WotC Hasbro's CEO Reports OGL-Related D&D Beyond Cancellations Had Minimal Impact

Hasbro held a quarterly earnings call recently in which CEO Chris Cocks (who formerly ran WotC before being promoted) indicated that the OGL controversy had a "comparatively minor" impact on D&D's revenue due to D&D Beyond subscription cancellations. He also noted that D&D grew by 20% in 2022 (Magic: the Gathering revenues grew by an astonishing 40% in Quarter 4!) WotC as a whole was up 22%...

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Hasbro held a quarterly earnings call recently in which CEO Chris Cocks (who formerly ran WotC before being promoted) indicated that the OGL controversy had a "comparatively minor" impact on D&D's revenue due to D&D Beyond subscription cancellations. He also noted that D&D grew by 20% in 2022 (Magic: the Gathering revenues grew by an astonishing 40% in Quarter 4!)

WotC as a whole was up 22% in Q4 2022.

Lastly, on D&D, we misfired on updating our Open Gaming License, a key vehicle for creators to share or commercialize their D&D inspired content. Our best practice is to work collaboratively with our community, gather feedback, and build experiences that inspire players and creators alike - it's how we make our games among the best in the industry. We have since course corrected and are delivering a strong outcome for the community and game.
 

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We're not the ones alleging serious financial crimes. Burden of proof is on you; you're the one slinging allegations.
The world would be a better place if folks would stop: Event X occurred... I will immediately associate completely unsubstantiated Events/Suppositions Y because these fit my world view and make me feel safe and as if I have a tribe. Instead of, you know, looking at Event X objectively and attempting to understand why X happened without tainting it with my personal prejudices.
 

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Returning to this thread after a day at work, I wanted to come back to this point you're making @Morrus, to go into more detail on the point I am wanting to make about what wotc/hasbro/Kyle Brinks/Chris Cocks are saying.

So here's the position Chris Cocks is in - his subsidiary has completely effed up its hostile attempt to aggressively takeover an entire hobby (surely no-one is going to take issue with this description of the events???).

Let's assume some of the things that we've heard are true, and D&D beyond lost 40K of subs in a week or two, and given there were active campaigns from prominent creators such as Ginny Di, perhaps the rate of unsubscriptions wasn't slowing down, so they really did have to take some immediate and over-corrective action - ie. they release the 5.1 SRD to Creative Commons and take the community by complete surprise, and lo and behold, it has pretty much the effect they are after - most customers (except cynical, snarky die-hards like me I guess) seem pretty happy to go back to the where they were before the snaffu and think "hey, wotc were just being a big bad corp like all corps, but now that I've got what I want, I'm all good"). Certainly I am seeing a majority of comments that people are happy enough now with the direction wotc have now taken.

So, I'm Chris Cocks and I now have to give information to my investors. I have two basic options -

1) We completely effed up and for two weeks we hemorrhaged subscriptions, to the tune of 40K subs and it didn't look like subsiding anytime soon. While as a percentage of our overall income it was still quite low, nonetheless it did not look like abating and we took action to end it.

or

2) “We misfired on updating our Open Game License. We have since course corrected, and are delivering a strong outcome for the community and game. We had some subscription cancellations, but they were comparatively minor in the totality of both the D&D [profit and loss] and the Wizards [profit and loss].”

Which message does he give his investors? Well, of course he is going to put it in the best light he can.

And is he "lying" in #2? From a legal point of view, I am sure the answer is a definite "no". The estimates are that D&D beyond has some 9 million subscribers (both paying and non-paying), so 40K unsubscriptions is indeed a "comparatively minor" number, in terms of profit and loss, and raw numbers. It's also reasonable to note that the financial affects may not be felt for quite some time (ie. when the movie comes out, or 1D&D) - but for right now, they are accurate.

But even though the 40K unsubscriptions are "comparatively minor" (just .44%!), it is still objectively a crap-ton of subs to lose in a single week or two. So while he isn't "lying", how actually honest, or a better description - "objectively accurate" - is he being?

But, that's all in relation to investors and perhaps the message is all fine and legal in that regard. The issue I really have is what is this saying to the D&D community? His statements are definitely wallpapering over the events and are completely nonchalant with regards to the effect wotc/hasbro's actions had on the community. I suspect most hasbro investors have little idea of any of the crapstorm that wotc created within the D&D community in January, and so it can just all be a footnote (more or less) in an earnings call - as long as he mentions it in order to meet his minimum obligations of course.

And while we the community are not the audience of an earnings call, nonetheless we were always going to hear about it, and how I interpret it is that they absolutely don't give a hoot about the community. As far as I am aware, no-one in the "c-suite" has acknowledged or apologised. In fact, I think it should have been Cynthia Williams to do so, and the fact that she hasn't, is to me, very telling of just how non-seriously she/they take the community.

All their actions and communication, including those of Kyle Brinks', say to me that the actions they have taken with regard to Creative Commons etc, were to fix the problem of the hemorrhaging unsubscriptions, and not anything to do with caring about the community, or even D&D as anything other than a product to make money from. Most of what Kyle Brinks is saying simply does not align with the events that actually happened. To me, this, and indeed all their actions, are a case of treating the community with disdain and disrespect. But again, YMMV. 🤷‍♂️

But yes, all in all this is just my interpretation of it all and it seems I am in the minority. I am certainly glad that 3PPs such as yourself, Kobold Press, Cubicle7, MCDM, and the host of smaller ones, will get to keep creating without the immediate threat of your livelihoods being decimated at the whim of the tiger in the room. But, I do believe wotc will try 'something' again in the future.
IMO, insofar as the financial statement impacts of OGLGate are concerned , I would expect they were significantly more worried about a need to impair the valuation of intangibles associated with the D&D/WotC brand as a result of all the bad press than anything to do with the short term blips in D&D Beyond subscriptions (though perhaps there might have been a case to look at the DDB intangible asset valuations as well).
 

Snarf Zagyg

Notorious Liquefactionist
The world would be a better place if folks would stop: Event X occurred... I will immediately associate completely unsubstantiated Events/Suppositions Y because these fit my world view and make me feel safe and as if I have a tribe. Instead of, you know, looking at Event X objectively and attempting to understand why X happened without tainting it with my personal prejudices.

 




Cergorach

The Laughing One
I'm seeing a lot of assumptions being made, and I also got the impression that my recollection about events might be influenced by my feelings, so I checked:

21st of December:

That's four days before Christmas, I don't know about you, but most of the holiday shopping/expenditure has already been done by that time. With the exception of foodstuffs, drinks and the like. That announcement was still light on the details and was lacking the actual new OGL text that was later leaked.

Q3 2022 ended before October 18th 2022 (see sources), as that was the date that Q3 2022 results were publicized. So that would mean that Q4 2022 ended before January 18th 2023. I do not have 100% proof, but I can say with a large degree of certainty that Q4 2022 didn't include any part of January 2023.

The DND Beyond cancellations only hit the 'peak' half way through January: D&D Beyond hit with so many subscription cancellations that the website crashed

The financial impact of those cancellations will only 'hit' when your current subscription runs out. Depending on when you started your subscription and for how long it runs, it might not even 'hit' this year. Even if we're talking about 50,000 cancellations that is $100k-$200k/month or $1.2M-$2.4M/year. And that is only IF those cancellations do not get replaced by new subscribers (or are only temporary)...

As for 'lying' to customers/investors, messing with the revenue numbers is very difficult, but there are companies that have done so before and companies at this scale in the US in this era of automation, that is very rare. Is it possible? Sure, but so is winning the lottery. Someone does win the lottery of course, but the chances of you winning the lottery... The chances that Hasbro/WotC are messing with the revenue numbers is very small imho. Not realistic to mention...

Hasbro is generating significantly less revenue (and profit) in 2022 then in 2021. Which honestly doesn't surprise me at all. What does surprise me is that Magic is generating (significantly) more revenue then compared with the year before. And that WotC is also generating more revenue, but a little less profit.

Profit and loss are something that creative bookkeeping can influence, generally nothing illegal is going on (but can be), it's just very difficult to understand for people that have no experience with accounting at this scale and they conclude that they are being lied to because they don't understand it. If there was something iffy going on, then this would be where that iffyness would happen. Again, it could happen, but chances that it's happening are slim.

Especially when you do some math, look at the revenue Magic is generating. Even with the controversy the last year with Magic, they are still seeing a huge amount of revenue. ~80% of WotC's revenue. If Magic saw a 7% increase and WotC only saw an increase of 3% for that same period, that means everything besides Magic was doing way worse at WotC then in 2021, around 11% worse then 2021. But looking at the timing of the OGL debacle, that has close to 0 impact on those numbers. And this is where the spin is, do we see anything about that 11% worse revenue at WotC when not looking at Magic? No.

When looking at a potential revenue loss of $2.4M/year from DND Beyond subscriptions. WotC had a revenue of $1.3B in 2022, that DNDB has only less then a 0,2% impact in revenue. That is virtually nothing! Even if we disregard Magic, that is still less then 1% of the rest of the WotC revenue.

As someone else mentioned, people have this tendency to get overly invested in their choices and want their choices to matter in the grand scheme of things and won't or can't accept that their choices just don't really matter to the world at large. Your choices are something that you have to live with, not the rest of us.

I also suspect that many people have already reversed their choices regarding D&D after the WotC backpedaling or this will just blow over and people will forget and keep consuming WotC/Hasbro products/services... And honestly, D&D is pretty small next to Magic. If there are any big shakeups in 2023 at WotC, I suspect that it will be in the Magic side of the business.

Sources:
 


Returning to this thread after a day at work, I wanted to come back to this point you're making @Morrus, to go into more detail on the point I am wanting to make about what wotc/hasbro/Kyle Brinks/Chris Cocks are saying.

So here's the position Chris Cocks is in - his subsidiary has completely effed up its hostile attempt to aggressively takeover an entire hobby (surely no-one is going to take issue with this description of the events???).

Let's assume some of the things that we've heard are true, and D&D beyond lost 40K of subs in a week or two, and given there were active campaigns from prominent creators such as Ginny Di, perhaps the rate of unsubscriptions wasn't slowing down, so they really did have to take some immediate and over-corrective action - ie. they release the 5.1 SRD to Creative Commons and take the community by complete surprise, and lo and behold, it has pretty much the effect they are after - most customers (except cynical, snarky die-hards like me I guess) seem pretty happy to go back to the where they were before the snaffu and think "hey, wotc were just being a big bad corp like all corps, but now that I've got what I want, I'm all good"). Certainly I am seeing a majority of comments that people are happy enough now with the direction wotc have now taken.

So, I'm Chris Cocks and I now have to give information to my investors. I have two basic options -

1) We completely effed up and for two weeks we hemorrhaged subscriptions, to the tune of 40K subs and it didn't look like subsiding anytime soon. While as a percentage of our overall income it was still quite low, nonetheless it did not look like abating and we took action to end it.

or

2) “We misfired on updating our Open Game License. We have since course corrected, and are delivering a strong outcome for the community and game. We had some subscription cancellations, but they were comparatively minor in the totality of both the D&D [profit and loss] and the Wizards [profit and loss].”

Which message does he give his investors? Well, of course he is going to put it in the best light he can.

And is he "lying" in #2? From a legal point of view, I am sure the answer is a definite "no". The estimates are that D&D beyond has some 9 million subscribers (both paying and non-paying), so 40K unsubscriptions is indeed a "comparatively minor" number, in terms of profit and loss, and raw numbers. It's also reasonable to note that the financial affects may not be felt for quite some time (ie. when the movie comes out, or 1D&D) - but for right now, they are accurate.

But even though the 40K unsubscriptions are "comparatively minor" (just .44%!), it is still objectively a crap-ton of subs to lose in a single week or two. So while he isn't "lying", how actually honest, or a better description - "objectively accurate" - is he being?

But, that's all in relation to investors and perhaps the message is all fine and legal in that regard. The issue I really have is what is this saying to the D&D community? His statements are definitely wallpapering over the events and are completely nonchalant with regards to the effect wotc/hasbro's actions had on the community. I suspect most hasbro investors have little idea of any of the crapstorm that wotc created within the D&D community in January, and so it can just all be a footnote (more or less) in an earnings call - as long as he mentions it in order to meet his minimum obligations of course.

And while we the community are not the audience of an earnings call, nonetheless we were always going to hear about it, and how I interpret it is that they absolutely don't give a hoot about the community. As far as I am aware, no-one in the "c-suite" has acknowledged or apologised. In fact, I think it should have been Cynthia Williams to do so, and the fact that she hasn't, is to me, very telling of just how non-seriously she/they take the community.

All their actions and communication, including those of Kyle Brinks', say to me that the actions they have taken with regard to Creative Commons etc, were to fix the problem of the hemorrhaging unsubscriptions, and not anything to do with caring about the community, or even D&D as anything other than a product to make money from. Most of what Kyle Brinks is saying simply does not align with the events that actually happened. To me, this, and indeed all their actions, are a case of treating the community with disdain and disrespect. But again, YMMV. 🤷‍♂️

But yes, all in all this is just my interpretation of it all and it seems I am in the minority. I am certainly glad that 3PPs such as yourself, Kobold Press, Cubicle7, MCDM, and the host of smaller ones, will get to keep creating without the immediate threat of your livelihoods being decimated at the whim of the tiger in the room. But, I do believe wotc will try 'something' again in the future.
‘So here's the position Chris Cocks is in - his subsidiary has completely effed up its hostile attempt to aggressively takeover an entire hobby (surely no-one is going to take issue with this description of the events???).’

Ridiculous hyperbole. There are many non D20/OGL games and they were trying to lock down their IP not take over the RPG universe like a Disney villain, though in an admittedly horrible way that would have impacted the community.
 

Jer

Legend
Supporter
Hasbro is publicly traded on NASDAQ

Their common stock is trading at $58.46 as of the close of the market yesterday afternoon.

Yes, that was darjr's point in response to a comparison being made to an executive at a private company. Discussions of how private company executives act are not necessarily relevant to how publicly traded executives act.

Private companies have a completely different dynamic - usually you have one owner or at worst a family of owners to keep happy with a private company. They basically want to get paid and having a profitable company that they get a piece of the profits of every year aligns with their desire to basically just get paid. A company that flashes up for a year and then fails spectacularly impacts their long term ability to extract money from the company and so keeping the owner happy tends to align with making the company successful in the long term.

Publicly traded companies are beasts which have no owner, just lots of people who own a piece. And those people increasingly don't care about the long term value of the company because the amount they get from the company directly (i.e. dividend) is a pittance compared to how much they paid for the (overpriced) shares of stock that they're sitting on. So what they want is the perceived value of the company to go up so they can dump the stock on some other sucker at an inflated price and get out. A company's stock price tripling overnight and then crashing to nothing is great for those types so long as they sell high and get out.

Not all publicly traded companies fall into the trap of giving top priority to investors whose only concern is dumping your stock at the soonest possible opportunity, but when it happens ooh boy it's bad for everyone who works for the company except the execs with the golden parachutes and the folks who sold their stock when it hit that high (and sometimes those are the same people). But a whole lot of corporate pathology in publicly traded companies can be traced right back to the model of trying to keep "shareholders" who don't care about the health of the company at all happier than the folks who are interested in its long term survival.
 

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