5th January 2012, 05:24 PM #1
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WotC, DDI, 4E, and Hasbro: Some History
In the - now very long - discussion of Ryan Dancey's latest EN World column which expands on his opinions in the recent Escapist articles about the past, present, and future of D&D, Ryan makes a few detailed replies throughout the thread. Since it's such a long thread, I've pulled this particularly interesting one out (see below). There are a couple of others, found here and here.
After Vince Calouri was pushed out of Wizards of the Coast he was replaced by Chuck Heubner. Chuck basically had to manage Wizards on the downslope from the Pokemon salad days. Hasbro has been through many boom & bust cycles in the toy business and they have a standard response when it happens: cut headcount and reduce overhead. Since Wizards was de facto the only part of the business that had not been rolled up into Hasbro proper it was not insulated by the successes of other things at Hasbro like GI Joe or Transformers.
While this was happening there was a big internal fight for control over the CCG business within Hasbro. Brian Goldner who was at the time the head of the Boys Toys (i.e. half the company) division of Hasbro thought that the company was missing a huge window of opportunity to follow up Pokemon with a series of mass-market CCGs linked to Hasbro's core brands GI Joe and Transformers. These battles resulted in things being escalated all the way to the C-Suite and the Hasbro Board, where Brian lost the fight and Wizards retained the exclusive ability within Hasbro to make CCGs. The downside for Wizards is that they were forced to do things with the Duelmaster brand that they did not want to do, and it never got the traction in the US that Wizards thought it could achieve. (In Japan, by contrast, it became a huge best-seller).
Chuck left after two years and Loren Greenwood, who had been the long time VP of Sales, replaced him in 2004. He was also a visible proponent of the idea that Wizards, and not Boys Toys, should set Hasbro's CCG strategy. Thus when Brian was named COO of the whole company in 2006 and CEO in 2008, Loren had a big problem on his hands. Loren guided the company through the post 3.5e crash of the TRPG market, the loss of the Pokemon franchise, and the unwinding of the Wizards retail strategy. All of this was pretty bitter fruit for hm since he'd been instrumental in building up much of what had to then be torn down. The combination of all these things led to Loren's exit and his replacement by Greg Leeds, who is the current CEO of Wizards.
Sometime around 2005ish, Hasbro made an internal decision to divide its businesses into two categories. Core brands, which had more than $50 million in annual sales, and had a growth path towards $100 million annual sales, and Non-Core brands, which didn't.
Under Goldner, the Core Brands would be the tentpoles of the company. They would be exploited across a range of media with an eye towards major motion pictures, following the path Transformers had blazed. Goldner saw what happened to Marvel when they re-oriented their company from a publisher of comic books to a brand building factory (their market capitalization increased by something like 2 billion dollars). He wanted to replicate that at Hasbro.
Core Brands would get the financing they requested for development of their businesses (within reason). Non-Core brands would not. They would be allowed to rise & fall with the overall toy market on their own merits without a lot of marketing or development support. In fact, many Non-Core brands would simply be mothballed - allowed to go dormant for some number of years until the company was ready to take them down off the shelf and try to revive them for a new generation of kids.
At the point of the original Hasbro/Wizards merger a fateful decision was made that laid the groundwork for what happened once Greg took over. Instead of focusing Hasbro on the idea that Wizards of the Coast was a single brand, each of the lines of business in Wizards got broken out and reported to Hasbro as a separate entity. This was driven in large part by the fact that the acquisition agreement specified a substantial post-acquisition purchase price adjustment for Wizards' shareholders on the basis of the sales of non-Magic CCGs (i.e. Pokemon).
This came back to haunt Wizards when Hasbro's new Core/Non-Core strategy came into focus. Instead of being able to say "We're a $100+ million brand, keep funding us as we desire", each of the business units inside Wizards had to make that case separately. So the first thing that happened was the contraction you saw when Wizards dropped new game development and became the "D&D and Magic" company. Magic has no problem hitting the "Core" brand bar, but D&D does. It's really a $25-30 million business, especially since Wizards isn't given credit for the licensing revenue of the D&D computer games.
It would have been very easy for Goldner et al to tell Wizards "you're done with D&D, put it on a shelf and we'll bring it back 10 years from now as a multi-media property managed from Rhode Island". There's no way that the D&D business circa 2006 could have supported the kind of staff and overhead that it was used to. Best case would have been a very small staff dedicated to just managing the brand and maybe handling some freelance pool doing minimal adventure content. So this was an existential issue (like "do we exist or not") for the part of Wizards that was connected to D&D. That's something between 50 and 75 people.
Sometime around 2006, the D&D team made a big presentation to the Hasbro senior management on how they could take D&D up to the $50 million level and potentially keep growing it. The core of that plan was a synergistic relationship between the tabletop game and what came to be known as <acronym title="Dungeons & Dragons Insider">DDI</acronym>. At the time Hasbro didn't have the rights to do an MMO for D&D, so <acronym title="Dungeons & Dragons Insider">DDI</acronym> was the next best thing. The Wizards team produced figures showing that there were millions of people playing D&D and that if they could move a moderate fraction of those people to <acronym title="Dungeons & Dragons Insider">DDI</acronym>, they would achieve their revenue goals. Then <acronym title="Dungeons & Dragons Insider">DDI</acronym> could be expanded over time and if/when Hasbro recovered the video gaming rights, it could be used as a platform to launch a true D&D MMO, which could take them over $100 million/year.
The <acronym title="Dungeons & Dragons Insider">DDI</acronym> pitch was that the 4th Edition would be designed so that it would work best when played with <acronym title="Dungeons & Dragons Insider">DDI</acronym>. <acronym title="Dungeons & Dragons Insider">DDI</acronym> had a big VTT component of its design that would be the driver of this move to get folks to hybridize their tabletop game with digital tools. Unfortunately, a tragedy struck the <acronym title="Dungeons & Dragons Insider">DDI</acronym> team and it never really recovered. The VTT wasn't ready when <acronym title="D&D 4th Edition">4e</acronym> launched, and the explicit link between <acronym title="D&D 4th Edition">4e</acronym> and <acronym title="Dungeons & Dragons Insider">DDI</acronym> that had been proposed to Hasbro's execs never materialized. The team did a yoeman's effort to make <acronym title="D&D 4th Edition">4e</acronym> work anyway while the VTT evolved, but they simply couldn't hit the numbers they'd promised selling books alone. The marketplace backlash to <acronym title="D&D 4th Edition">4e</acronym> didn't help either.
Greg wasn't in the hot seat long enough to really take the blame for the <acronym title="D&D 4th Edition">4e</acronym>/<acronym title="Dungeons & Dragons Insider">DDI</acronym> plan, and Wizards just hired a new exec to be in charge of Sales & Marketing, and Bill Slavicsek who headed RPG R&D left last summer, so the team that committed those numbers to Hasbro are gone. The team that's there now probably doesn't have a blank sheet of paper and an open checkbook, but they also don't have to answer to Hasbro for the promises of the prior regime.
As to their next move? Only time will tell.
Last edited by Morrus; 5th January 2012 at 06:07 PM.
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Good of Mr. Dancey to write it up. Hopefully this will quell some murmurings people have had against WotC and other items as they see that's it's not always roses and parades.
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Yikes, a murder-suicide was at the crux of this? How incredibly horrible and sad.
I appreciate finally knowing the details, may those poor people rest in peace.
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Wow. This is fascinating. The context helps make a lot of the past few years make more sense. I can only wonder what would be different if 4e had been more of a success.
Also, does this mean Hasbro's considering a Magic: the Gathering movie? WotC sure seems to be working a lot on having recognizable characters with an ongoing storyline.
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That's all pretty terrifying. If that $50M figure is accurate, I really don't see how WotC can hit it.
"The <acronym title="Dungeons & Dragons Insider">DDI</acronym> pitch was that the 4th Edition would be designed so that it would work best when played with <acronym title="Dungeons & Dragons Insider">DDI</acronym>."
This seems to imply that 4th Edition was designed in such a way that it expected DDI to be a normal part of the tabletop experience, and that playing without DDI was expected to be an experience which did not work as well as playing with the digital tools. That certainly makes a lot more decisions about the game have a better context.
I still question the Harold Camping scenario which Ryan Dancey seems to be pushing for rpgs though. A lot of what he says paints a bleak picture for D&D, but I do not believe it can be (or should be) applied to rpgs in general. Where he sees a downward spiral, I see opportunity for growth.
An extremely interesting read. Thanks for getting this out as a news item!
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D&D is a treasure trove of IP, that can be leveraged in a lot of ways. But even though the TRPG side is not as profitable, it is the core of what makes the brand, so it shouldn't be marginalized.
Here is what I think WotC needs to do to really build up D&D:
For the TRPG side:
-Make the website a hub for gamers of all editions by providing content for all prior editions in separate sections, obviously with 4e (and later 5e) being the prominent focus, but have self-contained sub-sites so there is a clear demarcation of content to avoid confusion.
-Provide all the old edition content for free in a hyper-linked cross referencable format ala d20pfsrd.com. Host some unobtrusive ads to generate revenue. Have the tools and the builders be subscription based. You don't necessarily have to OGL everything. Just make it an easy to use repository of D&D for all editions and millions of gamers will come and use it as a resource even if they don't buy new products. At least you'll get ad revenue and probably a signicant amount of it. Though you could do this in different ways. Make all the core books free for each edition, but all the add-on content is subscriber based. Just make it available.
-Convert the builder and other DDI tools to HTML5 so they are fully accessible on the iPad and non-MS browsers.
-Make a VTT that can also be downloaded and run across XBox Live Arcade/PS3 with full headset support and can import PCs stored online in the builder.
-Give 5e a default ruleset, but make 5e modular with the ability add or subtract the features that people like from each edition (which adds some synergy with the prior edition content being available).
To grow the brand outside the TRPG business:
-Create an MMO and/or console games - I STILL play D&D Heroes and Baldur's Gate Dark Alliance. And I would pay big money for a 4e based FF Tactics style game that let me use my 4e PCs. Especially, if it was co-op and could also act as a surrogate VTT by turning off some of the AI, and letting a DM build encounters, set terrain and monsters.
-And here is the big one: partner with Cartoon Network or Nickelodeon and make an Avatar TLA style kids show set in Eberron or the Realms. Lots of exploration of lost ruins, action, derring-do, and cool colorful characters and modern high quality animation ala Young Justice, or Avatar. Give a deep story so it can appeal to adults too. This could do huge things for the brand.