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% 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.

 

[Whizbang Dustyboots]

So how does the boycott which happened at the end of Jan and into Feb count for q4 2022 or year end 2022?

It doesn't. It's just them giving a preview for the investors of what to expect in the next briefing, since they would have asked anyway.

 

[darjr]

It doesn't, that data isn't available yet. But it's a company's job to talk up the share price. Far more money is lost due to a fall in share price than any effect of the boycott. And a company with a falling share price is vulnerable to hostile takeover. The sharks are quick to smell blood in the water. The isn't room for such niceties as "truth" when you are fighting for survival.

Ah. “Tis a flesh wound!”

Thanks. Makes sense.

 

[Snarf Zagyg]

So how does the boycott which happened at the end of Jan and into Feb count for q4 2022 or year end 2022?

So you have to ignore what will be the conspiracy theories.

Reports to investors will be heavily caveated, but with some exceptions, are the most honest documents you will see. They contain both the prior financial information as well as the predicted future revenue. By law, they have to include any material facts that are relevant.

While the report will be for the quarter (and year) that ends December 25, 2022, the disclosures (including calls with investors) will take into account information up to the earnings call.

All that said, remember that the words are usually chosen carefully. If the boycott had a comparatively minor impact, it was in relation to D&D's overall revenue- all of it, not just D&D Beyond. That doesn't really say much about how large the overall impact was- just in relation to the overall revenue of D&D

 

[darjr]

So you have to ignore what will be the conspiracy theories.

Reports to investors will be heavily caveated, but with some exceptions, are the most honest documents you will see. They contain both the prior financial information as well as the predicted future revenue. By law, they have to include any material facts that are relevant.

While the report will be for the quarter (and year) that ends December 25, 2022, the disclosures (including calls with investors) will take into account information up to the earnings call.

All that said, remember that the words are usually chosen carefully. If the boycott had a comparatively minor impact, it was in relation to D&D's overall revenue- all of it, not just D&D Beyond. That doesn't really say much about how large the overall impact was- just in relation to the overall revenue of D&D

OK. Like the morale of the creative team or the stress on the OPs crew and customer support team for DnDBeyond. Those can have lasting effects but are almost impossible to calculate so get left out?

 

[Scribe]

Nothing like a complete 'own goal' when otherwise you continued to have growth and profit over the year.

It doesn't, that data isn't available yet. But it's a company's job to talk up the share price. Far more money is lost due to a fall in share price than any effect of the boycott. And a company with a falling share price is vulnerable to hostile takeover. The sharks are quick to smell blood in the water. There isn't room for such niceties as "truth" when you are fighting for survival.

This is the truth of it right here. Nothing but the perception matters.

 

[Scribe]

OK. Like the morale of the creative team or the stress on the OPs crew and customer support team for DnDBeyond. Those can have lasting effects but are almost impossible to calculate so get left out?

They are utterly irrelevant to a reporting of financials. Unless its 'we cut X jobs to increase profit'. Then it may be reported.

 

[Snarf Zagyg]

OK. Like the morale of the creative team or the stress on the OPs crew and customer support team for DnDBeyond. Those can have lasting effects but are almost impossible to calculate so get left out?

I mean, yes- there are the intangibles.

But it's more three things.

First, we will see as we go on (next few quarters) if there was any major financial impact.

Second, that impact would be discussed in some measure during the call- at a minimum to minimize it- if it was viewed as a real problem.

Third, you would expect to see projections modified.

That said, if it was an absolute nothing, it wouldn't have even been addressed during the investor earnings call. Here is the relevant part-

Within our growth initiatives, our direct business comprised of MAGIC: Arena, D&D Beyond, Hasbro Pulse and MAGIC: Secret Lair was up 15% in 2022. Hasbro Pulse was our fastest-growing channel, increasing 70% on robust fan demand across premier industry entertainment properties. D&D Beyond delivered user growth in excess of 20% since we acquired the service in May of 2022; and, as forecasted, was EPS-accretive in Q4. Wizards of the Coast and Digital Gaming grew 5% in constant currency, outperforming a games market that, by most measurements, was flat to down, with MAGIC tabletop leading the growth.

Importantly, we celebrated our first $1 billion brand in MAGIC: THE GATHERING, a huge milestone, not just for Hasbro, but for the thousands of hobby shops, our most important and assets growing channel for the brand and millions of fans who make both MAGIC and D&D more than just games, but vibrant, global communities. Our growth in Wizards was not without challenges. We navigated significant supply chain disruptions that while resolved for 2023, compressed our set release schedules in 2022, particularly in Q4. We were too aggressive in some of our pricing assumptions, notably our 30th anniversary edition of MAGIC and pulled back on available supply impacting Q4 results.

Lastly, on D&D, we misfired on updating our open game 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.

....

Yes. I mean we had some subscription cancellations, but they were comparatively minor in the totality of both the D&D P&L and the Wizards P&L. Of course, we take anything like that seriously. We're in contact with the people who canceled. And in general, what we're finding is a lot of them are very open to restarting their subscriptions. D&D Beyond is a great platform. It's a really good value. And it's something that's been a good growth vector for us. We find it -- we feel about eight months into owning the asset, it's been a really good purchase for us. It was EPS accretive within six months of joining the company. And we had over 20% user growth through the end of 2022, and the revenue growth was roughly commensurate with the user growth as well. So I think D&D should be on pace for a healthy 2023 with everything we have going on.

 

[Whizbang Dustyboots]

They are utterly irrelevant to a reporting of financials. Unless its 'we cut X jobs to increase profit'. Then it may be reported.

Not irrelevant -- employee productivity obviously matters, and is almost certainly impacted by the last month and change -- but steered around unless it absolutely has to be addressed.

 

[Scribe]

Not irrelevant -- employee productivity obviously matters, and is almost certainly impacted by the last month and change -- but steered around unless it absolutely has to be addressed.

If it gets to a point where employee morale is reported on in a quarterly or (god help them) yearly financials report, then I would imagine this is the office. That stuff is a pretty hard line item to get included when the exec's are looking for talking points.

 

[Scribe]

Oh and I will say the call out the Magic 30 debacle is delicious.

We were too aggressive in some of our pricing assumptions, notably our 30th anniversary edition of MAGIC and pulled back on available supply impacting Q4 results.