer it takes, and the more it all needs to be managed – in fact, the management requirement is probably an exponential factor of page count.

And that’s true regardless of the nature of the publication format. E-books have a slightly smaller management element because they usually take less time to travel from inception to publication – but not necessarily a very large amount less. If it takes six months to create and publish an E-book, it would take six-months plus perhaps a month to a month-and-a-half to create and publish the equivalent dead-tree product – most of it working with, and waiting for, the printer, plus allowing time for the printer to miss his deadlines, and ditto the distributor. That’s a 25% increase – and it’s probably an extreme example.

8. Administration

This is something that is quite separate from Management. It’s getting all the paperwork done, and cutting through all the red tape. It’s making sure that people that need to be paid are paid, and on time, and that there’s the money on hand to do it, and that the bills are paid, and that anything that needs to be bought is sourced, and so on and on.

Administrative overheads are slightly time-based (the longer a project runs, the more admin there will be), and slightly size-based (the larger and more complicated a project is, the more admin there will be), and slightly people based (the more people that are involved in a project, the more admin there will be) – but mostly it’s project-based and independent of all of the above. In fact, some of it happens whether there’s a project or not!

It doesn’t matter, therefore, whether the end-product is electronic or physical. The overhead is just there, regardless.

9. Taxes

Taxes are a fact of life for almost everyone. Personal, business, state, federal, capital-gains, service taxes, payroll, medical, superannuation – it’s a maze. If you have to pay a tax bill on income or expenditure and not simply on profits, you had darned well better build that cost into your pricing models. This is another item that can be very different in an online world – prices are smaller, and so may not exceed tax thresholds. But be darned sure you know what your liabilities are. And beware of sliding scales – the percentage might increase with success, in such a way that you actually take less money out the door at the end of the day.

10. Legal

Similarly, legal costs are a fact of life. You can try and get away without professional guidance if you want – it’s all a question of how much risk you want to live with. Licenses, copyrights, warranties, advertising codes, contracts – and that’s just the tip of the iceberg. Again, scale makes a difference, at least in theory – E-books are cheaper and generate lower revenues, and so are less likely to cause major upset than a dead-tree product that violates something, or cost you less when the time comes. And if you believe that’s the reality, there’s some swampland I’d like to interest you in, a guaranteed investment…

11. Overheads

Every business has overheads on top of all of the above. These could be printer paper, electricity, gas, coffee, rent, air fares, accommodation – you name it. In theory, a smaller operation that produces PDFs has smaller overheads – but the larger organizations that publish dead-tree products get to spread that cost over more copies of the product, so this production cost is probably smaller in comparison.

12. Profit margin

One economic theory holds that profits are whatever is left after deducting costs from income. Another is that you should build a minimum profit margin into your price per unit, just to make sure that the end price results in a profit.

If you subscribe to the latter school, then the profit margin is a production cost that has to be met, regardless of whether you’re talking about a dead-tree product or an electronic one.

13. Commissions

Someone has to sell the product when you finish it. They will expect to be paid for doing so. Commission structures need to be clearly understood before you set your final price, or you can discover that all the profits are going to the vendors and there’s nothing left for you. And that’s true of any retail operation you product gets sold through, regardless of format.

14. Remainders

Economies of scale mean that it’s cheaper to print a LOT of copies of a dead-tree product than a few. That permits you to lower the price, or increase the profit margin, or both. But it means that if copies don’t sell, you have a lot of deadwood on the premises – in which you have invested a great deal of production expense. Even if your product is successful, you can still end up with hundreds of copies floating around that no-one wants.

That leaves a dead-tree publisher with two choices: they can build the anticipated cost into their pricing model from the start, or they can risk not doing so. Every copy that is remaindered has a certain production cost, and those costs have to be met from the profits on those copies that are actually sold. If you’re a really large book publisher, you can afford to take a risk, confident that the remainder costs of one book will be paid by the sales of a more successful book; I don’t think any RPG publisher is that big, and possibly never will be.

This expense is one that electronic publishers don’t have to worry about, because a customer’s copy of a product only materializes when one is wanted. It’s an on-demand operation.

And that’s the big attraction of print-on-demand options – because that’s another way of avoiding the remaindering nightmare. The cost per printed copy might be higher – but it’s a known price, not an unknown overhead that is only revealed after a product is released. It enables book vendors to take a chance with smaller repercussions, and that’s a good thing.

Conclusions

So, when you add it all together, what do you get? Half the major costs are creative, and don’t change. A number of the lesser costs scale to some extent, making smaller, cheaper products potentially more profitable. The biggest differences between dead-tree and electronic production costs are printing, binding, distribution, and the remainder risk.

And that’s where things get interesting – because the higher the production standards of the product, the larger the risks those production costs pose. The more, in other words, you are betting on a product being a success.

PDFs take much of the gamble out of a product. But even so, the expectation is that a product can only be sold electronically for a little over half what it would cost in an equivalent dead-tree format.

It doesn’t take much of a browse through RPGNow to realize that this pricing expectation doesn’t match the reality. The reasons for that discrepancy are something that I’ll look at in part two…

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