D&D General WotC Founder Peter Adkison On Hasbro's Layoffs

Peter Adkison, who owned Wizards of the Coast until it was sold to Hasbro in 1999, oversaw the relaunch of Dungeons & Dragons with D&D 3rd Edition. Today, he commented on this week's round of Hasbro layoffs, which have ripped through WotC. Adkison left WotC in 2000 and currently runs a production company called Hostile Work Environment.

Like many of you, I'm saddened to learn about the layoffs at Hasbro.

Caveat: I have no idea of what’s happening behind the scenes at WotC. If you’re asking who’s at fault, or to what extent it was or was not justified, that’s outside the scope of my knowledge. This post is about my own reflections.

When I read about the layoffs at Hasbro my immediate feeling was shame. Shame for when I did the same thing, at the same company (WotC, before we sold it to Hasbro).

I have made lots of mistakes, tons of them, more than I can even remember. And while I regret those mistakes, and I’m sad for those hurt, I realize it’s part of learning and it’s part of being human.

But layoffs, when handed poorly, or when they are unnecessary, aren’t just mistakes. They are failings of character. Those times when I had a failure of character, those are the moments that haunt me.

 

[mamba]

In the end, I think the smarter thing to have done was to just take the royalties from them being separate, rather than taking on a bunch of debt when your company isn’t doing so well.

WotC / D&D are doing well. By WotC’s accounts the DDB purchase already paid for itself.

Even if it has not, focusing on the parts of your business that are doing great and getting out of the ones that keep losing money is a good decision.

I do not see the purchase of DDB as a mistake. Buying eOne and the VTT are much more of a gamble that I consider somewhere between very risky (VTT) and a clear mistake (eOne). Of course the latter clearly has been by now while the jury on the VTT is still out. Even so I consider their VTT approach (pour tons of money into it without a product to show for) a mistake. They should release in smaller increments - and if they do not have that first increment yet, then the project is mismanaged

 

[Whizbang Dustyboots]

I think about this a lot. It seemed like a good idea to buy it instead of making their own but that’s a lot of money. Way more than they’re going to spend on the new core books which are probably not a tenth of that. That’s a huge debt rolling around Hasbro they probably can’t earn back anytime soon.

Yeah, large amounts of debt -- for acquisitions or leveraged buyouts -- is the motivator for a lot of not-great behavior in business.

 

[Zardnaar]

WotC / D&D are doing well. By WotC’s accounts the DDB purchase already paid for itself.

Even if it has not, focusing on the parts of your business that are doing great and getting out of the ones that keep losing money is a good decision.

I do not see the purchase of DDB as a mistake. Buying eOne and the VTT are much more of a gamble that I consider somewhere between very risky (VTT) and a clear mistake (eOne). Of course the latter clearly has been by now while the jury on the VTT is still out. Even so I consider their VTT approach (pour tons of money into it without a product to show for) a mistake. They should release in smaller increments - and if they do not have that first increment yet, then the project is mismamaged

VTT would not suppose me if it's a massive hit or it crashes and burns and idk what result is more likely or somewhere in the middle.

Software development is inherently high risk.

 

[FitzTheRuke]

Hasbro firing Mearls makes no sense at all to me.

The only reason I can think of is because he has a higher salary from all his years of solid work for the company. He was probably "worth" the equivalent of firing five to ten other people.

 

[Scribe]

The only reason I can think of is because he has a higher salary from all his years of solid work for the company. He was probably "worth" the equivalent of firing five to ten other people.

And what he brings, probably isnt what is forecast to be needed.

5.5 or whatever the revision is called doesnt need 'grand design' from the ground up, and he was working on MTG, which honestly needs even less it seems.

 

[Parmandur]

I think about this a lot. It seemed like a good idea to buy it instead of making their own but that’s a lot of money. Way more than they’re going to spend on the new core books which are probably not a tenth of that. That’s a huge debt rolling around Hasbro they probably can’t earn back anytime soon.

Chris Cocks said that Beyond had already paid for itself earlier this year. They only need about $11 on average from every user to generate that amount, and they don't have to worry about Beyond taking their customer data and pulling a Pathfinder.

 

[FitzTheRuke]

Chris Cocks said that Beyond had already paid for itself earlier this year. They only need about $11 on average from every user to generate that amount, and they don't have to worry about Beyond taking their customer data and pulling a Pathfinder.

Which kind of implies that D&D The Brand makes even more for Hasbro than we generally estimate.

 

[Parmandur]

Which kind of implies that D&D The Brand makes even more for Hasbro than we generally estimate.

Well, if you think about it, Beyond was a profitable enterprise, even after paying WotC their licensing fees. Which means that after the purchase they would be...even more profitable.

 

[NotAYakk]

you should be able to build your own version for less than that, they paid for the customers / market share that came with DDB, not just the technology.

In theory the D&D profits could pay that off in two years…

Oh my god, you have never ever run an IT project of any size.

"We could build it ourselves" -- are you a professional software development firm with a recent, proven and repeated history of developing projects of similar scope and size all the way to completion (done done, not done) with correctly predicted budgets from day 1?

If not, then no, you aren't going to be able to build their own version for less than that.

If you want citations, I can provide entire novels of citations of why IT projects go badly. I can even provide concrete examples of WotC failing horribly at exactly this kind of IT project recently. "Sure", you say, "it only failed because of X, they can avoid X" - which misses the point entirely; failure has a thousand fathers.

No, stock options are typically FMV - fair market value.

Of course, do you know how to price stock options? The Black-Scholes equation. The punchline is that a FMV stock option's value is proportional to the stock volatility.

If your pay your executives in stock options at FMV, the way they can increase the value of their stock is make sure that your stock price is volatile - it goes up and down rapidly and in difficult to predict ways.

And a good way to make something volatile is to increase leverage.

Now, an increase in stock value also makes the executive money - but if the executive knew how to increase the stock value, and other people knew the executive knew how to increase the stock value, that change in stock value would already be priced into the stock!

However, if the executive merely increases volatility and everyone knows the executive is doing this, the stock price cannot change "ahead of time" to factor that in.

In order to do this, the executive simply increases the company's internal leverage. Borrow money, pay dividends (or buy back stock). Now any change in company financial situation causes an out-sized change in company value; if things are more positive than expected, instead of a 1% change in stock value you'd get 10% or 50%. And if things are negative, well, stock options are options: the value of them cannot fall below 0.

 

[nevin]

Christmas layoffs seem a common thing in the US, I guess it is something to do with the tax year rather than just to be spiteful.

Well over the last 15 years a couple of Ivy league Colleges have done studies to validate what they been teaching and all of them have to thier horror, quite clearly and with no doubt given then loads of data that indicate that family Businesses tend to be better and more efficiently run than Publicly traded companies. And it always comes down to a few things. 1. Family owned companies plan on average in 3 to 10 year increments. 2. Their owner's don't have Stock that can be sold they just get paychecks. Things like equity shares in the company aren't public so no pressure to play the stock market with your decisions. 3. In spite of the Myth of bad owner's letting incompetent family members run things, most owners want the company to be successful , they fire the incompetents even if they are relatives.

I think someday humanity will look back at the idea of publicly traded companies, and wonder what moron came up with that idea that running a company with a bunch of greedy vultures sitting on the CEO's shoulder second guessing every thing he or she does was a good idea.