Voadam said:
As the market leader I always thought the benefits for WotC of having fairly compatible game stuff out there outweighed the numbers lost to those who only went for the third party niche games exclusively.
That's a good point I hadn't really considered either. Perhaps cutting off the competing games that piggyback on D&D is shortsighted as well? Given the fact that there will be competing systems no matter what, forcing those systems to be less compatible might be costing WotC in the long run? I don't know, there's a lot of factors. How compatible is it? Would more competing systems exist under the OGL than the hypothetical GSL? Or would they just be more visible?
For something like Malhavoc's alt systems - Arcana Unearthed/Evolved and Iron Heroes - it would seem to me that they are compatible enough that those who play Malhavoc's systems would still be likely to buy D&D products for use in their AU/E and IH games. The core books might directly compete, but (fact pulled from Stephen Colbert's gut here) I have a feeling the majority of shelves that have Arcana Evolved sitting on them, also have a Player's Handbook. With these examples, it seems, to me at least, closer to the "Don't complain because you didn't get those dollars, because you didn't make those products" reasoning that Clark mentions. They are close enough to D&D to be pretty much D&D accessories than entirely competing systems.
Shifting now to one of the other big examples is True 20. Now, this seems to be more of a potential worry to WotC. There are more fundamental changes in the system (as well as the strong branding of it as a different system, whereas Malhavoc's always felt more like a different flavor of D&D than an entirely different game). Products are even less compatible, but still usable between systems. However, the difference in compatibility seems to be big enough (especially given that True 20 is set up to handle more than fantasy), that is does appear to be a true direct competitor that doesn't boost D&D much at all.
Then shifting one step further to Mutants and Masterminds. Given the different genre and vast differences in rules, it really isn't compatible with D&D at all. However, to me at least, this seems like less of a direct competitor because it is for an entirely different genre. There is the issue of "gamers only have so much time to play RPGs" and if they are busy playing a supers game, they have less time for D&D. However, I think the simple fact is, some people will want to play a supers game either way, so it's best keeping them happy with a great supers game like M&M. So the small loss of having some play M&M as opposed to D&D is probably offset by the general benefit of keeping them playing RPGs.
So, overall, I think many competing systems aren't a problem. Either they are pretty similar to D&D accessories (Malhavoc's) or they are so separate that they no longer really compete (M&M). But something like True 20, that can hit the same genre, but really is a substantially different game can be a worry for WotC. So, I guess it's all Green Ronin's fault.

(Just kidding, I love their systems!) Or, alternatively, if Monte Cook had tried pushing AE as a full on alternate game, bringing even more publishers in on the act, releasing only AE compatible products, and working to market and brand it as less of a "campaign setting with some alternate rules" (after all, it wasn't really much further from core 3.x than Dark Sun was from 2e) and more of a "this is a different game", then that could have been a worry as well.
Apparently, either WotC disagrees with my reasoning above, or the benefit of D&D compatible alternate games was outweighed by the threat of the directly competing True 20's. (Or the short-sighted ones won out on this issue, and they would rather have competing systems have as little compatibility as possible.)