D&D (2024) RPG Evolution: The Fox in the Henhouse

Before WOTC began rolling out its monetization plans for D&D, Hasbro was under fire for not doing enough. Alta Fox Capital's blueprint has turned out to be prescient.

Who's Alta Fox?​

Alta Fox Capital is an activist investor firm which owns 2.5% of Hasbro stock. Activist investors are typically specialized hedge funds that buy a significant minority stake in publicly traded companies to change how it's run. Unlike traditional takeovers from private equity firms, activist investors use the media and proxy contests to force change within a company. As you can imagine, activist investors are often a company's worst nightmare.

For a long time, Hasbro's financial performance flew under the radar of investor scrutiny. That all changed when Alta Fox took an interest in Hasbro, and specifically in Wizards of the Coast. They launched their plan with a web site, Free the Wizards, which has since been archived. In retrospect, it's clear that Alta Fox's activism had an outsized influence on the Wizards of the Coast we know today.

The Case to Repair Hasbro​

Alta Fox argued that Hasbro's Board of Directors needed a shakeup:

Despite phenomenal growth in Hasbro’s Wizards of the Coast (“Wizards”) division over the last five years, the Company’s stock price has significantly underperformed the broader market and its own benchmark over every relevant timeframe. We attribute this underperformance to the Board’s exceptionally poor capital allocation and deficient investor disclosure and communication.

Alta Fox pointed out that none of the Board members had purchased shares of Hasbro over the last decade and received generous payouts (paid an average of $350,000 annually, higher than Apple) despite underperforming. According to Alta Fox, Hasbro's Brand Blueprint strategy was failing because it lacked financial discipline, an inability to sell successful branded video games, poor cost control (compared to Mattel), and underinvestment in its "crown jewel" intellectual properties like Magic: The Gathering and Dungeons & Dragons.

To fix this, Alta Fox recommended four nominees to the board: Marcelo Fischer of IDT Corporation (a cloud communications and financial services company); Jon Finkel, Managing Partner and Co-Chief Investment Officer at Landscape Capital Management and a former professional Magic player; Rani Hublou a marketing exec and Principal at Incline Strategies; and Carolyn Johnson, Chief Transformation Officer of American International Group, Inc. This dream team, Alta Fox argued, would shake things up.

Moreover, Alta Fox wanted Wizards of the Coast to be spun off. According to Alta Fox, Hasbro's Brand Blueprint strategy was a "cash cow" in which WOTC gave money to its parent company with little in return. They speculated that D&D and M:TG made up 90% of WOTC's 2021 sales. It quoted Cocks as saying that there was an 8x to 10x audience potential in bringing tabletop brands to the digital side of the business. Of the five reinvestment opportunities, Alta Fox's fifth recommendation was:

a one-stop-shop digital subscription & pay-as-you-go offering for a true-to-physical D&D experience (similar to how Arena is a true-to-physical MTG experience).

It all came to a head with an election contest by shareholders on Alta Fox's recommendations. Alta Fox lost the vote, and that should have been the end of it. But the efforts to revitalize Hasbro and WOTC in particular would be tremendously influential on the way the company is operating today.

Hasbro Takes Notice​

Although Hasbro rejected Alta Fox's proposals, its next actions were aligned with their suggestions. Hasbro brought on two new board members, Elizabeth Hamren and Blake Jorgensen. Both were executives with experience in gaming, technology, operations, and capital allocation: Hamren was chief operating officer at Discord Inc and worked on Xbox products, while Jorgensen previously served as chief financial officer for Electronic Arts.

That wasn't the only change. Directors were asked to purchase shares on the open market, just as Alta Fox had recommended. More to the point, the Brand Blueprint strategy that Alta Fox loathed got a revamp as Brand Blueprint 2.0. That was a four quadrant strategy in which Hasbro focused on a core group of eight to ten brands, including Dungeons & Dragons. The goal was to create $250 to $300 million savings annually over the next three years.

Cocks and Williams Lay It All Out​

In a USB Fireside Chat, Chris Cocks and new WOTC CEO Cynthia Williams shared their perspective on D&D's future:

You'll see us leaning heavily into the expansion of D&D through D&D Beyond, the acquisition that we did that closed this past May ... We have about 13 million customers, registered users, there that we will continue to serve by giving them more ways to express their fandom.

When Williams mentioned that the "D&D brand is undermonetized," it sounded a lot like the same claim made by Alta Fox. She pointed out that dungeon masters only made up 20% of the customer base, with an untapped player base that could be unlocked as "recurrent spenders," with more than 70% of digital gaming profits coming from post-sale. The D&D monetization strategy, according to Cocks, would be Hasbro's prime opportunity to implement Brand Blueprint 2.0.

We're now seeing that strategy in action. Although Alta Fox didn't get its board members listed, it seems it still got its way.

 

[Minigiant]

• Non-WOTC Hasbro expenses are out of control causing little net profit per brand
• MTG just screwed up hard
• D&D has to pick up the slackand money money for whole company
• Alta Fox highlights that
• Hasbro decline AF's plan, sticks with original dumb plan than wasn't working
• Hasbro okay's WOTC execs dumb plans to milk fans to cover for rest of corporation

 

[Minigiant]

As someone whose company is getting twisted into a pretzel for the sake of investors, even though it's harming the long-term value of the core company, this all sounds spot-on to me.

I used to work at a place doing the same thing.

 

[Cergorach]

I pay zero in monthly subscription fees to play D&D right now.

And that is great for you now. But in a few years or decades, the next generation? When I grew up, air-conditioning in cars was considered a luxury. These days a couple of car manufacturers want you to pay a subscription fee to activate car seat heating...

A long, long time ago, you bought LPs for music, these days we have hundreds of millions who have a subscription service for music...

Why is this popular? Convenience vs cost, it is VERY convienient and for most it's not that expensive (vs. buying)... It wouldn't surprise me in the least that in the future WotC is able to get to that sweetspot of convenience vs cost. Maybe not for you (or for me), but we get old and die, making room for later generations that are more open to it...

 

[Ulorian - Agent of Chaos]

I pay zero in monthly subscription fees to play D&D right now.

I've never used a VTT. Seems like a nice add on if you have a group who can't meet in person for whatever reason. I would think they all (or at least the top performers, the ones worth using) have a fixed price or subscription fee.

If you don't need a VTT though, there is nothing stopping you from just buying the books and playing in person.

In light of that, why do you think that WotC would be forcing you to pay a monthly fee to play D&D?

 

[Ystraeth]

Also, I've found players (or at least the 80% who aren't buying so many products) are generally stingy AF when it comes to paying for game materials.

This is pretty accurate, I feel.

There's also the segment of the customer base that simply has no interest in that way of interacting with the hobby, irrespective of available funds. I'm not attempting to dive into a digital vs physical gaming experience argument or anything here, each to their own and all. However I can see a bunch of people who primarily play face to face balking at an attempt to make virtual tabletop D&D the default experience. In essence this makes D&D into something.....else.

I'm not sure how I feel about all this, except maybe a little sad. While I play many other systems I do enjoy D&D. I grew up with early 2nd Ed and D&D generally has been an important part of my gaming history. I want to continue to be a customer. I buy a lot of RPG books, including from WotC.

The actions by WoTC certainly feel like an attempt to redefine the hobby into a recurring monthly revenue model across what they see as a poorly monetized customer base. Of course the obvious way to do that, if you have a bunch of executives from the video gaming and e-commerce space trying to offset broader shareholder concerns, is to make digital gaming pretty fundamental to 'the hobby'. I can absolutely see a business logic in trying to make VTT the default, with a walled-garden of evergreen rules including controlled entry points for 3PPs, ramping up of merchandizing, and eventually pulling back on print releases outside of, say, big ticket collector's or limited edition items. This approach may also make it incrementally just a little harder to pirate their products, which they have every right to do. Piracy won't go away of course, but I can see the logic in this (I do not support pirating RPGs at all, to be clear).

So yeah, I can see how they might choose to take this path. It would also make it pretty clear that my business is of little interest to them. Which I'm cool with, I suppose, if a little sad about. Personally, I have no use for or any interest in VTT gaming, just doesn't appeal to me. It's not hard to redirect funds I would have spent on WotC books to other publishers so there's that.

 

[billd91]

I've never used a VTT. Seems like a nice add on if you have a group who can't meet in person for whatever reason. I would think they all (or at least the top performers, the ones worth using) have a fixed price or subscription fee.

If you don't need a VTT though, there is nothing stopping you from just buying the books and playing in person.

In light of that, why do you think that WotC would be forcing you to pay a monthly fee to play D&D?

Notice in the prior post by guachi, they aren't saying that Hasbro wants to force players to pony up $5/month. It's get players to pay $5/month. That doesn't have to be force because it could be induce - by attracting them with content so they keep coming back to the trough. Right now, there are lots of people who effectively do pay a monthly fee to play D&D with services offered online - whether that's with D&D Beyond (like my daughter) or with VTTs like Roll20 (like me). I have no problem with a company like WotC continuing to do so or expand those as long as the value is still good for the money (and the company isn't being a complete jackass with its methods and policies).

 

[Ulorian - Agent of Chaos]

Notice in the prior post by guachi, they aren't saying that Hasbro wants to force players to pony up $5/month. It's get players to pay $5/month. That doesn't have to be force because it could be induce - by attracting them with content so they keep coming back to the trough. Right now, there are lots of people who effectively do pay a monthly fee to play D&D with services offered online - whether that's with D&D Beyond (like my daughter) or with VTTs like Roll20 (like me). I have no problem with a company like WotC continuing to do so or expand those as long as the value is still good for the money (and the company isn't being a complete jackass with its methods and policies).

I hear you and you are technically correct. That might be a semantic splitting of hairs though. The tone of that post (and previous posts by that person) suggests that by get the OP meant force.

In any case, even if the intent was get in the sense you mean... why is this bad? That is literally what any producer of a VTT is getting the world to do: induce others to buy their product. Although in this case, WotC is trying to strongarm others out of the marketplace rather than rely on the quality of their product to float them to the top. At first glance, this seems ethically wrong. But on further reflection, it doesn't: they own the product these VTTs are based on. But on even further reflection, that approaches stifles the potential quality of VTTs in general as it quashes the competition that naturally pushes you to improve your product.

All of this is very grey and nebulous... which is why I get yikes-ed out by those on both sides who are ABSOLUTELY AND WITHOUT A DOUBT certain about their moral and ethical stance on this. Not to mention that this whole tempest in a teacup is an unnoticeable blip on the radar of life.

 

[Alzrius]

Although in this case, WotC is trying to strongarm others out of the marketplace rather than rely on the quality of their product to float them to the top. At first glance, this seems ethically wrong. But on further reflection, it doesn't: they own the product these VTTs are based on.

Leaving aside the programming aspects of what makes a VTT possible, and that they can and do support RPGs besides D&D, WotC elected of their own volition to license out the material that you're referring to, and they did so while making guarantees that they'd never (be able to) renege on that license. That they're trying to claim a legal loophole, let alone a moral mandate, that justifies turning around and doing exactly that is entirely unethical.

All of this is very grey and nebulous... which is why I get yikes-ed out by those on both sides who are ABSOLUTELY AND WITHOUT A DOUBT certain about their moral and ethical stance on this. Not to mention that this whole tempest in a teacup is an unnoticeable blip on the radar of life.

Sure, but we're not on these boards to discuss anything that makes a larger blip on said radar. You don't come to EN World to discuss the war in Ukraine, or the extremization of partisanship, or the declining state of the environment. This is a place for discussing role-playing games of the tabletop variety, and in that context what's happening with the OGL is a massive issue to which a vociferous response is entirely appropriate.

 

[GMforPowergamers]

Monetize is to make revenue. Successful monetization turns into profit.

So as much as microtransactions are A WAY to monetize, so too are selling products.

Being undermonetized CAN mean "we need to produce more items and sell them"

Being undermonetized CAN mean there are entire options on items you don't sell... you may not even NEED to sell them but license out the sales.

If someone looks at D&D and says "We could have a cartoon, a toy line, and kids T shirts, but we don't" that could mean D&D is UNDER monetized.

If someone looks at the books sold in 3.5 (2 a month) the ones sold in 4e (1 a month) and then looks at each individual book now selling more copies then most or even all the 3.5 and 4 books, they could say "We should put out more source books, because we are leaving money on the table and all these 3pp are taking it up, D&D is undermonitized"


if only 20% of teh player base is buying books, but that 20% half of them are buying 3pp books on top of wotc D&D books then there is more money sitting there not grabbed up yet.

 

[GMforPowergamers]

"25 XP for stitching my own wounds shut? I'm ripping those suckers out and doing it again!"

in 2e there were charts each class got bonus XP for doing things... clerics preaching to the people to convert them, wizards casting spells, and fighters getting the killing blow on monsters...

So I saw groups complain about a wizard getting the kill shot as "lost xp" and having spells left at the end of an adventure being "lost xp"

BUT I also saw people try to game the system. "Oh look we have a wizard thief and and a fighter thief in the party... they pick pocket each other back and forth and each time they get xp equal to double the gp value of the item."

the most abusive was when I convinced a party to help me steal a gallon full of treasure, and rocketed up like 15ish levels