Ok, going to step in here. Paizo created Pathfinder as a move of last resort. They were going to move their Pathfinder Adventure Path books from 3.5 to 4e... except WotC kept pushing back the license, and pushing it back, and they were forced to make a decision on what to do. Pathfinder the system was a Hail Mary Pass, not a move to slip into a market place. To them the AP is the flagship product, and they needed a system to support it. They had absolutely no idea it would explode like it has. That was never the plan. Though I'm more than sure they aren't complaining that it worked out so well.
Pathfinder was created because they needed a rule system in print for their adventure line. If the GSL had come out sooner, and if it wasn't quite the strict thing it was when it came out (including the poison pill section that prevented use of the OGL if you accepted the GSL), then Paizo would have published their material as 4e support material, and Pathfinder the game never would have happened. (Though of course, some other company may have stepped up to the plate... but a lot of what makes Pathfinder works is the high quality of the material and the talent they have working on it. Not a lot of companies can boast the same.)
I've spoken with many of the Paizo employees about this several times, and we have a recording up on our site that explains a lot of this here:
http://35privatesanctuary.com/index...ur&catid=35:the-tome-know-direction&Itemid=34
EDIT: This may be the version I'm thinking of, instead...
http://35privatesanctuary.com/index...11&catid=35:the-tome-know-direction&Itemid=34
That's Lisa Stevens talking about how WotC was formed, Paizo was formed, and how Pathfinder came to be.
There's more to it than that. Lisa wrote a series of anniversary blogs at Paizo's 10th anniversary, one for each year.
The truly catastrophic thing for them was the pulling of DRAGON and DUNGEON license. If they'd retained the magazine licenses, they'd have quite happily continued working as a magazine design studio for WotC.
[Lisa Stevens, 2006]Our license for publishing Dragon and Dungeon was due to expire in March 2007, and this meeting would be the first step toward negotiating a renewal of that contract. It took a while to find a time that fit everyone's schedule, and we finally had to resort to meeting by phone rather than face-to-face. On May 30, 2006 at 2 pm, I had a conference call with Wizards, and it was during this call that they let me know that they had other plans for Dragon and Dungeon; they wouldn't be renewing the license for the magazines. I personally don't remember much of my reaction, but after the call, I brought Erik in to my office and told him the news, tears streaming down my face. (Read Erik's recollection of this major event below.)
We always knew that this might be a possibility. That was, after all, one of the main reasons we had been building the other parts of our business: so we wouldn't be caught unprepared if the unthinkable were to happen. But I don't think any of us ever really thought that this was much more than a remote possibility. Dragon and Dungeon were finally firing on all cylinders and were enjoying critical acclaim that hadn't been seen in years. So this news struck us to the core. In one meeting, the last large chunk of the company that we started not quite four years before was going away. We were numb. How the heck were we going to cope with this? Frankly, it seemed impossible at the time.
I have to give Wizards of the Coast a lot of praise for how they handled the end of the license. Contractually, they only needed to deliver notice of non-renewal by the end of December 2006; without the extra seven months' notice they chose to give us, I'm not sure that Paizo could have survived. Wizards also granted our request to extend the license through August 2007 so that we could finish up the Savage Tide adventure path. This gave us quite a bit of time to figure out how we were going to cope with the end of the magazines. It would have been very easy for WotC to have handled this in a way which would have effectively left Paizo for dead—all they would have had to do was follow the letter of the contract. Instead, they treated us like the valued partner we had been, giving us the ability to both plan and execute a strategy for survival. For that, I will always be thankful.
Erik Mona recalls the same event:
[Erik Mona, 2006]That seemed like a solid strategy until the day in late spring when Lisa Stevens called me into her office to discuss a phone call she'd just had with the higher-ups at Wizards of the Coast. As soon as I saw the tears streaking down her face, I suspected that the call had not gone quite as expected. Lisa was in shock. Not only would Wizards not be renewing our license to create Dragon and Dungeon magazines, but they were going to cease publishing the magazines entirely. There was some vague chat about Wizards wanting to start a kind of online subscription program tied to their upcoming edition (something they'd been very cagey about, and about which we'd only heard the barest of rumors by this point), but the upshot was that in just a few months, the magazines as printed products would be dead and buried.
And I was the one who would get to shovel the grave dirt onto their corpses.
Not exactly the role I had been prepping for since third grade. While Lisa's tears showed her human concern for the business we had built and the employees she referred to as family, I wasn't quite ready to think about any of those big-picture concerns, yet. I was still fixated on the massive sense of rejection I felt from folks who had been my coworkers at Wizards, and whom I still considered close friends. I was worried about my own career, and about the fate of two pillars of D&D that had helped support the brand (and my own gaming hobby) for decades. I couldn't even contemplate a world without Dragon and Dungeon magazines, even as I had just been told that world was coming. Soon.
I don't remember a lot of the details about that conversation in Lisa's office. I do remember numbly wandering out of the building to take a quick walk to gather my thoughts. It was a gorgeous day, and I'd lately been in the habit of taking a half-mile walk on my lunch hour, so my slipping out must not have seemed odd to my co-workers, who had no idea what had just transpired. I walked down Richards Road to an old abandoned residential hospital that had a nice lawn behind it facing a gorgeous wall of trees. I sat down on that lawn for a half-hour, going through the ramifications of the day's news, and building a huge list of questions and next-steps in my head.
What will happen to Paizo?
Will the members of the editorial staff land on their feet if the company collapses?
How do we let them know? When?
How in the world am I going to explain this to the readers?
How can we end Dungeon magazine in the middle of the Savage Tide Adventure Path?
Will the prisoners who send me mail every week blame me for canceling the magazines?
Where do we go from here?
In the days and weeks to come, a lot of those answers grew more and more clear. Paizo would go on. Once we came up with the idea behind a "monthly Adventure Path book" (not yet called Pathfinder), the management team resolved to chart a path to the company's survival that kept every employee intact. We'd already experienced a bunch of layoffs, and to transition the company into its new form in 2007, we'd need all hands on deck.
That was then followed the very next year by the decision referred to in the your link.
[2007] Sales during the convention were brisk, and the feedback we received from our customers was nothing short of fantastic. And we needed all that good karma, because we were dealt another blow when Wizards of the Coast announced at the show that D&D 4th Edition was coming in August 2008. We had just launched two new lines of 3.5 compatible products, and it seemed that they could already be on a deathwatch towards obscurity. Sometimes it seemed as if every time we got up, there was something to knock us down again.
However, after talks with our colleagues at Wizards of the Coast, we were cautiously optimistic. There was talk of getting together when we were back in Seattle and running through a playtest of the current rules. We were also promised that there would be a third-party license, similar to the OGL, really soon.
When we got back to Seattle, we anxiously awaited the opportunity to playtest 4th Edition, but that never materialized, and the license that eventually became the GSL was delayed month after month. Meanwhile, the more the public learned about 4th Edition, the more our community—and our gut—was telling us not to go there.
One of the largest threads on the paizo.com messageboards began in October, when Erik announced that Paizo Is Still Undecided. The lack of any information from WotC and the seemingly overwhelming support for us to stay put were making us lean towards sticking with 3.5, but it would be suicide to produce support products for a game that no longer has core rules in print. So if we wanted to stick with 3.5, we knew that we'd have to release some sort of rulebook.
As the end of 2007 neared, we still held out hope that things might work out for 4th Edition. But we were already planning the Pathfinder Adventure Path that would begin shipping the same month that Wizards was releasing 4th Edition, and the deadline for soliciting August 2008 products to our distributors was rapidly approaching, so we needed to make a decision, and fast.
As the year ended, our new product lines were well-received, and the new Paizo was looking healthier than ever. But the decision about 4th Edition was now reaching a critical stage and the new year would again test our mettle. Fortunately, Jason Bulmahn had started tinkering on his own time with some ideas he had for a 3.5 revision, a project he had dubbed "Mon Mothma..."
For me, the take-home message is that it was not - as some claim - the OGL which caused the creation of Pathfinder, it was the loss of the magazine license closely followed by procrastination on the GSL. Paizo would happily continued producing magazines for WotC; and after that was pulled from them, would have happily produced adventure paths for 4E. The Pathfinder RPG was the result of necessity and being forced into a corner.